<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY , 1999
REGISTRATION NOS.: 811-09059
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO.1 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO.1 [X]
----------------
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
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
DISCOVER BROKERAGE
S&P 500 FUND
(an investment portfolio of Discover Brokerage Index Series)
Prospectus
MAY , 1999
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 or disapproved
these securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
The Fund .............................................. 1
Investment Objective ................................ 1
Principal Investment Strategies ..................... 1
Principal Risks ..................................... 2
Fees and Expenses ................................... 4
Additional Investment Strategy Information .......... 6
Additional Risk Information ......................... 7
Fund Management ....................................... 8
Pricing Fund Shares ................................... 9
Buying and Selling Shares ............................. 10
How to Buy Shares ................................... 10
How to Sell Shares .................................. 12
Distributions ......................................... 13
Tax Consequences ...................................... 14
Taxes on Distributions .............................. 14
Taxes on Sales (Redemptions) ........................ 14
</TABLE>
This Prospectus contains important information about the Fund. Please read
it carefully and keep it for future reference.
<PAGE>
Fund Category: Growth & Income
THE FUND
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INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The Fund will normally invest at least 80% of its total assets in common
stocks of companies included in the S&P 500 Index. The "Investment Manager,"
Morgan Stanley Dean Witter Advisors Inc., "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. The Fund may invest in foreign
companies that are included in the S&P 500 Index.
The Investment Manager seeks a correlation between the performance of the
Fund, before expenses, and that of the S&P 500 Index of 95% or better. A figure
of 100% would indicate perfect correlation.
Common stock is a share ownership or equity interest in a corporation. It
may or may not pay dividends, as some companies reinvest all of their profits
back into their businesses, while others pay out some of their profits to
shareholders as dividends.
In addition to common stocks, the Fund may invest in stock index futures
on the S&P 500 Index, and Standard & Poor's Depository Receipts ("SPDRs").
In pursuing the Fund's investment objective, the Investment Manager has
considerable leeway in deciding which trading strategies it uses. For example,
the Investment Manager in its discretion may determine to use some permitted
trading strategies while not using others.
1
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"Standard & Poor's (Registered Trademark) ," "S&P (Registered
Trademark) ," "S&P 500 (Registered Trademark) ," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by the Fund. The Fund is not sponsored, endorsed, sold or promoted by
S&P, and S&P makes no representation regarding the advisability of investing in
the Fund.
PRINCIPAL RISKS
There is no assurance that the Fund will achieve its investment objective.
The Fund's share price will fluctuate with changes in the market value of the
Fund's portfolio securities. When you sell Fund shares, they may be worth less
than what you paid for them and, accordingly, you can lose money investing in
this Fund.
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 Fund shares.
The performance of the S&P 500 Index is a hypothetical number which does
not take into account brokerage commissions and other transaction costs,
custody and other costs which will be borne by the Fund (e.g., management fee,
transfer agency and accounting costs).
The Fund's ability to correlate its performance, before expenses, with the
S&P 500 Index may be affected by, among other things, changes in securities
markets, the manner in which the S&P 500 is calculated and the timing of
purchases and sales. The Fund's ability to correlate its performance to the
Index also depends to some extent on the size of the Fund's portfolio, the size
of cash flows into and out of the Fund and differences between how
2
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and when the Fund and the Index are valued. The Investment Manager regularly
monitors the correlation and, in the event the desired correlation is not
achieved, the Investment Manager will determine what additional investment
changes may need to be made.
The performance of the Fund also will depend on whether the Investment
Manager is successful in pursuing the Fund's investment strategy, including the
Investment Manager's ability to manage cash flows (primarily from purchases and
sales, and distributions from the Fund's investments). The Fund is also subject
to other risks from its other permissible investments including risks
associated with its stock index futures, SPDRs and foreign securities. For more
information about these risks, see the "Additional Risk Information" section.
3
<PAGE>
FEES AND EXPENSES
The table below briefly describes the Fund's fees and expenses that you
may pay if you buy and hold shares of the Fund. The Fund does not charge
account or exchange fees.
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM
YOUR INVESTMENT)
Sales charge (load) imposed on purchases ......... None
Deferred sales charge (load) ..................... None(1)
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management fee(3) ................................ 0.10%
Distribution and service (12b-1) fees ............ None
Other expenses(2)(3) ............................. .40%
Total annual Fund operating expenses(3) .......... .50%
</TABLE>
(1) There is a $25 transaction fee payable to Discover Brokerage Direct for
shares redeemed within 30 days of the purchase date.
(2) "Other Expenses" are estimated based on expenses anticipated for the
first complete fiscal year of the Fund.
(3) The Investment Manager has undertaken to assume all expenses of the Fund
(except for any brokerage fees) and to waive the compensation provided
for in its Management Agreement with the Fund until such time as the Fund
attains $50 million of net assets or until six months from the date of
commencement of the Fund's operations, whichever occurs first. The
Investment Manager has permanently undertaken to cap total expenses of
the Fund (other than brokerage fees) at 0.50% of average daily net
assets.
4
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EXAMPLE
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your investment
has a 5% return each year, and the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, the tables below show your
costs at the end of each period based on these assumptions depending upon
whether or not you sell your shares at the end of each period.
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
------------------------ ------------------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
------ ------- ------ -------
<S> <C> <C> <C>
$51 $160 $51 $160
</TABLE>
5
<PAGE>
ADDITIONAL INVESTMENT STRATEGY INFORMATION
The Fund seeks to provide investment results that, before expenses,
correspond to the total return of the S&P 500 Index. There is no guarantee that
the Fund will achieve its objective.
This section provides additional information concerning the Fund's
principal strategies.
Stock Index Futures. The Fund may invest in stock index futures with
respect to the S&P 500 Index. Stock index futures may be used to simulate
investment in the S&P 500 while retaining a cash balance for fund management
purposes, to facilitate trading, to reduce transaction costs or to seek higher
investment returns.
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.
The percentage limitations relating to the composition of the Fund's
portfolio apply at the time the Fund acquires an investment. Subsequent
percentage changes that result from market fluctuations or changes in total
assets will not require the Fund to sell any portfolio security. The Fund may
change its principal investment strategies without shareholder approval;
however, you would be notified of any changes.
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.
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.
6
<PAGE>
Foreign securities also have risks related to political and economic
developments abroad. 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.
Futures. If the Fund invests in futures, its participation in these
markets would subject the Fund's portfolio to certain risks. The Investment
Manager's predictions of movements in the direction of the stock market may be
inaccurate, and 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 futures include, for example,
the possible imperfect correlation between the price of futures contracts and
movements in the prices of the securities.
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. If the Fund invests in
SPDRs, it would, in addition to its own expenses, indirectly bear its ratable
share of the SPDR's expenses.
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 corporate and governmental issuers
in which the Fund invests do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the Fund, the Investment Manager 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.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues.
Corporate and governmental data processing errors also may result in production
problems for individual companies and overall economic
7
<PAGE>
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial. Accordingly, the Fund's investments may be
adversely affected.
FUND MANAGEMENT
The Fund has retained the Investment Manager--Morgan Stanley Dean Witter
Advisors Inc.--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. 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. Guy G.
Rutherfurd, Jr., a Senior Vice President of the Investment Manager, is the
primary portfolio manager of the Fund. Mr. Rutherfurd has been a portfolio
manager with the Investment Manager since February, 1997. During the period
from May, 1992 to February, 1997, Mr. Rutherfurd was the Executive Vice
President and Chief Investment Officer of Nomura Asset Management (U.S.A.) Inc.
Mr. Rutherfurd is assisted by Kevin Jung, Vice President of the Investment
Manager. Mr. Jung has been a portfolio manager with the Investment Manager
since September, 1997, and prior to that he was a Vice President and portfolio
manager with LBS Asset Management (NY) Inc. from April, 1993 through August,
1997.
The Fund pays the Investment Manager a monthly management fee at an annual
rate of 0.40% 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.
PRICING FUND SHARES
The price of Fund shares, called "net asset value," is based on the value
of the Fund's portfolio securities. The net asset value per share of the Fund
is determined once daily at 4:00 p.m. Eastern time on each day that the New
York Stock Exchange is open (or, on days when the New York Stock Exchange
closes prior to 4:00 p.m., at such earlier time). Shares will not be priced on
days that the New York Stock Exchange is closed.
8
<PAGE>
The value of the Fund's portfolio securities is based on the securities'
market price when available. When a market price is not readily available,
including circumstances under which the Investment Manager 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. However, if the cost does not reflect the securities' market
value, the 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. While the
minimum brokerage account size is generally $2,000, it 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.
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.
9
<PAGE>
Involuntary Sales. The Fund reserves the right, on sixty days' notice, to
sell the shares of any shareholder (other than shares held in an IRA or 403(b)
Custodial Account) whose shares, due to sales by the shareholder, have a value
below $100.
However, before the Fund sells your shares in this manner, we will notify
you and allow you sixty days to make an additional investment in an amount that
will increase the value of your account to at least the required amount before
the sale is processed.
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)
Over the Internet:
o Access your account at
http://www.discoverbrokerage.com
o Provide the Required Purchase Information (described later in this
section)
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
HOW TO SELL SHARES
You may sell 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 Sale Information (described later in this section)
Over the Internet:
o Access your account at:
http://www.discoverbrokerage.com
o Provide the Required Sale Information
o Refer to the Discover Brokerage Internet Trading Guide for details
Required Sale 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 or dollar amount you want to sell
Payment for Sold Shares. Payment for sold shares will be credited directly
to your Discover Brokerage account no later than 7 days after Discover
Brokerage Direct receives your sell instructions in proper form. Only in the
case of newly purchased shares sale proceeds are mailed upon clearance of the
purchase check, which may take up to 15 days. 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 to sell 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
11
<PAGE>
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 capital gains are distributed to
shareholders annually in December. The Fund, however, may retain and reinvest
any long-term capital gains.
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.
TAX CONSEQUENCES
As with any investment, you should consider how your Fund investment will
be taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in the Fund.
Unless your investment in the Fund is through a tax-deferred retirement
account, such as a 401(k) plan or IRA, you need to be aware of the possible tax
consequences when:
o The Fund makes distributions, and
o You sell 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
12
<PAGE>
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. Your sale of Fund shares normally is subject to federal
and state income tax and may result in a taxable gain or loss to you. A sale
also may be subject to local income tax.
When you open your Fund account, you should provide your Social Security
or tax identification number on your investment application. By providing this
information, you will avoid being subject to a federal backup withholding tax
of 31% on taxable distributions and redemption proceeds. Any withheld amount
would be sent to the IRS as an advance tax payment.
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 information about the Fund. The Statement of Additional Information
is incorporated herein by reference (legally is part of this Prospectus). For a
free copy of any of these documents, to request other information about the
Fund, or to make shareholder inquiries, please call:
(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.
13
<PAGE>
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.
(INVESTMENT COMPANY ACT FILE NO. 811-09059)
14
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DISCOVER BROKERAGE
S&P 500 FUND
MAY , 1999
(AN INVESTMENT PORTFOLIO OF
DISCOVER BROKERAGE INDEX
SERIES)
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus (dated May , 1999) for the Discover Brokerage S&P 500 Fund (the
"Fund"), may be obtained without charge from the Fund at its address or
telephone number listed below or from .
Discover Brokerage S&P 500 Fund
Two World Trade Center
New York, New York 10048 (Insert Phone Number)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -------------------------------------------------------------------------------------
<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 .................... 14
V. Investment Management and Other Services ............................... 14
A. Investment Manager .................................................. 14
B. Principal Underwriter ............................................... 15
C. Services Provided by the Investment Manager and Fund Expenses Paid by
Third Parties ..................................................... 15
D. Other Service Providers ............................................. 16
VI. Brokerage Allocation and Other Practices ............................... 16
A. Brokerage Transactions .............................................. 16
B. Commissions ......................................................... 17
C. Brokerage Selection ................................................. 17
VII. Capital Stock .......................................................... 18
VIII. Purchase of Shares and Offering Price .................................. 18
A. Purchase of Shares .................................................. 18
B. Offering Price ...................................................... 18
C. Tax Considerations .................................................. 19
IX. Underwriters ........................................................... 20
X. Calculation of Performance Data ........................................ 20
XI. Financial Statements ................................................... 21
</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" -- Discover Brokerage S&P 500 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, a division of the
McGraw-Hill Companies Inc. ("S&P"). S&P 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. S&P's only relationship to the Fund is the licensing
of certain trademarks and trade names of S&P and of the S&P 500 Index which is
determined, composed and calculated by S&P without regard to the Fund. S&P 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.
S&P 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. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Fund.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500
Index or any data included therein and S&P shall have no liability for any
errors, omissions, or interruptions therein. S&P 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. S&P 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 S&P
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 TRANSACTIONS. The Fund may invest in stock index
futures.
A futures contract purchaser incurs an obligation to take delivery of a
specified amount of the obligation underlying the contract at a specified time
in the future for a specified price. A seller of a futures contract incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price.
Index futures contracts provide for the delivery of an amount of cash
equal to a specified dollar amount times the difference between the index value
at the open or close of the last trading day of the contract and the futures
contract price. A futures contract sale is closed out by effecting a futures
contract purchase for the same aggregate amount of the specific type of
security and the same delivery date. If the sale price exceeds the offsetting
purchase price, the seller would be paid the difference and would realize a
gain. If the offsetting purchase price exceeds the sale price, the seller would
pay the difference and would realize a loss. Similarly, a futures contract
purchase is closed out by effecting a futures
4
<PAGE>
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 gain, whereas if the purchase price
exceeds the offsetting sale price, the purchaser would realize a loss. There is
no assurance that the Fund will be able to enter into a closing transaction.
Margin. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities
or other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges
on which futures contracts trade and may, from time to time, change. In
addition, brokers may establish margin deposit requirements in excess of those
required by the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a broker's client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper termination
of the futures contract. The margin deposits made are marked to market daily
and the Fund may be required to make subsequent deposits of cash or U.S.
Government securities, called "variation margin," which are reflective of price
fluctuations in the futures contract.
Limitations on Futures Contracts. The Fund may not enter into futures
contracts if, immediately thereafter, the amount committed to margin plus the
amount paid for premiums for unexpired options on futures contracts exceeds 5%
of the value of the Fund's total assets, after taking into account unrealized
gains and unrealized losses on such contracts it has entered into. However,
there is no overall limitation on the percentage of the Fund's net assets which
may be subject to a hedge position.
Risks of Transactions in Futures Contracts. The prices of indexes subject
to futures contracts (and thereby the futures contract prices) may correlate
imperfectly with the behavior of the cash prices of the Fund's portfolio
securities. A correlation may also be distorted (a) temporarily, by short-term
traders' seeking to profit from the difference between a contract or security
price objective and their cost of borrowed funds; (b) by investors in futures
contracts electing to close out their contracts through offsetting transactions
rather than meet margin deposit requirements; (c) by investors in futures
contracts opting to make or take delivery of underlying securities rather than
engage in closing transactions, thereby reducing liquidity of the futures
market; and (d) temporarily, by speculators who view the deposit requirements
in the futures markets as less onerous than margin requirements in the cash
market. Due to the possibility of price distortion in the futures market and
because of the possible imperfect correlation between movements in the prices
of securities and movements in the prices of futures contracts, a correct
forecast or market movement trends by the Investment Manager may still not
result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for
futures contracts 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.
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 these situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. 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 the broker and/or incur a
loss of all or part of its margin deposits with the broker.
5
<PAGE>
MONEY MARKET SECURITIES. The Fund may invest in various money market
securities for cash management purposes, which among others may include
commercial paper, bank acceptances, bank obligations, corporate debt
securities, certificates of deposit, U.S. Government securities, obligations of
savings institutions and repurchase agreements. Such securities are limited to:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered
by the FDIC), limited to $100,000 principal amount per certificate and to 15%
or less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate; and
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the highest grade by Moody's Investors
Service, Inc. ("Moody's") or, if not rated, issued by a company having an
outstanding debt issue rated at least AAA by S&P or Aaa by Moody's; and
Repurchase Agreements. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Fund. These
agreements, which may be viewed as a type of secured lending by the Fund,
typically involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
serving as collateral at a specified price and at a fixed time in the future,
usually not more than seven days from the date of purchase. The collateral will
be marked-to-market daily to determine that the value of the collateral, as
specified in the agreement, does not decrease below the purchase price plus
accrued interest. If such decrease occurs, additional collateral will be
requested and, when received, added to the account to maintain full
collateralization. The Fund will accrue interest from the institution until the
time when the repurchase is to occur. Although this date is deemed by the Fund
to be the maturity date of a repurchase agreement, the maturities of securities
subject to repurchase agreements are not subject to any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Investment
Manager 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
6
<PAGE>
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.
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
7
<PAGE>
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 objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act
of 1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the
Fund. The Investment Company Act defines a majority as the lesser of (a) 67% or
more of the shares present at a meeting of shareholders, if the holders of 50%
of the outstanding shares of the Fund are present or represented by proxy; or
(b) more than 50% of the outstanding shares of the Fund. For purposes of the
following restrictions: (i) all percentage limitations apply immediately after
a purchase or initial investment; and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the Fund.
The Fund will:
1. Seek 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 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.
4. Purchase or sell real estate or interests therein, although the Fund may
purchase securities of issuers which engage in real estate operations
and securities secured by real estate or interests therein.
5. Purchase or sell commodities except that the Fund may purchase or sell
futures contracts and related options.
6. Borrow money, except that the Fund may borrow from a bank for temporary
or emergency purposes in amounts not exceeding 5% of its total assets
(not including the amount borrowed).
7. Issue senior securities as defined in the Investment Company Act except
insofar as the Fund may be deemed to have issued a senior security by
reason of: (a) entering into any repurchase agreement; (b) borrowing
money; (c) lending portfolio securities; (d) purchasing or selling
options and futures; or (e) purchasing securities on a when-issued or
forward commitment basis.
8. Make loans of money or securities, except: (a) by the purchase of debt
obligations; (b) by investment in repurchase agreements; or (c) by
lending its portfolio securities.
9. 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.
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.
8
<PAGE>
III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Trust 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 Trust consists of eight (8)
Trustees. Six Trustees (75% of the total number) have no affiliation or
business connection with the Investment Manager or any of its affiliated
persons and do not own any stock or other securities issued by the Investment
Manager's parent company, MSDW. These are the "non-interested" or "independent"
Trustees. The other two Trustees (the "Management Trustees") are affiliated
with the Investment Manager. All of the Independent Trustees also serve as
Independent Trustees of the "Morgan Stanley Dean Witter Funds," a family of
mutual funds for which the Investment Manager is the investment manager. Three
of the six Independent Trustees are also Independent Trustees of certain other
mutual funds, referred to as the "TCW/DW Funds," for which MSDW Services
Company is the manager and TCW Funds Management, Inc. is the investment
advisor.
The Trustees and executive officers of the Trust (which includes the
Fund), their principal business occupations during the last five years and
their affiliations, if any, with the Investment Manager, and with the 86 Morgan
Stanley Dean Witter Funds and the 11 TCW/DW Funds are shown below:
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------- ------------------------------------------------------------------
<S> <C>
Michael Bozic (58) ................... Vice Chairman of Kmart Corporation (since December, 1998);
Trustee Director or Trustee of the Morgan Stanley Dean Witter Funds;
c/o Kmart Corporation formerly Chairman and Chief Executive Officer of Levitz Furniture
3100 West Big Beaver Road Corporation (November, 1995-November, 1998) and President
Troy, Michigan and Chief Executive Officer of Hills Department Stores
(May, 1991-July, 1995); formerly variously Chairman, Chief
Executive Officer, President and Chief Operating Officer
(1987-1991) of the Sears Merchandise Group of Sears, Roebuck
and Co.; Director of Eaglemark Financial Services, Inc. and
Weirton Steel Corporation.
Charles A. Fiumefreddo* (65) ......... Chairman, Director or Trustee and Chief Executive Officer of the
Chairman of the Board, Morgan Stanley Dean Witter Funds and the TCW/DW Funds;
Chief Executive Officer formerly Chairman, Chief Executive Officer and Director of the
and Trustee Investment Manager, the Distributor and MSDW Services
Two World Trade Center Company; Executive Vice President and Director of Dean Witter
New York, New York Reynolds; Chairman and Director of the Transfer Agent; formerly
Director and/or officer of various MSDW subsidiaries (until
June, 1998).
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------ --------------------------------------------------------------------
<S> <C>
Edwin J. Garn (66) ................. Director or Trustee of the Morgan Stanley Dean Witter Funds;
Trustee formerly United States Senator (R-Utah) (1974-1992) and
c/o Huntsman Corporation Chairman, Senate Banking Committee (1980-1986); formerly
500 Huntsman Way Mayor of Salt Lake City, Utah (1971-1974); formerly Astronaut,
Salt Lake City, Utah Space Shuttle Discovery (April 12-19, 1985); Vice Chairman,
Huntsman Corporation; Director of Franklin Covey (time
management systems), BMW Bank of North America, Inc.
(industrial loan corporation), United Space Alliance (joint venture
between Lockheed Martin and the Boeing Company) and
Nuskin Asia Pacific (multilevel marketing); member of the board
of various civic and charitable organizations.
Wayne E. Hedien (65) ............... Retired; Director or Trustee of the Morgan Stanley Dean Witter
Trustee Funds; Director of The PMI Group, Inc. (private mortgage
c/o Gordon Altman Butowsky insurance); Trustee and Vice Chairman of The Field Museum of
Weitzen Shalov & Wein Natural History; formerly associated with the Allstate Companies
Counsel to the (1966-1994), most recently as Chairman of The Allstate
Independent Trustees Corporation (March, 1993-December, 1994) and Chairman and
114 West 47th Street Chief Executive Officer of its wholly-owned subsidiary, Allstate
New York, New York Insurance Company (July, 1989-December, 1994); director of
various other business and charitable organizations.
Dr. Manuel H. Johnson (50) ......... Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Co-Chairman and a founder of the Group of Seven Council
c/o Johnson Smick (G7C), an international economic commission; Chairman of the
International, Inc. Audit Committee of the Fund and Chairman of the Audit
1133 Connecticut Avenue, N.W. Committee and Director or Trustee of the Morgan Stanley Dean
Washington, D.C. Witter Funds and the TCW/DW Funds; Director of Greenwich
Capital Markets, Inc. (broker-dealer) and NVR, Inc. (home
construction); Chairman and Trustee of the Financial Accounting
Foundation (oversight organization of the Financial Accounting
Standards Board); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System (1986-1990) and
Assistant Secretary of the U.S. Treasury.
Michael E. Nugent (62) ............. General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Chairman of the Insurance Committee of the Fund
c/o Triumph Capital, L.P. and Chairman of the Insurance Committee and Director or
237 Park Avenue Trustee of the Morgan Stanley Dean Witter Funds and the
New York, New York TCW/DW Funds; formerly Vice President, Bankers Trust
Company and BT Capital Corporation (1984-1988); director of
various business organizations.
Philip J. Purcell* (55) ............ Chairman of the Board of Directors and Chief Executive Officer
Trustee of MSDW, Dean Witter Reynolds and Novus Credit Services
1585 Broadway Inc.; Director of the Distributor; Director or Trustee of the
New York, New York Morgan Stanley Dean Witter Funds; Director and/or officer of
various MSDW subsidiaries.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------- ------------------------------------------------------------------
<S> <C>
John L. Schroeder (68) .............. Retired; Chairman of the Derivatives Committee of the Fund
Trustee and Chairman of the Derivatives Committee and Director or
c/o Gordon Altman Butowsky Trustee of the Morgan Stanley Dean Witter Funds and the
Weitzen Shalov & Wein TCW/DW Funds; Director of Citizens Utilities Company; formerly
Counsel to the Independent Executive Vice President and Chief Investment Officer of the
Trustees Home Insurance Company (August, 1991-September, 1995).
114 West 47th Street
New York, New York
Mitchell M. Merin (45) .............. President and Chief Operating Officer of Asset Management of
President MSDW (since December, 1998); President and Director (since
Two World Trade Center April, 1997) and Chief Executive Officer (since June, 1998) of
New York, New York the Investment Manager and MSDW Services Company;
Chairman, Chief Executive Officer and Director of the Distributor
(since June, 1998); Chairman and Chief Executive Officer
(since June, 1998) and Director (since January, 1998) of the
Transfer Agent; Director of various MSDW subsidiaries;
President of the Morgan Stanley Dean Witter Funds and the
TCW/DW Funds (since May, 1999); previously Chief Strategic
Officer of the Investment Manager and MSDW Services
Company and Executive Vice President of the Distributor
(April, 1997-June, 1998), Vice President of the Morgan Stanley
Dean Witter Funds, the TCW/DW Funds and Discover Brokerage
Index Series (May, 1997-April, 1999), and Executive Vice
President of Dean Witter, Discover & Co.
Barry Fink (44) ..................... Senior Vice President (since March, 1997) and Secretary and
Vice President, General Counsel (since February, 1997) and Director (since
Secretary and General Counsel July, 1998) of the Investment Manager and MSDW Services
Two World Trade Center Company; Senior Vice President (since March, 1997) and
New York, New York Assistant Secretary and Assistant General Counsel (since
February, 1997) of the Distributor; Assistant Secretary of Dean
Witter Reynolds (since August, 1996); Vice President, Secretary
and General Counsel of the Morgan Stanley Dean Witter Funds
and the TCW/DW Funds (since February, 1997); previously
First Vice President (June, 1993-February, 1997), Vice President
and Assistant Secretary and Assistant General Counsel of the
Investment Manager and MSDW Services Company and
Assistant Secretary of the Morgan Stanley Dean Witter Funds
and the TCW/DW Funds.
Kevin Jung (33) ..................... Vice President of the Investment Manager (since September,
Vice President 1997); formerly Vice President of UBS Asset Management (NY)
Two World Trade Center Inc. (April, 1993-August, 1997).
New York, New York
Guy G. Rutherfurd, Jr. (59) ......... Senior Vice President of the Investment Manager (since
Vice President February, 1997); Vice President of various Morgan Stanley
Two World Trade Center Dean Witter Funds; formerly Executive Vice President and
New York, New York Chief Investment Officer of Nomura Asset Management (U.S.A.)
Inc. (May, 1992-February, 1997).
</TABLE>
- ----------
* Denotes Trustees who are "interested persons" of the Fund as defined in the
Investment Company Act.
11
<PAGE>
In addition, Ronald E. Robison, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, Robert S. Giambrone, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer
Agent, are Vice Presidents of the Trust.
In addition, Frank Bruttomesso, Marilyn K. Cranney, Lou Anne D. McInnis,
Carsten Otto and Ruth Rossi, First Vice Presidents and Assistant General
Counsels of the Investment Manager and MSDW Services Company, and Todd Lebo,
Vice President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, are Assistant Secretaries of the Trust.
INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The Trust
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 Trust's Board, such individuals may
reject other attractive assignments because the Trust makes substantial demands
on their time. All of the Independent Trustees serve as members of the Audit
Committee. In addition, three of the Trustees, including two Independent
Trustees, serve as members of the Derivatives Committee and the Insurance
Committee.
The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts and distribution
and underwriting agreements; continually reviewing Fund performance; checking
on the pricing of portfolio securities, brokerage commissions, transfer agent
costs and performance, and trading among funds in affiliated fund complexes;
and approving fidelity bond and related insurance coverage and allocations, as
well as other matters that arise from time to time.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Trust's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
The Board of the Trust 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 the Trust has formed an Insurance Committee to
review and monitor the insurance coverage maintained by the Trust and/or Fund.
TRUSTEE AND OFFICER INDEMNIFICATION. The Trust's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Trust is liable to
the Trust or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Trust, 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 Trust property
for satisfaction of claims arising in connection with the affairs of the Trust.
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 Trust.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or
a Committee meeting, or a meeting of the Independent Trustees and/or more than
one Committee meeting, take place on a single day, the Trustees are paid a
single meeting fee by the Fund. The Fund also reimburses such Trustees for
travel
12
<PAGE>
and other out-of-pocket expenses incurred by them in connection with attending
such meetings. Trustees and officers of the Fund who are or have been employed
by the Investment Manager or an affiliated company receive no compensation or
expense reimbursement from the Fund for their services as Trustee.
At such time as the Fund has paid fees to the Independent Trustees for a
full fiscal year at the compensation rates set forth above, and assuming that
during such fiscal year the Fund holds the same number of meetings of the
Board, the Independent Trustees and the Committees as were held by the Morgan
Stanley Dean Witter Funds during the calendar year ended December 31, 1998, it
is estimated that the compensation paid to each Independent Trustee during such
fiscal year will be $1,650, with an additional $750 to Dr. Johnson who serves
as Chairman of the Audit Committee and an additional $500 to each of Messrs.
Nugent and Schroeder who serve as Chairmen of the Insurance Committee and the
Derivatives Committee, respectively.
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 85 Morgan Stanley Dean Witter Funds and, in the case of Messrs. Johnson,
Nugent and Schroeder, the 11 TCW/DW Funds that were in operation at December
31, 1998. With respect to Messrs. Johnson, Nugent and Schroeder, the TCW/DW
Funds are included solely because of a limited exchange privilege between those
Funds and five Morgan Stanley Dean Witter Money Market Funds.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
DIRECTOR OR TOTAL CASH
TRUSTEE AND COMPENSATION FOR
COMMITTEE FOR SERVICE AS SERVICES TO 85
MEMBER OF 85 TRUSTEE AND MORGAN STANLEY
MORGAN STANLEY COMMITTEE DEAN WITTER FUNDS
DEAN WITTER MEMBER OF 11 AND 11 TCW/DW
NAME OF INDEPENDENT TRUSTEE FUNDS TCW/DW FUNDS FUNDS
- ------------------------------- ---------------- ---------------- ------------------
<S> <C> <C> <C>
Michael Bozic ................. $120,150 -- $120,150
Edwin J. Garn ................. 132,450 -- 132,450
Wayne E. Hedien ............... 132,350 -- 132,350
Dr. Manuel H. Johnson ......... 128,400 $62,331 190,731
Michael E. Nugent ............. 132,450 62,131 194,581
John L. Schroeder ............. 132,450 64,731 197,181
</TABLE>
As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds have adopted a retirement program under which
an Independent Trustee who retires after serving for at least five years (or
such lesser period as may be determined by the Board) as an Independent
Director or Trustee of any Morgan Stanley Dean Witter Fund that has adopted the
retirement program (each such Fund referred to as an "Adopting Fund" and each
such Trustee referred to as an "Eligible Trustee") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation
plus 0.5036667% of such Eligible compensation for each full month of service as
an Independent Director or Trustee of any Adopting Fund in excess of five years
up to a maximum of 60.44% after ten years of service. The foregoing percentages
may be changed by the Board.(1) "Eligible Compensation" is one-fifth of the
total compensation earned by such Eligible Trustee for service to the Adopting
Fund in the five year period prior to the date of the Eligible Trustee's
retirement. Benefits under the retirement program are not secured or funded by
the Adopting Funds.
- ----------
(1) An Eligible Trustee may elect alternative payments of his or her
retirement benefits based upon the combined life expectancy of the
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. In addition, the Eligible Trustee may elect that
the surviving spouse's periodic payment of benefits will be equal to a
lower percentage of the periodic amount, when both spouses were alive.
The amount estimated to be payable under this method, through the
remainder of the later of the lives of the Eligible Trustee and spouse,
will be the actuarial equivalent of the Regular Benefit.
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<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 55 Morgan Stanley Dean Witter Funds for the
calendar year ended December 31, 1998, and the estimated retirement benefits
for the Independent Trustees, to commence upon their retirement, from the 55
Morgan Stanley Dean Witter Funds as of the calendar year ended December 31,
1998.
RETIREMENT BENEFITS FROM ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
RETIREMENT ESTIMATED
BENEFITS ANNUAL
ESTIMATED ACCRUED AS BENEFITS UPON
CREDITED YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
NAME OF RETIREMENT ELIGIBLE ADOPTING ADOPTING
INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- ------------------------------- ---------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Michael Bozic ................. 10 60.44% $22,377 $52,250
Edwin J. Garn ................. 10 60.44 35,225 52,250
Wayne E. Hedien ............... 9 51.37 41,979 44,413
Dr. Manuel H. Johnson ......... 10 60.44 14,047 52,250
Michael E. Nugent ............. 10 60.44 25,336 52,250
John L. Schroeder ............. 8 50.37 45,117 44,343
</TABLE>
- ----------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------
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.
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: 0.40% of average
daily net assets. The Investment Manager has undertaken to assume all expenses
of the Fund (except for any brokerage fees) and to waive the compensation
provided for in its Management Agreement with the Fund until such time as the
Fund attains $50 million of net assets or until , 1999, whichever occurs
first. The Investment Manager has permanently undertaken to cap total expenses
of the Fund (other than brokerage fees) at 0.50% of average daily net assets.
The Investment Manager has retained its wholly-owned subsidiary, Services
Company, to perform administrative services for the Fund.
14
<PAGE>
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.
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
15
<PAGE>
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 INDEPENDENT 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.
PricewaterhouseCoopers LLP serves as the independent accountants of the
Fund. The independent accountants are responsible for auditing the annual
financial statements of the Fund.
(3) AFFILIATED PERSONS
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.
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
16
<PAGE>
a profit to the dealer. 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.
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.
17
<PAGE>
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 Fund's shares are offered at "net asset value," which is based on the
value of the Fund's portfolio securities.
Net asset value per share is calculated by dividing the value of the
Fund's securities and other assets, less the liabilities, by the number of
shares of that Class outstanding.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange is valued at its latest sale price on that exchange, prior to
the time when assets are valued; if there were no sales that day, the security
is valued at the latest bid price (in cases where a security is traded on more
than one exchange, the security is valued on the exchange designated as the
primary market pursuant to procedures adopted by the Trustees); and (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest bid price. When market quotations
are not readily available, including circumstances under which it is determined
by the Investment Manager that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Fund's Trustees. For valuation purposes, quotations of
foreign portfolio securities, other assets and liabilities and forward
contracts stated in foreign currency are translated into U.S. dollar
equivalents at the prevailing market rates prior to the close of the New York
Stock Exchange.
18
<PAGE>
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.
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.
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.
19
<PAGE>
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. 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.
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
20
<PAGE>
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 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 recognized organizations.
XI. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EXPERTS. The Statement of Assets and Liabilities of the Trust at May 19,
1999 included in this Statement of Additional Information and incorporated by
reference in the Prospectus has been so included and incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
* * * * *
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from
the SEC.
21
<PAGE>
DISCOVER BROKERAGE INDEX SERIES--DISCOVER BROKERAGE S&P 500 FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 14, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Cash .................................................................... $100,000
Deferred offering costs (Note 1) ........................................ 68,000
--------
Total Assets .......................................................... 168,000
--------
LIABILITIES:
Offering costs payable (Note 1) ......................................... 68,000
Commitments (Notes 1 and 2) ............................................. --
--------
Total Liabilities ..................................................... 68,000
--------
Net Assets ............................................................ $100,000
========
NET ASSET VALUE PER SHARE,
10,000 shares outstanding (unlimited authorized of $.01 par value)..... $ 10.00
========
</TABLE>
- ----------
NOTE 1--Discover Brokerage Index Series (the "Trust") was organized as a
Massachusetts business trust on October 13, 1998. Discover Brokerage S&P 500
Fund (the "Fund") is the first investment portfolio of the Trust. To date the
Fund has had no transactions other than those relating to organizational
matters and the sale of 10,000 shares of beneficial interest for $100,000 to
Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager"), a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW"). The Fund
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as a no load, diversified, open-end management investment company. The
investment objective of the Fund is to provide investment results that, before
expenses, correspond to the total return of the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500 Index"). The Fund seeks to achieve its objective by
investing at least 80% of its total assets in common stocks included in the S&P
500 Index. Estimated organizational expenses of the Fund in the amount of
approximately $20,000, incurred prior to the offering of the Fund's shares,
will be absorbed by the Investment Manager. It is currently estimated that the
Investment Manager will incur and be reimbursed approximately $68,000 by the
Fund in offering costs. Actual costs could differ from these estimates.
Offering costs will be deferred and amortized by the Fund on the straight-line
method over the period of benefit of approximately one year or less from the
date of commencement of operations.
NOTE 2--The Fund has retained the Investment Manager to supervise the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. Under the terms of the Investment
Management Agreement, the Investment Manager maintains certain of the Fund's
books and records and furnishes, at its own expense, such office space,
facilities, equipment, supplies, clerical help and bookkeeping and certain
legal services as the Fund may reasonably require in the conduct of its
business. In addition, the Investment Manager pays the salaries of all
personnel, including officers of the Fund, who are employees of the Investment
Manager. The Investment Manager also bears the cost of the Fund's telephone
service, heat, light, power and other utilities.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund incurred by the Investment Manager, the Fund will pay
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.40% to the Fund's average daily net assets.
The Investment Manager has undertaken to assume all operating expenses
(except for any brokerage fees) and to waive the compensation provided for in
its Investment Management Agreement until such time as the Fund has $50 million
of net assets or until six months from the date of commencement of the Fund's
operations, whichever occurs first. The Investment Manager has permanently
undertaken to cap total expenses of the Fund (other than brokerage fees) at
0.50% of average daily net assets.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment
Manager, is the transfer agent of the Fund's shares, dividend disbursing agent
for payment of dividends and distributions on Fund shares and agent for
shareholders under various investment plans.
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholder and Trustees of
Discover Brokerage Index Series--Discover Brokerage S&P 500 Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Discover Brokerage
S&P 500 Fund, a portfolio of Discover Brokerage Index Series; (hereafter
referred to as the "Fund") at June 14, 1999, in conformity with generally
accepted accounting principles. This financial statement is the responsibility
of the Fund's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
June 15, 1999
23
<PAGE>
DISCOVER BROKERAGE INDEX SERIES
PART C - OTHER INFORMATION
Item 23. Exhibits:
1. -- Declaration of Trust of Registrant, dated October 13,
1998, is incorporated by reference to Exhibit 1 of the
Registration Statement on Form N-1A, filed on October 14,
1998
2. -- Amended and Restated By-Laws of the Registrant dated
May 1, 1999
3. -- None
4. -- Form of Investment Management Agreement between Registrant
and Morgan Stanley Dean Witter Advisors Inc.
5. (a)-- Form of Distribution Agreement between Registrant and
Morgan Stanley Dean Witter Distributors Inc.
5. (b)-- Form of Selected Dealer Agreement
5. (c)-- None
6. -- None
7. -- Form of Custodian Agreement
8. (a)-- Form of Transfer Agency and Service Agreement between
Registrant and Morgan Stanley Dean Witter Trust FSB.
8. (b)-- Form of Services Agreement between Morgan Stanley Dean
Witter Advisors Inc. and Morgan Stanley Dean Witter
Services Company Inc.
9. (a)-- Opinion of Barry Fink, Esq.
9. (b)-- Opinion of Lane Altman & Owens LLP
10. -- Consent of Independent Accountants
11. -- None
12. -- Investment Letter of Morgan Stanley Dean Witter Advisors
Inc.
13. -- None
14. -- Not Applicable
15. -- None
Other -- Powers of Attorney
<PAGE>
Item 24. Persons Controlled by or Under Common Control with the Fund.
None
Item 25. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such trustee,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act, and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company Act
of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such Act
remains in effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
<PAGE>
Item 26. Business and Other Connections of Investment Advisor
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment advisor. The following information is given regarding
officers of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW
Advisors is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
Closed-End Investment Companies
(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities
Open-end Investment Companies
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
<PAGE>
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Limited Term Municipal Trust
(35) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(36) Morgan Stanley Dean Witter Market Leader Trust
(37) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(38) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(39) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(40) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(41) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(42) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(43) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(44) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(45) Morgan Stanley Dean Witter Real Estate Fund
(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
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
<PAGE>
(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 WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ------------------------------------------------
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and
Director Director of Morgan Stanley Dean Witter
Distributors Inc. ("MSDW Distributors") and
Morgan Stanley Dean Witter Trust FSB ("MSDW
Trust"); President, Chief Executive Officer and
Director of Morgan Stanley Dean Witter Services
Company Inc. ("MSDW Services"); President of the
Morgan Stanley Dean Witter Funds, TCW/DW Funds
and Discover Brokerage Index Series; Executive
Vice President and Director of Dean Witter
Reynolds Inc. ("DWR"); Director of various MSDW
subsidiaries.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter
Executive Vice President Funds and Discover Brokerage Index Series;
and Chief Investment Director of MSDW Trust.
Officer
Ronald E. Robison President MSDW Trust; Executive Vice President,
Executive Vice President, Chief Administrative Officer and Director of
Chief Administrative MSDW Services; Vice President of the Morgan
Officer and Director Stanley Dean Witter Funds, TCW/DW Funds and
Discover Brokerage Index Series.
Edward C. Oelsner, III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice
Senior Vice President, President, Secretary, General Counsel and
Secretary, General Director of MSDW Services; Senior Vice President,
Counsel and Director Assistant Secretary and Assistant General Counsel
of MSDW Distributors; Vice President, Secretary
and General Counsel of the Morgan Stanley Dean
Witter Funds, TCW/DW Funds and Discover Brokerage
Index Series.
Peter M. Avelar Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the High
Yield Group
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Mark Bavoso Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Douglas Brown
Senior Vice President
Rosalie Clough
Senior Vice President
and Director of Marketing
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Morgan Stanley Dean
Senior Vice President Witter 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, TCW/DW Funds and Discover
Brokerage Index Series.
Rajesh K. Gupta Vice President of various Morgan Stanley Dean
Senior Vice President, Witter Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative Officer -
Investments
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds and Discover Brokerage Index Series.
Kevin Hurley Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Jenny Beth Jones Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Michelle Kaufman Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the Sector
Rotation
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Jonathan R. Page Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the Money
Market Group
Ira N. Ross Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the Growth
Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
James Solloway
Senior Vice President
Jayne M. Stevlingson Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the Growth
and Income Group
Elizabeth A. Vetell
Senior Vice President
and Director of Shareholder
Communication
James F. Willison Vice President of various Morgan Stanley Dean
Senior Vice President Witter Funds.
and Director of the
Tax-Exempt Fixed
Income Group
Frank Bruttomesso First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors, the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Treasurer Distributors; Treasurer and Chief Financial and
Accounting Officer of the Morgan Stanley Dean
Witter Funds, TCW/DW Funds and Discover Brokerage
Index Series.
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Thomas Chronert
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of MSDW Services;
and Assistant Secretary Assistant Secretary of MSDW Distributors, the
Morgan Stanley Dean Witter Funds, TCW/DW Funds
and Discover Brokerage Index Series.
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First Vice President
Michael Interrante First Vice President and Controller of MSDW
First Vice President Services; Assistant Treasurer of MSDW
and Controller Distributors; First Vice President and Treasurer
of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Lou Anne D. McInnis First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors, the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
Carsten Otto First Vice President and Assistant Secretary of
First Vice President MSDW Services; Assistant Secretary of MSDW
and Assistant Secretary Distributors, the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
Ruth Rossi First Vice President and Assistant Secretary of
First Vice President and MSDW Services; Assistant Secretary of MSDW
Assistant Secretary Distributors the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
James P. Wallin
First Vice President
Robert Abreu
Vice President
Dale Albright
Vice President
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Armon Bar-Tur
Vice President
Raymond Basile
Vice President
Nancy Belza
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Dale Boettcher
Vice President
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Liam Carroll
Vice President
Philip Casparius
Vice President
Aaron Clark
Vice President
William Connerly
Vice President
David Dineen
Vice President
Sheila Finnerty Vice President of Morgan Stanley Dean Witter
Vice President Prime Income Trust
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Jeffrey D. Geffen
Vice President
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
Gail Gerrity
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Trey Hancock
Vice President
Matthew Haynes Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Peter Hermann Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
David T. Hoffman
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Carol Espejo-Kane
Vice President
Nancy Karole-Kennedy
Vice President
Doug Ketterer
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Todd Lebo Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of MSDW
Assistant Secretary Distributors, the Morgan Stanley Dean Witter
Funds, TCW/DW Funds and Discover Brokerage Index
Series.
Gerard J. Lian Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Nancy Login
Vice President
Sharon Loguercio
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of Morgan Stanley Dean Witter
Vice President Natural Resource Development Securities Inc.
Albert McGarity
Vice President
Teresa McRoberts Vice President of Morgan Stanley Dean Witter S&P
Vice President 500 Select Fund.
Mark Mitchell
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter
Vice President Natural Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Anne Pickrell Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Dawn Rorke
Vice President
John Roscoe Vice President of Morgan Stanley Dean Witter Real
Vice President Estate Fund
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Patrice Saunders
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter
Vice President Federal Securities Trust.
Peter J. Seeley Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Robert Stearns
Vice President
Naomi Stein
Vice President
Michael Strayhorn
Vice President
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
Marybeth Swisher
Vice President
Michael Thayer
Vice President
<PAGE>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- ------------------------------------------------
Robert Vanden Assem
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean
Vice President Witter Funds.
John Wong
Vice President
The principal address of MSDW Advisors, MSDW Services, MSDW
Distributors, DWR, the Morgan Stanley Dean Witter Funds, the TCW/DW Funds and
Discover Brokerage Index Series is Two World Trade Center, New York, New York
10048. The principal address of MSDW is 1585 Broadway, New York, New York 10036.
The principal address of MSDW Trust is 2 Harborside Financial Center, Jersey
City, New Jersey 07311.
Item 27. Principal Underwriters
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
<PAGE>
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Limited Term Municipal Trust
(35) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(36) Morgan Stanley Dean Witter Market Leader Trust
(37) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(38) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(39) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(40) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(41) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(42) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(43) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(44) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(45) Morgan Stanley Dean Witter Prime Income Trust
(46) Morgan Stanley Dean Witter Real Estate Fund
(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
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than Mr.
Purcell, who is a Trustee of the Registrant, none of the following persons has
any position or office with the Registrant.
<PAGE>
Name Positions and Office with MSDW Distributors
- ---- -------------------------------------------
Michael T. Gregg Vice President and Assistant Secretary.
James F. Higgins Director
Fredrick K. Kubler Senior Vice President, Assistant Secretary and
Chief Compliance Officer.
Philip J. Purcell Director
John Schaeffer Director
Charles Vadala Senior Vice President and Financial Principal.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 29. Management Services
Registrant is not a party to any such management-related service
contract.
Item 30. Undertakings
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and the State of New York on
the 16th day of June, 1999.
DISCOVER BROKERAGE INDEX SERIES
By: /s/ Barry Fink
---------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signatures Title Date
---------- ----- ----
By: /s/ Charles A. Fiumefreddo Chairman, 06/16/99
-------------------------- Chief Executive
Charles A. Fiumefreddo Officer and Trustee
By: /s/ Michael Bozic Trustee 06/16/99
--------------------------
Michael Bozic
By: /s/ Edwin J. Garn Trustee 06/16/99
--------------------------
Edwin J. Garn
By: /s/ Wayne E. Hedien Trustee 06/16/99
--------------------------
Wayne E. Hedien
By: /s/ Manuel H. Johnson Trustee 06/16/99
--------------------------
Manuel H. Johnson
By: /s/ Michael E. Nugent Trustee 06/16/99
--------------------------
Michael E. Nugent
By: /s/ Philip J. Purcell Trustee 06/16/99
--------------------------
Philip J. Purcell
By: /s/ John L. Schroeder Trustee 06/16/99
--------------------------
John L. Schroeder
By: /s/ Thomas F. Caloia Treasurer, Chief 06/16/99
-------------------------- Financial Officer
Thomas F. Caloia and Chief Accounting
Officer
<PAGE>
DISCOVER BROKERAGE INDEX SERIES
EXHIBIT INDEX
2. -- Amended and Restated By-Laws of the Registrant dated May 1, 1999
4. -- Form of Investment Management Agreement between Registrant and
Morgan Stanley Dean Witter Advisors Inc.
5.(a) -- Form of Distribution Agreement between Registrant and Morgan Stanley
Dean Witter Distributors Inc.
5.(b) -- Form of Selected Dealer Agreement
7. -- Form of Custodian Agreement
8.(a) -- Form of Transfer Agency and Service Agreement between Registrant and
Morgan Stanley Dean Witter Trust FSB.
8.(b) -- Form of Services Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Services Company Inc.
9.(a) -- Opinion of Barry Fink, Esq.
9.(b) -- Opinion of Lane Altman & Owens LLP
10. -- Consent of Independent Accountants
12. -- Investment Letter of Morgan Stanley Dean Witter Advisors Inc.
14. -- Not Applicable
Other -- Powers of Attorney
<PAGE>
BY-LAWS
OF
DISCOVER BROKERAGE
INDEX SERIES
AMENDED AND RESTATED AS OF MAY 1, 1999
ARTICLE I
DEFINITIONS
The terms "Commission," "Declaration," "Distributor," "Investment
Adviser," "Majority Shareholder Vote," "1940 Act," "Shareholder," "Shares,"
"Transfer Agent," "Trust," "Trust Property," and "Trustees" have the respective
meanings given them in the Declaration of Trust of Discover Brokerage Index
Series dated October 13, 1998, as amended from time to time.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or the
business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the provisions
of Section 16(a) of the 1940 Act, for that purpose. Meetings of Shareholders
shall also be called by the Secretary upon the written request of the holders
of Shares entitled to vote as otherwise required by Section 16(c) of the 1940
Act and to the extent required by the corporate or business statute of any
state in which the Shares of the Trust are sold, as made applicable to the
Trust by the provisions of Section 2.3 of the Declaration. Such request shall
state the purpose or purposes of such meeting and the matters proposed to be
acted on thereat. Except to the extent otherwise required by Section 16(c) of
the 1940 Act, as made applicable to the Trust by the provisions of Section 2.3
of the Declaration, the Secretary shall inform such Shareholders of the
reasonable estimated cost of preparing and mailing such notice of the meeting,
and upon payment to the Trust of such costs, the Secretary shall give notice
stating the purpose or purposes of the meeting to all entitled to vote at such
meeting. No meeting need be called upon the request of the holders of Shares
entitled to cast less than a majority of all votes entitled to be cast at such
meeting, to consider any matter which is substantially the same as a matter
voted upon at any meeting of Shareholders held during the preceding twelve
months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety
(90) days before such meeting to each Shareholder entitled to vote at such
meeting. Such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the Shareholder at his address as it
appears on the records of the Trust.
<PAGE>
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders, the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
be requisite and shall constitute a quorum for the transaction of business. In
the absence of a quorum, the Shareholders present or represented by proxy and
entitled to vote thereat shall have the power to adjourn the meeting from time
to time. The Shareholders present in person or represented by proxy at any
meeting and entitled to vote thereat also shall have the power to adjourn the
meeting from time to time if the vote required to approve or reject any
proposal described in the original notice of such meeting is not obtained (with
proxies being voted for or against adjournment consistent with the votes for
and against the proposal for which the required vote has not been obtained).
The affirmative vote of the holders of a majority of the Shares then present in
person or represented by proxy shall be required to adjourn any meeting. Any
adjourned meeting may be reconvened without further notice or change in record
date. At any reconvened meeting at which a quorum shall be present, any
business may be transacted that might have been transacted at the meeting as
originally called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy for each Share of beneficial interest of the Trust
and for the fractional portion of one vote for each fractional Share entitled
to vote so registered in his or her name on the records of the Trust on the
date fixed as the record date for the determination of Shareholders entitled to
vote at such meeting. Without limiting the manner in which a Shareholder may
authorize another person or persons to act for such Shareholder as proxy
pursuant hereto, the following shall constitute a valid means by which a
Shareholder may grant such authority:
(i) A Shareholder may execute a writing authorizing another person or
persons to act for such Shareholder as proxy. Execution may be accomplished
by the Shareholder or such Shareholder's authorized officer, director,
employee, attorney-in-fact or another agent signing such writing or causing
such person's signature to be affixed to such writing by any reasonable
means including, but not limited to, by facsimile or telecopy signature. No
written evidence of authority of a Shareholder's authorized officer,
director, employee, attorney-in-fact or other agent shall be required; and
(ii) A Shareholder may authorize another person or persons to act for such
Shareholder as proxy by transmitting or authorizing the transmission of a
telegram or cablegram or by other means of telephonic, electronic or
computer transmission to the person who will be the holder of the proxy or
to a proxy solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such telegram or cablegram or
other means of telephonic, electronic or computer transmission must either
set forth or be submitted with information from which it can be determined
that the telegram, cablegram or other transmission was authorized by the
Shareholder.
No proxy shall be valid after eleven months from its date, unless otherwise
provided in the proxy. At all meetings of Shareholders, unless the voting is
conducted by inspectors, all questions relating to the qualification of voters
and the validity of proxies and the acceptance or rejection of votes shall be
decided by the chairman of the meeting. In determining whether a telegram,
cablegram or other electronic transmission is valid, the chairman or inspector,
as the case may be, shall specify the information upon which he or she relied.
Pursuant to a resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or Officers of the Trust. Proxy
solicitations may be made in writing or by using telephonic or other electronic
solicitation procedures that include appropriate methods of verifying the
identity of the Shareholder and confirming any instructions given thereby.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority Shareholder
Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
of any
2
<PAGE>
Shareholder or his proxy shall, appoint Inspectors of Election of the meeting.
In case any person appointed as Inspector fails to appear or fails or refuses
to act, the vacancy may be filled by appointment made by the Trustees in
advance of the convening of the meeting or at the meeting by the person acting
as chairman. The Inspectors of Election shall determine the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all
votes or consents, determine the results, and do such other acts as may be
proper to conduct the election or vote with fairness to all Shareholders. On
request of the chairman of the meeting, or of any Shareholder or his proxy, the
Inspectors of Election shall make a report in writing of any challenge or
question or matter determined by them and shall execute a certificate of any
facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under Section 32 of the Business Corporation Law of
the Commonwealth of Massachusetts.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
SECTION 3.10. Presence at Meetings. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any two
(2) Trustees.
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, directed to
the Trustee at his address as it appears on the records of the Trust. Subject
to the provisions of the 1940 Act, notice or waiver of notice need not specify
the purpose of any special meeting.
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.
3
<PAGE>
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of the Trustees may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all of the Trustees entitled to
vote upon the action and such written consent is filed with the minutes of
proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of said
persons shall receive for services rendered as a Trustee of the Trust such
compensation as may be fixed by the Trustees. Nothing herein contained shall be
construed to preclude any Trustee from serving the Trust in any other capacity
and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all checks,
notes, drafts and other obligations for the payment of money by the Trust shall
be signed, and all transfer of securities standing in the name of the Trust
shall be executed, by the Chairman, the President, any Vice President or the
Treasurer or by any one or more officers or agents of the Trust as shall be
designated for that purpose by vote of the Trustees; notwithstanding the above,
nothing in this Section 4.7 shall be deemed to preclude the electronic
authorization, by designated persons, of the Trust's Custodian (as described
herein in Section 9.1) to transfer assets of the Trust, as provided for herein
in Section 9.1.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Trustee, officer, employee, or agent of the Trust. The
indemnification shall be against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by him in connection with the action, suit, or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that his conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or on behalf of the Trust to obtain a judgment or decree in its favor
by reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Trust; except that no indemnification shall be made in respect of any
claim, issue, or matter as to which the person has been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Trust,
except to the extent that the court in which the action or suit was brought, or
a court of equity in the county in which the Trust has its principal office,
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the person is fairly and reasonably
entitled to indemnity for those expenses which the court shall deem proper,
provided such Trustee, officer, employee or agent is not adjudged to be liable
by reason of his willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
therewith.
4
<PAGE>
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a) or
(b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties as described
in Section 17(h) and (i) of the Investment Company Act of 1940 ("disabling
conduct"). A person shall be deemed not liable by reason of disabling
conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the action, suit or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition thereof
if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
(3) either, (i) such person provides a security for his undertaking, or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available facts,
that there is reason to believe that such person ultimately will be
found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding the office, and shall continue as to a person who has ceased to
be a Trustee, officer, employee, or agent and inure to the benefit of the
heirs, executors and administrators of such person; provided that no
5
<PAGE>
person may satisfy any right of indemnity or reimbursement granted herein or to
which he may be otherwise entitled except out of the property of the Trust, and
no Shareholder shall be personally liable with respect to any claim for
indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such. However, in no event will the Trust purchase
insurance to indemnify any officer or Trustee against liability for any act for
which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the Trustees
of the Trust and may delegate to such committees, in the intervals between
meetings of the Trustees, any or all of the powers of the Trustees in the
management of the business and affairs of the Trust. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in place
of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Trust. The number of persons constituting any such advisory committee
shall be determined from time to time by the Trustees. The members of any such
advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of any Committee of the Trustees appointed pursuant to Section 5.1 of
these By-Laws may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all members of the Committee entitled to
vote upon the action and such written consent is filed with the records of the
proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person, but
no officer shall execute,
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acknowledge or verify any instrument in more than one capacity. The executive
officers of the Trust shall be elected annually by the Trustees and each
executive officer so elected shall hold office until his or her successor is
elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers
and may elect, or may delegate to the Chairman the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his or her successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in their
judgment, the best interests of the Trust will be served thereby, but such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. Powers and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws or, to the extent not so provided, as may be prescribed by the
Trustees; provided that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless such third
party has knowledge thereof.
SECTION 6.6. The Chairman. The Chairman shall be the chief executive
officer of the Trust, shall preside at all meetings of the Shareholders and of
the Trustees, shall have general and active management of the business of the
Trust, shall see that all orders and resolutions of the Trustees are carried
into effect and, in connection therewith, shall be authorized to delegate to
the President or to one or more Vice Presidents such of his or her powers and
duties at such times and in such manner as he or she may deem advisable, shall
be a signatory on all Annual and Semi-Annual Reports as may be sent to
Shareholders, and shall perform such other duties as the Trustees may from time
to time prescribe.
SECTION 6.7. The President. The President shall perform such duties as the
Trustees and the Chairman may from time to time prescribe and shall, in the
absence or disability of the Chairman, exercise the powers and perform the
duties of the Chairman. The President shall be authorized to delegate to one or
more Vice Presidents such of his or her powers and duties at such times and in
such manner as he or she may deem advisable.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by the
Trustees. The Vice President, or, if there shall be more than one, the Vice
Presidents in such order as may be determined from time to time by the Trustees
or the Chairman, shall, in the absence or disability of the President, exercise
the powers and perform the duties of the President, and shall perform such
other duties as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there shall be more than one, the Assistant Vice Presidents in such
order as may be determined from time to time by the Trustees or the Chairman,
shall perform such duties and have such powers as may be assigned them from
time to time by the Trustees or the Chairman.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He or she shall give, or cause to be given, notice of
all meetings of the Shareholders and special meetings of the Trustees, and
shall perform such other duties and have such powers as the Trustees or the
Chairman may from time to time prescribe. He or she shall keep in safe custody
the seal of the Trust and affix or cause the same to be affixed to any
instrument requiring it, and, when so affixed, it shall be attested by his or
her signature or by the signature of an Assistant Secretary.
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SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there shall be more than one, the Assistant Secretaries in such order as may be
determined from time to time by the Trustees or the Chairman, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such duties and have such other
powers as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He or she shall keep or cause to be kept full and
accurate accounts of receipts and disbursements in books belonging to the
Trust, and he or she shall render to the Trustees and the Chairman, whenever
any of them require it, an account of his or her transactions as Treasurer and
of the financial condition of the Trust, and he or she shall perform such other
duties as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in such order as may be
determined from time to time by the Trustees or the Chairman, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Trustees or the Chairman may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in Shares,
from any sources permitted by law, all as the Trustees shall from time to time
determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary from
the computation thereof on the records of the Trust, the Trustees shall have
power, in their discretion, to distribute as income dividends and as capital
gain distributions, respectively, amounts sufficient to enable the Trust to
avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of the
Trust by the President, or a Vice President, and countersigned by the Secretary
or an Assistant Secretary or the Treasurer and an Assistant Treasurer of the
Trust; shall be sealed with the seal; and shall contain such recitals as may be
required by law. Where any certificate is signed by a Transfer Agent or by a
Registrar, the signature of such officers and the seal may be facsimile,
printed or engraved. The Trust may, at its option, determine not to issue a
certificate or certificates to evidence Shares owned of record by any
Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Trust, such certificate or certificates shall,
nevertheless, be adopted by the Trust and be issued and
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delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall appear therein
had not ceased to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Trust alleged to have
been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or
destruction; and the Trustees may, in their discretion, require the owner of
the lost, stolen or destroyed certificate, or his legal representative, to give
to the Trust and to such Registrar, Transfer Agent and/or Transfer Clerk as may
be authorized or required to countersign such new certificate or certificates,
a bond in such sum and of such type as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be
against them or any of them on account of or in connection with the alleged
loss, theft or destruction of any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at least
five million dollars ($5,000,000) as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as
may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon between
the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to such notice and filed with the records of the meeting, whether before or
after the holding thereof, or actual attendance at the meeting of shareholders,
Trustees or committee, as the case may be, in person, shall be deemed
equivalent to the giving of such notice to such person.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting of Shareholders, or (ii) receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. The record date, in
any case, shall not be more than one hundred eighty (180) days, and in the case
of a meeting of Shareholders not less than ten (10) days, prior to the date on
which such meeting is to be held or the date on which such other particular
action requiring determination of Shareholders is to be taken, as the case may
be. In the case of a meeting of Shareholders, the meeting date set forth in the
notice to Shareholders accompanying the proxy statement shall be the date used
for purposes of calculating the 180 day or 10 day period, and any adjourned
meeting may be reconvened without a change in record date. In lieu of fixing a
record date, the Trustees may provide that the transfer books shall be closed
for a stated period but not to exceed, in any case, twenty (20) days. If the
transfer books are closed for the purpose of determining Shareholders entitled
to notice of a vote at a meeting of Shareholders, such books shall be closed
for at least ten (10) days immediately preceding the meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from time
to time provide. The seal of the Trust may be affixed to any document, and the
seal and its attestation may be lithographed, engraved or otherwise printed on
any document with the same force and effect as if it had been imprinted and
attested manually in the same manner and with the same effect as if done by a
Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement between
the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees; provided,
however, that no By-Law may be amended, adopted or repealed by the Trustees if
such amendment, adoption or repeal requires, pursuant to law, the Declaration,
or these By-Laws, a vote of the Shareholders. The Trustees shall in no event
adopt By-Laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
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ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Discover Brokerage Index Series,
dated October 13, 1998, a copy of which, together with all amendments thereto,
is on file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name 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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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the day of , 199 , by and between
Discover Brokerage Index Series, a Massachusetts business trust (hereinafter
called the "Fund"), and Morgan Stanley Dean Witter Advisors Inc., a Delaware
corporation (hereinafter called the "Investment Manager"):
WHEREAS, The Fund intends to engage in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment advisor
under the Investment Advisers Act of 1940, and engages in the business of
acting as investment advisor; and
WHEREAS, The Fund is authorized to issue shares of beneficial interest in
separate Series (the "Series") with each such Series, representing interests in
a separate portfolio of securities and other assets; and
WHEREAS, The Fund presently offers shares in one Series designated as the
Discover Brokerage S&P 500 Fund, such Series, together with all other Series,
subsequently established by the Fund with respect to which the Fund desires to
retain the Investment Manager to render management and investment advisory
services in the manner and on the terms and conditions hereinafter set forth
being collectively referred to as the "Series"; and
WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Series and, subject to the supervision of the Board of Trustees,
to supervise the investment activities of the Series as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities and commodities markets and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; shall continuously
manage the assets of the Series in a manner consistent with the investment
objectives and policies of the Series; shall determine the securities and
commodities to be purchased, sold or otherwise disposed of by the Series and
the timing of such purchases, sales and dispositions; and shall take such
further action, including the placing of purchase and sale orders on behalf of
the Series, as the Investment Manager shall deem necessary or appropriate. The
Investment Manager shall also furnish to or place at the disposal of the Fund
such of the information, evaluations, analyses and opinions formulated or
obtained by the Investment Manager in the discharge of its duties as the Fund
may, from time to time, reasonably request.
In the event the Fund establishes one or more Series other than the
Discover Brokerage S&P 500 Fund with respect to which it desires to retain the
Investment Manager to render investment advisory services hereunder, it shall
notify the Investment Manager in writing. If the Investment Manager is willing
to render such services, it shall notify the Fund in writing, whereupon such
Series shall become a Series hereunder.
2. The Investment Manager shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Manager shall be deemed to
include persons employed or otherwise retained by the Investment Manager to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and scientific developments,
and such other information, advice and assistance as the Investment Manager may
desire.
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The Investment Manager shall, as agent for the Fund, maintain the Fund's
records and books of account (other than those maintained by the Fund's
transfer agent, registrar, custodian and other agents). All such books and
records so maintained shall be the property of the Fund and, upon request
therefor, the Investment Manager shall surrender to the Fund such of the books
and records so requested.
3. The Fund will, from time to time, furnish or otherwise make available
to the Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Investment
Manager may reasonably require in order to discharge its duties and obligations
hereunder.
4. The Investment Manager shall bear the cost of rendering the investment
management and supervisory services to be performed by it under this Agreement,
and shall, at its own expense, pay the compensation of the officers and
employees, if any, of the Fund who are also directors, officers or employees of
the Investment Manager, and provide such office space, facilities and equipment
and such clerical help and bookkeeping services as the Fund shall reasonably
require in the conduct of its business. The Investment Manager shall also bear
the cost of telephone service, heat, light, power and other utilities provided
to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses
of the Fund, including without limitation, fees pursuant to any plan of
distribution that the Fund may adopt; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities or commodities and other
property, and any stock transfer or dividend agent or agents appointed by the
Fund; brokers' commissions chargeable to the Fund in connection with portfolio
transactions to which the Fund is a party; all taxes, including securities or
commodities issuance and transfer taxes, and fees payable by the Fund to
federal, state or other governmental agencies; the cost and expense of
engraving or printing certificates representing shares of the Fund; all costs
and expenses in connection with the registration and maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions (including filing fees
and legal fees and disbursements of counsel); the cost and expense of printing,
including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of trustees or members of any advisory board or
committee who are not employees of the Investment Manager or any corporate
affiliate of the Investment Manager; all expenses incident to the payment of
any dividend, distribution, withdrawal or redemption, whether in shares or in
cash; charges and expenses of any outside service used for pricing of the
Fund's shares; charges and expenses of legal counsel, including counsel to the
Trustees of the Fund who are not interested persons (as defined in the Act) of
the Fund or the Investment Manager, and of independent accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Trustees) of the Fund which
inure to its benefit; extraordinary expenses (including but not limited to
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation
unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, each Series of the Fund shall pay
to the Investment Manager monthly compensation determined by applying an annual
rate or rates to the daily net assets of the respective Series determined as of
the close of each business day; the rate so applied to the Discover Brokerage
Index Series shall be 0.40% of the Series daily net assets. Except as
hereinafter set forth, compensation under this Agreement shall be calculated
and accrued daily and the amounts of the daily accruals shall be paid monthly
as promptly as possible for the preceding month. Such calculations shall be
made by applying 1/365ths of the annual rates to the net assets of the
respective Series each day determined as of the close of business on that day
or the last previous business day. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day
of a month, compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as
set forth above.
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7. The Investment Manager will use its best efforts in the supervision and
management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund
or any of its investors for any error of judgment or mistake of law or for any
act or omission by the Investment Manager or for any losses sustained by the
Fund or its investors.
8. Nothing contained in this Agreement shall prevent the Investment
Manager or any affiliated person of the Investment Manager from acting as
investment advisor or manager for any other person, firm or corporation and
shall not in any way bind or restrict the Investment Manager or any such
affiliated person from buying, selling or trading any securities or commodities
for their own accounts or for the account of others for whom they may be
acting. Nothing in this Agreement shall limit or restrict the right of any
Director, officer or employee of the Investment Manager to engage in any other
business or to devote his or her time and attention in part to the management
or other aspects of any other business whether of a similar or dissimilar
nature.
9. This Agreement shall remain in effect until April 30, 2000 and from
year to year thereafter with respect to each Series provided such continuance
with respect to a Series is approved at least annually by the vote of holders
of a majority, as defined in the Investment Company Act of 1940, as amended
(the "Act"), of the outstanding voting securities of such Series or by the
Trustees of the Fund; provided, that in either event such continuance is also
approved annually by the vote of a majority of the Trustees of the Fund who are
not parties to this Agreement or "interested persons" (as defined in the Act)
of any such party, which vote must be cast in person at a meeting called for
the purpose of voting on such approval; provided, however, that (a) the Fund
may, at any time and without the payment of any penalty, terminate this
Agreement upon thirty days' written notice to the Investment Manager, either by
majority vote of the Trustees of the Fund or, with respect to a Series, by the
vote of a majority of the outstanding voting securities of such Series; (b)
this Agreement shall immediately terminate in the event of its assignment (to
the extent required by the Act and the rules thereunder) unless such automatic
terminations shall be prevented by an exemptive order of the Securities and
Exchange Commission; and (c) the Investment Manager may terminate this
Agreement without payment of penalty on thirty days' written notice to the
Fund. Any notice under this Agreement shall be given in writing, addressed and
delivered, or mailed post-paid, to the other party at the principal office of
such party.
10. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Agreement to the
requirements of applicable federal laws or regulations, but neither the Fund
nor the Investment Manager shall be liable for failing to do so.
11. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
12. The Investment Manager and the Fund each agree that the name "Discover
Brokerage," which comprises a component of the Fund's name, is a property right
of Discover Brokerage Direct, Inc. The Fund agrees and consents that (i) it
will only use the name "Discover Brokerage" as a component of its name and for
no other purpose, (ii) it will not purport to grant to any third party the
right to use the name "Discover Brokerage" for any purpose, (iii) the
Investment Manager or its parent, Morgan Stanley Dean Witter & Co., or any
corporate affiliate of the Investment Manager's parent, 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, (iv) at the request of the Investment Manager or its
parent, the Fund will take such action as may be required to provide its
consent to the use of the name "Discover Brokerage," or any combination or
abbreviation thereof, by the Investment Manager or its parent or any corporate
affiliate of the Investment Manager's parent, or by any person to whom the
Investment Manager or its parent or any corporate affiliate of the Investment
Manager's parent shall have granted the right to such use, and (v) upon the
termination of any investment advisory agreement into which the
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Investment Manager and the Fund may enter, or upon termination of affiliation
of the Investment Manager with its parent, the Fund shall, upon request by the
Investment Manager or its parent, cease to use the name "Discover Brokerage" as
a component of its name, and shall not use the name, or any combination or
abbreviation thereof, as a part of its name or for any other commercial
purpose, and shall cause its officers, trustees and shareholders to take any
and all actions which the Investment Manager or its parent may request to
effect the foregoing and to reconvey to the Investment Manager or its parent
any and all rights to such name.
13. The Declaration of Trust establishing Discover Brokerage Index Series,
dated October 13, 1998, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name 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.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on , 199 in New York, New York.
DISCOVER BROKERAGE INDEX SERIES
By:
-------------------------------------
Attest:
- ---------------------------------
MORGAN STANLEY DEAN WITTER ADVISORS INC.
By:
-------------------------------------
Attest:
- ---------------------------------
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DISCOVER BROKERAGE INDEX SERIES
DISTRIBUTION AGREEMENT
AGREEMENT made as of this day of , 199 between Discover
Brokerage Index Series, an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (the "Fund"), and Morgan Stanley Dean
Witter Distributors Inc., a Delaware corporation (the "Distributor");
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end investment company and it is in the
interest of the Fund to offer its shares for sale continuously; and
WHEREAS, the Fund is authorized to issue shares of beneficial interest in
separate portfolios or series (the "Series") with each such Series representing
interests in a separate portfolio of securities and other assets; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's transferable
shares of beneficial interest, of $.01 par value ("Shares"), in order to
promote the growth of the Fund and facilitate the distribution of its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Distributor. (a) The Fund hereby appoints
the Distributor as the principal underwriter of the Fund to sell Shares to the
public on the terms set forth in this Agreement and the Fund's prospectus and
the Distributor hereby accepts such appointment and agrees to act hereunder.
The Fund, during the term of this Agreement, shall sell Shares to the
Distributor upon the terms and conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from the Fund and to sell Shares as principal to investors, and
securities dealers, including Discover Brokerage Direct, Inc. ("Discover
Brokerage"), an affiliate of the Distributor, upon the terms described herein
and in the Fund's prospectus (the "Prospectus") and statement of additional
information included in the Fund's registration statement (the "Registration
Statement") most recently filed from time to time with the Securities and
Exchange Commission (the "SEC") and effective under the Securities Act of 1933,
as amended (the "1933 Act"), and 1940 Act or as said Prospectus may be
otherwise amended or supplemented and filed with the SEC pursuant to Rule 497
under the 1933 Act.
SECTION 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive principal underwriter and distributor of the Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by the Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund; or
(ii) pursuant to reinvestment of dividends or capital gains distributions; or
(iii) pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. Purchase of Shares from the Fund. (a) The Distributor shall
have the right to buy from the Fund the Shares needed, but not more than the
Shares needed (except for clerical errors in transmission), to fill
unconditional orders for Shares placed with the Distributor by investors. The
price which the Distributor shall pay for the Shares so purchased from the Fund
shall be the net asset value, determined as set forth in the Prospectus, used
in determining the public offering price on which such orders were based.
(b) The Shares are to be resold by the Distributor at the public offering
price, as set forth in the Prospectus, to investors or to securities dealers
including Discover Brokerage, who have entered into selected dealer agreements
with the Distributor pursuant to Section 7 ("Selected Dealers").
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(c) The Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(e) hereof. The Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of the Fund, makes it impracticable to sell the Shares.
(d) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that the
Fund will not arbitrarily or without reasonable cause refuse to accept orders
for the purchase of Shares. The Distributor will confirm orders upon their
receipt, and the Fund (or its agent) upon receipt of payment therefor and
instructions will deliver share certificates for such Shares or a statement
confirming the issuance of Shares. Payment shall be made to the Fund in New
York Clearing House funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its agent).
(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to the Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. Repurchase or Redemption of Shares. (a) Any of the outstanding
Shares may be tendered for redemption at any time, and the Fund agrees to
redeem the Shares so tendered in accordance with the applicable provisions set
forth in the Prospectus. The price to be paid to redeem the Shares shall be
equal to the net asset value determined as set forth in the Prospectus. All
payments by the Fund hereunder shall be made in the manner set forth below.
Upon any redemption of Shares the Fund shall pay the total amount of the
redemption price in accordance with applicable provisions of the Prospectus in
New York Clearing House funds.
(b) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in the
Prospectus. The Distributor shall promptly transmit to the transfer agent of
the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(c) The Distributor is authorized, as agent for the Fund, to repurchase
Shares held in a shareholder's account with the Fund for which no share
certificate has been issued, upon the telephonic or telegraphic request of the
shareholder, or at the discretion of the Distributor. The Distributor shall
promptly transmit to the transfer agent of the Fund, for redemption, all such
orders for repurchase of shares. Payment for shares repurchased may be made by
the Fund to the Distributor for the account of the shareholder. The Distributor
shall be responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
(d) With respect to Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of the Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and
to instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer, and
shall maintain, a record of such orders. The Distributor is further authorized
to obtain from the Fund, and shall maintain, a record of payments made directly
to the Selected Dealer on behalf of the Distributor.
(e) Redemption of Shares or payment by the Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as
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a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
SECTION 5. Duties of the Fund. (a) The Fund shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use in connection with the
distribution of the Shares, including one certified copy, upon request by the
Distributor, of all financial statements prepared by the Fund and examined by
independent accountants. The Fund shall, at the expense of the Distributor,
make available to the Distributor such number of copies of the Prospectus as
the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) The Fund shall use its best efforts to pay the filing fees for an
appropriate number of the Shares for sale under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by the Fund at
any time in its discretion. As provided in Section 8(c) hereof, such filing
fees shall be borne by the Fund. The Distributor shall furnish any information
and other material relating to its affairs and activities as may be required by
the Fund in connection with the sale of its Shares in any state.
(d) The Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of annual and
interim reports of the Fund.
SECTION 6. Duties of the Distributor. (a) The Distributor shall sell
Shares of the Trust through Discover Brokerage and may sell Shares through
other securities dealers and shall devote reasonable time and effort to promote
sales of the Shares, but shall not be obligated to sell any specific number of
Shares. The services of the Distributor hereunder are not exclusive and it is
understood that the Distributor may act as principal underwriter for other
registered investment companies so long as the performance of its obligations
hereunder is not impaired thereby. It is also understood that Selected Dealers,
including Discover Brokerage, may also sell shares for other registered
investment companies.
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the Fund.
(c) The Distributor agrees that it will comply with the applicable terms
and limitations of the Rules of the Association of the National Association of
Securities Dealers, Inc. ("NASD").
SECTION 7. Selected Dealers Agreements. (a) The Distributor shall have the
right to enter into selected dealers agreements with Selected Dealers for the
sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Fund. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public
offering price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell Shares
only to such Selected Dealers as are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by the
Fund, for the confirmation of sales of Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. Payment of Expenses. (a) The Distributor shall bear all
expenses incurred by it in connection with its duties and activities under this
Agreement including the payment to Selected Dealers of any service fees and
other expenses for sales of the Fund's shares (except such expenses as are
specifically undertaken herein by the Fund) incurred or paid by Selected
Dealers, including Discover
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Brokerage. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any supplementary sales literature used by the
Distributor or furnished by it for use by Selected Dealers in connection with
the offering of the Shares for sale. Any expenses of advertising incurred in
connection with such offering will also be the obligation of the Distributor.
(b) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Trustees of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund or
the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and Prospectuses
and all amendments and supplements thereto, and the expense of preparing,
printing, mailing and otherwise distributing prospectuses and statements of
additional information, annual or interim reports or proxy materials to
shareholders.
(c) The Fund shall pay the filing fees and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying the Fund as a
broker or dealer, in such states of the United States or other jurisdictions as
shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.
SECTION 9. Indemnification. (a) The Fund shall indemnify and hold harmless
the Distributor and each person, if any, who controls the Distributor against
any loss, liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or
expense and reasonable counsel fees incurred in connection therewith) arising
by reason of any person acquiring any Shares, which may be based upon the 1933
Act, or on any other statute or at common law, on the ground that the
Registration Statement or related Prospectus and Statements of Additional
Information, as from time to time amended and supplemented, or the annual or
interim reports to shareholders of the Fund, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, unless
such statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the indemnity of the
Fund in favor of the Distributor and any such controlling persons to be deemed
to protect the Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any such
controlling persons, as the case may be, shall have notified the Fund in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve it from any liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Fund will be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the defense, of any
suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or trustees in connection with the issuance or sale of the Shares.
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(b) (i) The Distributor shall indemnify and hold harmless the Fund and
each of its Trustees and officers and each person, if any, who controls the
Fund against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus and Statement of Additional Information, as from time to time
amended, or the annual or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless the Fund and the
Fund's transfer agent, individually and in its capacity as the Fund's transfer
agent, from and against any claims, damages and liabilities which arise as a
result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to Section 4(d) hereof and pay the proceeds to, or as directed by, the
Distributor for the account of each shareholder whose Shares are so redeemed
and (2) register Shares in the names of investors, confirm the issuance thereof
and receive payment therefor pursuant to Section 3(e).
(iii) In case any action shall be brought against the Fund or any person
so indemnified by this subsection 9(b) in respect of which indemnity may be
sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall
have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages, liabilities or expenses
(or actions in respect thereof) referred to herein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Fund on the one hand and the Distributor on
the other from the offering of the Shares. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law, then
each indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Fund on the one hand and
the Distributor on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Fund on the one hand and
the Distributor on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received
by the Fund bear to the total compensation received by the Distributor, in each
case as set forth in the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Fund or the Distributor
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Fund and the
Distributor agree that it would not be just and equitable if contribution were
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such claim. Notwithstanding the provisions of this subsection
(c), the Distributor shall not be required to contribute any amount in excess
of the amount by which the total price at which the Shares distributed by it to
the public were offered to the public exceeds the amount of any damages which
it has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
SECTION 10. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until April 30, 1999, and thereafter, but only so long as such
continuance is specifically approved at least annually by (i) the Board of
Trustees of the
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Fund, or by the vote of a majority of the outstanding voting securities of the
Fund, cast in person or by proxy, and (ii) a majority of those Trustees who are
not parties to this Agreement or interested persons of any such party and who
have no direct or indirect financial interest in this Agreement cast in person
at a meeting called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Trustees of the Fund, by a majority of the Trustees of the Fund
who are not interested persons of the Fund and who have no direct or indirect
interest in this Agreement, or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Trustees
of the Fund, or by the vote of a majority of outstanding voting securities of
the Fund, and (ii) a majority of those Trustees of the Fund who are not parties
to this Agreement or interested persons of any such party and who have no
direct or indirect financial interest in this Agreement, cast in person at a
meeting called for the purpose of voting on such approval.
SECTION 12. Governing Law. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
SECTION 13. Personal Liability. The Declaration of the Trust establishing
Discover Brokerage Index Series, dated October 13, 1998, a copy of which,
together with all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that the
name 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.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
DISCOVER BROKERAGE INDEX SERIES
By:
------------------------------------
MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.
By:
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DISCOVER BROKERAGE INDEX SERIES
FORM OF SELECTED DEALERS AGREEMENT
Gentlemen:
Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") has a
distribution agreement (the "Distribution Agreement") with Discover Brokerage
Index Series, a Massachusetts business trust (the "Fund"), pursuant to which it
acts as the Distributor for the sale of the Fund's shares of common stock, par
value $0.01 per share (the "Shares"). Under the Distribution Agreement, the
Distributor has the right to distribute Shares for resale.
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to
the public are registered under the Securities Act of 1933, as amended. You
have received a copy of the Distribution Agreement between us and the Fund
and reference is made herein to certain provisions of such Distribution
Agreement. The terms used herein, including "Prospectus" and "Registration
Statement" of the Fund and "Selected Dealer" shall have the same meaning in
this Agreement as in the Distribution Agreement. As principal, we offer to
sell shares to you, as a Selected Dealer, upon the following terms and
conditions:
1. In all sales of Shares to the public you shall act as dealer for your
own account, and in no transaction shall you have any authority to act as
agent for the Fund, for us or for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order, as set forth in the
current Prospectus. The procedure relating to the handling of orders shall be
subject to instructions which we or the Fund shall forward from time to time
to you. All orders are subject to acceptance or rejection by the Distributor
or the Fund in the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable net asset values
and subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and
offers to sell Shares you will furnish to each person to whom any such sale
or offer is made a copy of the Prospectus (as then amended or supplemented)
and will not furnish to any person any information relating to the Shares,
which is inconsistent in any respect with the information contained in the
Prospectus (as then amended or supplemented) or cause any advertisement to be
published by radio or television or in any newspaper or posted in any public
place or use any sales promotional material without our consent and the
consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund and
personal services to Fund shareholders by paying you a sales charge and/or
other commissions, which may be in the form of a gross sales credit and/or an
annual residual commission) and/or a service fee, under the terms and in the
percentage amounts as may be in effect from time to time by the Distributor.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding; e.g., by a change in
the "net asset value" from that used in determining the offering price to
your customers.
6. If any Shares sold to you under the terms of this Agreement are
repurchased by us for the account of the Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and
refund to us, any commission received by you with respect to such Shares.
7. No person is authorized to make any representations concerning the
Shares or the Fund except those contained in the current Prospectus and in
such printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus. In purchasing Shares through us you shall
rely solely on the representations contained in the Prospectus and
supplemental information above mentioned. Any printed information which we
furnish you other than the Prospectus and the Fund's periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no
liability or responsibility to you in these respects unless expressly assumed
in connection therewith.
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8. You agree to deliver to each of the purchasers from you a copy of the
then current Prospectus at or prior to the time of offering or sale and you
agree thereafter to deliver to such purchasers copies of the annual and
interim reports and proxy solicitation materials of the Fund. You further
agree to endeavor to obtain proxies from such purchasers. Additional copies
of the Prospectus, annual or interim reports and proxy solicitation materials
of the Fund will be supplied to you in reasonable quantities upon request.
9. You are hereby authorized (i) to place orders directly with the Fund or
its agent for shares of the Fund to be sold by us subject to the applicable
terms and conditions governing the placement of orders for the purchase of
Fund shares, as set forth in the Distribution Agreement, and (ii) to tender
shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in the Distribution Agreement.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Shares entirely. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Fund shares. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us herein.
Nothing contained in this paragraph is intended to operate as, and the
provisions of this paragraph shall not in any way whatsoever constitute, a
waiver by you of compliance with any provision of the Securities Act of 1933,
as amended, or of the rules and regulations of the Securities and Exchange
Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States,
we both hereby agree to abide by the Rules of Fair Practice of such
Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Shares have been qualified for sale under, or are exempt from
the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. All communications to us should be sent to the address shown below.
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
15. This Agreement shall become effective as of the date of your
acceptance hereof, provided that you return to us promptly a signed and dated
copy.
Morgan Stanley Dean Witter
Distributors Inc.
By:
-----------------------------------
(Authorized Signature)
Please return one signed copy of this agreement to:
Morgan Stanley Dean Witter Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: Dean Witter Reynolds Inc.
By:
- ------------------------------------
Mitchell M. Merin
Address: Two World Trade Center
New York, NY 10048
Date: February 9, 1999
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CUSTODY AGREEMENT
Agreement made as of this day of , 1999, between DISCOVER BROKERAGE
INDEX SERIES, a Massachusetts business trust organized and existing under the
laws of the Commonwealth of Massachusetts, having its principal office and place
of business at Two World Trade Center, New York, New York 10048 (hereinafter
called the "Fund"), and THE BANK OF NEW YORK, a New York corporation authorized
to do a banking business, having its principal office and place of business at
One Wall Street, New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, shall
have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices and
Certifications described in the Exhibits delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether or not such
person is an Officer or employee of the Fund, duly authorized by the Board of
Trustees of the Fund to give Oral Instructions and Written Instructions on
behalf of the Fund and listed in the Certificate annexed hereto as Appendix A or
such other Certificate as may be received by the Custodian from time to time,
provided that each person who is designated in any such Certificate as an
"Officer of DWTC" shall be an Authorized Person only for purposes of Articles
XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
4. "Call Option" shall mean an exchange traded option with respect to
Securities other than Index, Futures
<PAGE>
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and payment of the exercise price, as specified therein, to purchase
from the writer thereof the specified underlying instruments, currency, or
Securities.
5. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is actually received (irrespective of constructive receipt)
by the Custodian and signed on behalf of the Fund by any two Officers, and the
term Certificate shall also include Instructions.
6. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of any Put
Option guarantee letter or similar document described in paragraph 8 of
Article V herein.
8. "Composite Currency Unit" shall mean the European Currency Unit or
any other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
9. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
10. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.
11. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a
resolution of the Fund's Board of Trustees specifically approving deposits
therein by the Custodian.
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12. "Financial Futures Contract" shall mean the firm commitment to buy
or sell financial instruments on a U.S. commodities exchange or board of trade
at a specified future time at an agreed upon price.
13. "Futures Contract" shall mean a Financial Futures Contract and/or
Index Futures Contracts.
14. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
15. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.
16. "Index Futures Contract" shall mean a bilateral agreement pursuant
to which the parties agree to take or make delivery of an amount of cash equal
to a specified dollar amount times the difference between the value of a
particular index at the close of the last business day of the contract and the
price at which the futures contract is originally struck.
17. "Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
18. "Instructions" shall mean instructions communications transmitted
by electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission signed by an Officer and tested telex.
19. "Investment Company Act of 1940" shall mean the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder.
20. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or a Depository shall be deemed to have been deposited
in, or
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withdrawn from, a Margin Account upon the Custodian's effecting an appropriate
entry in its books and records.
21. "Money Market Security" shall mean all instruments and obligations
commonly known as a money market instruments, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale, including, without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest and/or
principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to Securities and bank time deposits.
22. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
23. "Officers" shall mean the President, any Vice President, the
Secretary, the Clerk, the Treasurer, the Controller, any Assistant Secretary,
any Assistant Clerk, any Assistant Treasurer, and any other person or persons,
whether or not any such other person is an officer or employee of the Fund, but
in each case only if duly authorized by the Board of Trustees of the Fund to
execute any Certificate, instruction, notice or other instrument on behalf of
the Fund and listed in the Certificate annexed hereto as Appendix B or such
other Certificate as may be received by the Custodian from time to time;
provided that each person who is designated in any such Certificate as holding
the position of "Officer of DWTC" shall be an Officer only for purposes of
Articles XII and XIII hereof.
24. "Option" shall mean a Call Option, Covered Call Option, Index
Option and/or a Put Option.
25. "Oral Instructions" shall mean verbal instructions actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an
Authorized Person.
26. "Put Option" shall mean an exchange traded option with respect to
instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the writer
thereof for the exercise price.
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<PAGE>
27. "Reverse Repurchase Agreement" shall mean an agreement pursuant
to which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
28. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Index Options, Index Futures
Contracts, Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, over the
counter options on Securities, common stocks and other securities having
characteristics similar to common stocks, preferred stocks, debt obligations
issued by state or municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds, industrial bonds
and industrial development bonds), bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe for the same, or
evidencing or representing any other rights or interest therein, or rights to
any property or assets.
29. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically al-
located to such Series shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.
30. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund, except that if the Fund does not have more than one portfolio, "Series"
shall mean the Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only one portfolio.
31. "Shares" shall mean the shares of beneficial interest of the Fund
and its Series.
32. "Transfer Agent" shall mean Dean Witter Trust Company, a New Jersey
limited purpose trust company, its successors and assigns.
33. "Transfer Agent Account" shall mean any account in the name of the
Transfer Agent maintained with The Bank of New York pursuant to a Cash
Management and Related Services Agreement between The Bank of New York and the
Transfer Agent.
34. "Written Instructions" shall mean written communications actually
received (irrespective of constructive receipt)
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by the Custodian from an Authorized Person or from a person reasonably believed
by the Custodian to be an Authorized Person by telex or any other such system
whereby the receiver of such communications is able to verify by codes or
otherwise with a reasonable degree of certainty the identity of the sender of
such communication.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and money at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated, and the Custodian shall not
be responsible for any Securities or money not so delivered. The Custodian shall
physically segregate, keep and maintain the Securities of the Series separate
and apart from each other Series and from other assets held by the Custodian.
Except as otherwise expressly provided in this Agreement, the Custodian will not
be responsible for any Securities and money not actually received by it, unless
the Custodian has been negligent or has engaged in willful misconduct with
respect thereto. The Custodian will be entitled to reverse any credits of money
made on the Fund's behalf where such credits have been previously made and money
are not finally collected, unless the Custodian has been negligent or has
engaged in willful misconduct with respect thereto. The Fund shall deliver to
the Custodian a certified resolution of the Board of Trustees of the Fund,
substantially in the form of Exhibit A hereto, approving, authorizing and
instructing the Custodian on a continuous and on-going basis to deposit in the
Book-Entry System all Securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated and to utilize the
Book-Entry System to the extent possible in connection with its
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<PAGE>
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities and
deliveries and returns of Securities collateral. Prior to a deposit of
Securities specifically allocated to a Series in any Depository, the Fund shall
deliver to the Custodian a certified resolution of the Board of Trustees of the
Fund, substantially in the form of Exhibit B hereto, approving, authorizing and
instructing the Custodian on a continuous and on-going basis until instructed to
the contrary by a Certificate to deposit in such Depository all Securities
specifically allocated to such Series eligible for deposit therein, and to
utilize such Depository to the extent possible with respect to such Securities
in connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities collateral. Securities and
money deposited in either the Book-Entry System or a Depository will be
represented in accounts which include only assets held by the Custodian for
customers, including, but not limited to, accounts in which the Custodian acts
in a fiduciary or representative capacity and will be specifically allocated on
the Custodian's books to the separate account for the applicable Series. Prior
to the Custodian's accepting, utilizing and acting with respect to Clearing
Member confirmations for Options and transactions in Options for a Series as
provided in this Agreement, the Custodian shall have received a certified
resolution of the Fund's Board of Trustees, substantially in the form of Exhibit
C hereto, approving, authorizing and instructing the Custodian on a continuous
and on-going basis, until instructed to the contrary by a Certificate, to
accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series. All securities are to be held or
disposed of by the Custodian for, and subject at all times to the instructions
of, the Fund pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement, and shall have the
sole power to release and deliver Securities held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Fund with respect to such
Series. Such money will be held in such manner and account as the Fund and the
Custodian shall agree upon in writing from time to time. Money credited to a
separate account for a Series shall be subject only to drafts, orders, or
charges of the Custodian pursuant to this Agreement and shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
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<PAGE>
(b) Pursuant to Resolutions of the Fund's Board of Trustees
certified by an Officer and by the Secretary or Assistant Secretary of the
Fund setting forth the name and address of the person to whom the payment is
to be made, the Series account from which payment is to be made, the purpose for
which payment is to be made, and declaring such purpose to be a proper corporate
purpose; provided, however, that amounts representing dividends or distributions
with respect to Shares shall be paid only to the Transfer Agent Account;
(c) In payment of the fees and in reimbursement of the expenses
and liabilities of the Custodian attributable to such Series and authorized by
this Agreement; or
(d) Pursuant to Certificates to pay interest, taxes, management
fees or operating expenses (including, without limitation thereto, Board of
Trustees' fees and expenses, and fees for legal accounting and auditing
services), which Certificates set forth the name and address of the person to
whom payment is to be made, state the purpose of such payment and designate the
Series for whose account the payment is to be made.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series but held in a Depository, the Custodian shall upon such
transfer also by book-entry or otherwise identify such Securities as belonging
to such Series in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and money held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the
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<PAGE>
Book-Entry System or a Depository any Securities which it may hold hereunder and
which may from time to time be registered in the name of the Fund. The Custodian
shall hold all such Securities specifically allocated to a Series which are not
held in the Book-Entry System or in a Depository in a separate account in the
name of such Series physically segregated at all times from those of any other
person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income and dividends due or payable;
(b) Promptly give notice to the Fund and promptly present for
payment and collect the amount of money or other consideration payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix D annexed hereto, which may be amended at
any time by the Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for the Fund's
account the amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in exchange
for definitive Securities;
(e) Promptly execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be
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executed by the registered holder (if Securities are registered otherwise than
in the name of the Fund), but without indicating the manner in which proxies or
consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Promptly execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any Securities held
hereunder for the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
right, warrant or conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series in exchange
therefor such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount payable
upon Securities which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940 in connection with the purchase,
sale, settlement, closing-out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries
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specified in Certificates in connection with any such purchase, sale, writing,
settlement or closing-out upon its receipt from a broker, dealer, or futures
commission merchant of a statement or confirmation reasonably believed by the
Custodian to be in the form customarily used by brokers, dealers, or futures
commission merchants with respect to such Futures Contracts, Options, or Futures
Contract Options, as the case may be, confirming that such Security is held by
such broker, dealer or futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstanding the foregoing,
payments to or deliveries from the Margin Account and payments with respect to
Securities to which a Margin Account relates, shall be made in accordance with
the terms and conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall, notwithstanding
any provision in this Agreement to the contrary, make payment for any Futures
Contract, Option, or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the provisions of this
Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each execution of a purchase of Securities by the
Fund, other than a purchase of an Option, a Futures Contract, or a Futures
Contract Option, the Fund shall deliver to the Custodian (i) with respect to
each purchase of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money Market Securities,
a Certificate, Oral Instructions or Written Instructions, specifying with
respect to each such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount purchased and
accrued interest, if any; (d) the date of purchase and settlement; (e) the
purchase price per unit; (f) the total amount payable upon such purchase; (g)
the name of the person from whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any; and (h) the name of the
broker to whom payment is to be
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made. The Custodian shall, upon receipt of such Securities purchased by or for
the Fund, pay to the broker specified in the Certificate out of the money held
for the account of such Series the total amount payable upon such purchase,
provided that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
2. Promptly after each execution of a sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures Contract Option, or
any Reverse Repurchase Agreement, the Fund shall deliver such to the Custodian
(i) with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate, Oral Instructions or Written Instructions, specifying
with respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale and settlement; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series to the broker in
accordance with generally accepted street practices and as specified in the
Certificate upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
ARTICLE V.
OPTIONS
1. Promptly after each execution of a purchase of any Option by the
Fund other than a closing purchase transaction the Fund shall deliver to the
Custodian a Certificate specifying with respect to each Option purchased: (a)
the Series to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or Security underlying such
Option and the number of Options, or the name of the in the case of an Index
Option, the index to which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in connection
with such purchase; and (h) the name of the Clearing Member through whom such
Option was
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purchased. The Custodian shall pay, upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such Clearing Member
for the account of the Custodian (or any duly appointed and registered nominee
of the Custodian) as custodian for the Fund, out of money held for the account
of the Series to which such Option is to be specifically allocated, the total
amount payable upon such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Certificate.
2. Promptly after the execution of a sale of any Option purchased by
the Fund, other than a closing sale transaction, pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the instrument, currency, or Security
underlying such Option and the number of Options, or the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Index
Option, the index to which such Option relates and the number of Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which previously
supplied the confirmation described in preceding paragraph 1 of this Article
with respect to such Option against payment to the Custodian of the total amount
payable to the Fund, provided that the same conforms to the total amount payable
as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the money held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased
by the Fund pursuant to paragraph 1 hereof,
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the Fund shall deliver to the Custodian a Certificate specifying with respect
to such Put Option: (a) the Series to which such Put Option was specifically
allocated; (b) the name of the issuer and the title and number of shares subject
to the Put Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to be paid to
the Fund upon such exercise; and (g) the name of the Clearing Member through
whom such Put Option was exercised. The Custodian shall, upon receipt of the
amount payable upon the exercise of the Put Option, deliver or direct a
Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Index Option: (a)
the Series to which such Index Option was specifically allocated; (b) the type
of Index Option (put or call); (c) the number of Options being exercised; (d)
the index to which such Option relates; (e) the expiration date; (f) the
exercise price; (g) the total amount to be received by the Fund in connection
with such exercise; and (h) the Clearing Member from whom such payment is to be
received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct a
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct
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<PAGE>
the Depository to deliver, the Securities subject to such Covered Call Option
and specifying: (a) the Series for which such Covered Call Option was written;
(b) the name of the issuer and the title and number of shares subject to the
Covered Call Option; (c) the Clearing Member to whom the underlying Securities
are to be delivered; and (d) the total amount payable to the Fund upon such
delivery. Upon the return and/or cancellation of any receipts delivered pursuant
to paragraph 6 of this Article, the Custodian shall deliver, or direct a
Depository to deliver, the underlying Securities as specified in the Certificate
against payment of the amount to be received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; and (i) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option
was written; (b) the name of the issuer and title and number of shares subject
to the Put Option; (c) the Clearing Member from whom the underlying Securities
are to be received; (d) the total amount payable by the Fund upon such delivery;
(e) the amount of cash and/or the amount and kind of Securities specifically al-
located to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian
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<PAGE>
in connection with such Put Option, the Custodian shall pay out of the money
held for the account of the Series to which such Put Option was specifically
allocated the total amount payable to the Clearing Member specified in the
Certificate as set forth in such Certificate, against delivery of such
Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) whether such
Index Option is a put or a call; (c) the number of options written; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the Clearing Member through whom such Option was written; (h) the
premium to be received by the Fund; (i) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian shall, upon
receipt of the premium specified in the Certificate, make the deposits, if any,
into the Senior Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian has specifically agreed to
issue, which are in accordance with the customs prevailing among Clearing
Members in Index Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever an Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option being exercised;
(c) the Clearing Member through whom such Index Option is being exercised; (d)
the total amount payable upon such exercise, and whether such amount is to be
paid by or to the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f) the amount
of cash and/or amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian
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<PAGE>
shall pay out of the money held for the account of the Series to which such
Stock Index Option was specifically allocated to the Clearing Member specified
in the Certificate the total amount payable, if any, as specified therein.
12. Promptly after the execution of a purchase or sale by the Fund of
any Option identical to a previously written Option described in paragraphs, 6,
8 or 10 of this Article in a transaction expressly designated as a "Closing
Purchase Transaction" or a "Closing Sale Transaction", the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was written; (c)
the instrument, currency, or Security subject to the Option, or, in the case of
an Index Option, the index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g) the type of Option
(put or call); (h) the date of such purchase or sale; (i) the name of the
Clearing Member to whom the premium is to be paid or from whom the amount is to
be received; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium or receipt of the amount, as the case may be,
specified in the Certificate and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the
Option being liquidated through the Closing Purchase Transaction or the Closing
Sale Transaction, the Custodian shall remove, or direct a Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Ac-
count and/or the Senior Security Account as may be specified in a Certificate
received in connection with such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an Option
described in this Article shall be subject to Article IV hereof.
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ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e) the
date the Futures Contract(s) was (were) entered into and the maturity date; (f)
whether the Fund is buying (going long) or selling (going short) such Futures
Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such Series; (h) the
name of the broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (i) the amount of fee or commission, if
any, to be paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make the
deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment out
of the money specifically allocated to such Series of the fee or commission,
if any, specified in the Certificate and deposit in the Senior Security Account
for such Series the amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian prior to the delivery or
settlement date a Certificate specifying: (a) the Futures Contract and the
Series to which the same relates; (b) with respect to an Index Futures Contract,
the total cash settlement amount to be paid or received, and with respect to a
Financial Futures Contract,
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<PAGE>
the Securities and/or amount of cash to be delivered or received; (c) the
broker, dealer, or futures commission merchant to or from whom payment or
delivery is to be made or received; and (d) the amount of cash and/or Securities
to be withdrawn from the Senior Security Account for such Series. The Custodian
shall make the payment or delivery specified in the Certificate, and delete such
Futures Contract from the statements delivered to the Fund pursuant to paragraph
3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the money specifically allocated to such Series the total
amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
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<PAGE>
2. Promptly after the execution of a sale of any Futures Contract
Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to each such
sale: (a) Series to which such Futures Contract Option was specifically
allocated; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the date of
sale; (e) the sale price; (f) the date of settlement; (g) the total amount
payable to the Fund upon such sale; and (h) the name of the broker or futures
commission merchant through whom the sale was made. The Custodian shall consent
to the cancellation of the Futures Contract Option being closed against payment
to the Custodian of the total amount payable to the Fund, provided the same
conforms to the total amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall make, out of the money and
Securities specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities
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<PAGE>
specifically allocated to such Series the deposits into the Senior Security
Account, if any, as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically al-
located; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract
Option is exercised; (e) the net total amount, if any, payable to the Fund upon
such exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Promptly after the execution by the Fund of a purchase of any
Futures Contract Option identical to a previously written Futures Contract
Option described in this Article in order to liquidate its position as a writer
of such
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<PAGE>
Futures Contract Option, the Fund shall deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction
is a closing transaction; (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Option Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased
by the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or
in the case of an exercise such deposits into the Senior Security Account as may
be specified in a Certificate. The deposits to and/or withdrawals from the
Margin Account, if any, shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
ARTICLE VIII.
SHORT SALES
1. Promptly after the execution of any short sales of Securities by any
Series of the Fund, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b) the name of
the issuer and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has been or is to be established; (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in
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a Senior Security Account, and (i) the name of the broker through whom such
short sale was made. The Custodian shall upon its receipt of a statement from
such broker confirming such sale and that the total amount credited to the Fund
upon such sale, if any, as specified in the Certificate is held by such broker
for the account of the Custodian (or any nominee of the Custodian) as custodian
of the Fund, issue a receipt or make the deposits into the Margin Account and
the Senior Security Account specified in the Certificate.
2. Promptly after the execution of a purchase to close-out any short
sale of Securities, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such closing-out: (a) the Series for
which such transaction is being made; (b) the name of the issuer and the title
of the Security; (c) the number of shares or the principal amount, and accrued
interest or dividends, if any, required to effect such closing-out to be
delivered to the broker; (d) the dates of closing-out and settlement; (e) the
purchase price per unit; (f) the net total amount payable to the Fund upon such
closing-out; (g) the net total amount payable to the broker upon such
closing-out; (h) the amount of cash and the amount and kind of Securities to be
withdrawn, if any, from the Margin Account; (i) the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the Senior Security
Account; and (j) the name of the broker through whom the Fund is effecting such
closing-out. The Custodian shall, upon receipt of the net total amount payable
to the Fund upon such closing-out, and the return and/or cancellation of the
receipts, if any, issued by the Custodian with respect to the short sale being
closed-out, pay out of the money held for the account of the Fund to the broker
the net total amount payable to the broker, and make the withdrawals from the
Margin Account and the Senior Security Account, as the same are specified in the
Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral Instructions, or
Written Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker, dealer, or financial institution with whom the Reverse
Repurchase Agreement is entered; (d) the amount and kind of Securities to be
delivered by the Fund to
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such broker, dealer, or financial institution; (e) the date of such Reverse
Repurchase Agreement; and (f) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Senior Security Account for such Series in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon receipt of the total amount
payable to the Fund specified in the Certificate, Oral Instructions, or Written
Instructions make the delivery to the broker, dealer, or financial institution
and the deposits, if any, to the Senior Security Account, specified in such
Certificate, Oral Instructions, or Written Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described
in preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate, Oral Instructions, or Written Instructions to the
Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and
the Series for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in connection
with such termination; (d) the date of termination; (e) the name of the
broker, dealer, or financial institution with whom the Reverse Repurchase
Agreement is to be terminated; and (f) the amount of cash and/or the amount and
kind of Securities to be withdrawn from the Senior Securities Account for such
Series. The Custodian shall, upon receipt of the amount and kind of Securities
to be received by the Fund specified in the Certificate, Oral Instructions, or
Written Instructions, make the payment to the broker, dealer, or financial
institution and the withdrawals, if any, from the Senior Security Account,
specified in such Certificate, Oral Instructions, or Written Instructions.
3. The Certificates, Oral Instructions, or Written Instructions
described in paragraphs 1 and 2 of this Article may with respect to any
particular Reverse Repurchase Agreement be combined and delivered to the
Custodian at the time of entering into such Reverse Repurchase Agreement.
ARTICLE X.
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the
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<PAGE>
title of the Securities, (c) the number of shares or the principal amount
loaned, (d) the date of loan and delivery, (e) the total amount to be
delivered to the Custodian against the loan of the Securities, including the
amount of cash collateral and the premium, if any, separately identified, and
(f) the name of the broker, dealer, or financial institution to which the loan
was made. The Custodian shall deliver the Securities thus designated to the
broker, dealer or financial institution to which the loan was made upon receipt
of the total amount designated in the Certificate as to be delivered against the
loan of Securities. The Custodian may accept payment in connection with a
delivery otherwise than through the Book-Entry System or a Depository only in
the form of a certified or bank cashier's check payable to the order of the
Fund or the Custodian drawn on New York Clearing House funds.
2. In connection with each termination of a loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from
time to time make such deposits thereto, or withdrawals therefrom, as specified
in a Certificate. Such Certificate shall specify the Series for which such
deposit or withdrawal is to be made and the amount of cash and/or the amount and
kind of Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the
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Custodian into, or withdrawn from, a Senior Securities Account, the
Custodian shall be under no obligation to make any such deposit or withdrawal
and shall promptly notify the Fund that no such deposit has been made.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. The Custodian shall establish a Collateral Account and from time to
time shall make such deposits thereto as may be specified in a Certificate.
Promptly after the close of business on each business day in which cash and/or
Securities are maintained in a Collateral Account for any Series, the Custodian
shall furnish the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the delivery to the
Fund of such statement, the Fund shall furnish to the Custodian a Certificate or
Written Instructions specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated
to be
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less than the Custodian's obligation with respect to any outstanding Put Option
guarantee letter or similar document, the Fund shall promptly specify in a
Certificate the additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein and the declaration of dividends and
distributions thereon the Custodian to rely on Oral Instructions, Written
Instructions, or a Certificate setting forth the date of the declaration of
such dividend or distribution, the date of payment thereof, the record date as
of which shareholders entitled to payment shall be determined, the amount
payable per Share of such Series to the shareholders of record as of that date
and the total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution,
Oral Instructions, Written Instructions, or Certificate, as
the case may be, the Custodian shall pay to the Transfer Agent
Account out of the money held for the account of the Series
specified therein the total amount payable to the Dividend
Agent and any sub-dividend agent or co-dividend agent of the
Fund with respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause
to be delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price;
and
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(b) The amount of money to be received by the Custodian for the
sale of such Shares and specifically allocated to the separate account in the
name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall pay,
out of the money held for the account of such Series, all original issue or
other taxes required to be paid by the Fund in connection with such issuance
upon the receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the Custodian a
Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the money held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the money held by the
Custodian in the
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<PAGE>
separate account for such Series shall be insufficient to pay the total amount
payable upon a purchase of Securities specifically allocated to such Series,
as set forth in a Certificate, Oral Instructions, or Written Instructions or
which results in an overdraft in the separate account of such Series for some
other reason, or if the Fund is for any other reason indebted to the Custodian
with respect to a Series, (except a borrowing for investment or for temporary
or emergency purposes using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this Article), such
overdraft or indebtedness shall be deemed to be a loan made by the Custodian
to the Fund for such Series payable on demand and shall bear interest from the
date incurred at a rate per annum (based on a 360-day year for the actual
number of days involved) equal to the Federal Funds Rate plus 1/2%, such rate
to be adjusted on the effective date of any change in such Federal Funds
Rate but in no event to be less than 6% per annum. In addition, the Fund hereby
agrees that the Custodian shall have a continuing lien, security interest,
and security entitlement in and to any property including any investment
property or any financial asset specifically allocated to such Series at any
time held by it for the benefit of such Series or in which the Fund may have
an interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's behalf. The
Fund authorizes the Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due thereon against any
money balance of account standing to such Series' credit on the Custodian's
books. In addition, the Fund hereby covenants that on each Business Day on which
either it intends to enter a Reverse Repurchase Agreement and/ or otherwise
borrow from a third party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repurchase Agreement or
such a borrowing, it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify the Series to which
the same relates, and shall not incur any indebtedness, including pursuant to
any Reverse Repurchase Agreement, not so specified other than from the
Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an
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<PAGE>
attached promissory note, duly endorsed by the Fund, or other loan agreement,
(d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver such Securities as additional collateral
as may be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as collateral by the Custodian, to any
such bank, the Custodian shall not be under any obligation to deliver any
Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in
order for the Fund to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to such Fund a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Fund shall use the Software solely for its own internal and
proper business purposes, and not in the operation of a service bureau, and
agrees not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of the Custodian. The Fund acknowledges that the Custodian
and its suppliers have title
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<PAGE>
and exclusive proprietary rights to the Software, including any trade secrets
or other ideas, concepts, know how, methodologies, or information incorporated
therein and the exclusive rights to any copyrights, trademarks and patents
(including registrations and applications for registration of either) or
statutory or legal protections available with respect thereof. The Fund further
acknowledges that all or a part of the Software may be copyrighted or
trademarked (or a registration or claim made therefor) by the Custodian or its
suppliers. The Fund shall not take any action with respect to the Software
inconsistent with the foregoing acknowledgments, nor shall the Fund attempt to
decompile, reverse engineer or modify the Software. The Fund may not copy, sell,
lease or provide, directly or indirectly, any of the Software or any portion
thereof to any other person or entity without the Custodian's prior written
consent. The Fund may not remove any statutory copyright notice, or other notice
including the software or on any media containing the Software. The Fund shall
reproduce any such notice on any reproduction of the Software and shall add
statutory copyright notice or other notice to the Software or media upon the
Bank's request. Custodian agrees to provide reasonable training, instruction
manuals and access to Custodian's "help desk" in connection with the Fund's user
support necessary to use of the Software. At the Fund's request, Custodian
agrees to permit reasonable testing of the Software by the Fund.
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Custody
Agreement.
3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data bases relating
solely to the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Fund distributed to third parties. The provisions of this
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<PAGE>
Article shall not affect the copyright status of any of the Information
which may be copyrighted and shall apply to all Information whether or not
copyrighted.
4. The Custodian reserves the right to modify, at its own expense, the
Software from time to time without prior notice and the Fund shall install new
releases of the Software as the Custodian may direct. The Fund agrees not to
modify or attempt to modify the Software without the Custodian's prior written
consent. The Fund acknowledges that any modifications to the Software, whether
by the Fund or the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
5. The Custodian and its manufacturers and suppliers make no warranties
or representations of any kind with regard to the Software or the method(s) by
which the Fund may transmit Instructions to the Custodian, express or implied,
including but not limited to any implied warranties of merchantability or
fitness for a particular purpose.
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL,
DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM)
IN OR TO ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE FUND
OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN
ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S.
LAWS PROHIBITED. The Fund hereby authorizes Custodian to report its name and
address to government agencies to which Custodian is required to provide such
information by law.
7. Where the method for transmitting Instructions by the Fund involves
an automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Fund may not
claim that such Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
8. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly authorized by the Fund transmit such Instructions to the
Custodian. The Fund will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the Custodian
to act in accordance with and rely upon Instructions received by it pursuant
hereto.
(b) The Fund hereby represents, acknowledges and agrees that it is
fully informed of the protections and risks
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associated with the various methods of transmitting Instructions to the
Custodian and that there may be more secure methods of transmitting instructions
to the Custodian than the method(s) selected by the Fund. The Fund hereby agrees
that the security procedures (if any) to be followed in connection with the
Fund's transmission of Instructions provide to it a commercially reasonable
degree of protection in light of its particular needs and circumstances.
9. The Fund hereby represents, warrants and covenants to the Custodian
that this Agreement has been duly approved by a resolution of its Board of
Trustees, and that its transmission of Instructions pursuant hereto shall at all
times comply with the Investment Company Act.
10. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.
11. Custodian will indemnify and hold harmless the Fund with respect to
any liability, damages, loss or claim incurred by or brought against Fund by
reason any claim or infringement against any patent, copyright, license or other
property right arising out or by reason of the Fund's use of the Software in the
form provided under this Section. Custodian at its own expense will defend such
action or claim brought against Fund to the extent that it is based on a claim
that the Software in the form provided by Custodian infringes any patents,
copyrights, license or other property right, provided that Custodian is provided
with reasonable written notice of such claim, provided that the Fund has not
settled, compromised or confessed any such claim without the Custodian's written
consent, in which event Custodian shall have no liability or obligation
hereunder, and provided Fund cooperates with and assists Custodian in the
defense of such claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result of any claim of
infringement against any patent, copyright, license or other property right,
Custodian is enjoined from using the Software, or if Custodian believes that the
System is likely to become the subject of a claim of infringement, Custodian at
its option may in its sole discretion either (a) at its expenses procure the
right for the Fund to continue to use the Software, or (b), replace or modify
the Software so as
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to make it non-infringing, or (c) may discontinue the license granted herein
upon written notice to Customer.
ARTICLE XVI.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (a) the Series to which such FX Transaction
is specifically allocated; (b) the type and amount of Currency to be purchased
by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the Currency to be purchased is to be delivered; (e) the date on
which the Currency to be sold is to be delivered; and (f) the name of the person
from whom or through whom such currencies are to be purchased and sold. Unless
otherwise instructed by a Certificate or Oral Instructions, the Custodian shall
deliver, or shall instruct a Foreign SubCustodian to deliver, the Currency to
be sold on the date on which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign SubCustodian to receive,
the Currency to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as
the Currency to be purchased, as specified in the Certificate or Oral
Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and such receipt and
delivery may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
such receipts and deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary of
The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Fund may issue a
standing Certificate with respect to FX Transaction but the Custodian may
establish rules or limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of investing in Securities
or holding Currency. Without limiting the foregoing, the Fund shall bear the
risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign
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depositories, exchange controls, asset freezes or other laws, rules,
regulations or orders shall prohibit or impose burdens or costs on the transfer
to, by or for the account of the Fund of Securities or any cash held outside the
Fund's jurisdiction or denominated in Currency other than its home jurisdiction
or the conversion of cash from one Currency into another currency. The Custodian
shall not be obligated to substitute another Currency for a Currency (including
a Currency that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.
ARTICLE XVII.
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of its
duties hereunder, and, except as hereinafter provided, neither the Custodian nor
its nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence, bad faith, or willful misconduct or that of its
officers, employees, or agents. The Custodian may, with respect to questions of
law arising hereunder or under any Margin Account Agreement, apply for and
obtain the advice and opinion of counsel to the Fund, at the expense of the
Fund, or of its own counsel, at its own expense, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the Fund for any loss
or damage resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the part of the
Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall be under no
obligation to inquire into, and shall not be liable for:
(a) The validity (but not the authenticity) of the issue of any
Securities purchased, sold, or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount paid or
received therefor, as specified in a Certificate, Oral Instructions, or Written
Instructions;
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(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor, as specified in a
Certificate;
(c) The legality of the declaration or payment of any dividend by
the Fund, as specified in a resolution, Certificate, Oral Instructions, or
Written Instructions;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall
the Custodian be under any duty or obligation to see to it that the cash
collateral delivered to it by a broker, dealer, or financial institution or held
by it at any time as a result of such loan of portfolio Securities of the Fund
is adequate collateral for the Fund against any loss it might sustain as a
result of such loan, except that this subparagraph shall not excuse any
liability the Custodian may have for failing to act in accordance with Article X
hereof or any Certificate, Oral Instructions, or Written Instructions given in
accordance with this Agreement. The Custodian specifically, but not by way of
limitation, shall not be under any duty or obligation periodically to check or
notify the Fund that the amount of such cash collateral held by it for the Fund
is sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the termina-
tion of such loan, provided, however, that the Custodian shall promptly notify
the Fund in the event that such dividends or interest are not paid and received
when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund, except that this sub-
paragraph shall not excuse any liability the Custodian may have for failing to
establish, maintain, make deposits to or withdrawals from such accounts in
accordance with this Agreement. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer, futures commission merchant
or Clearing Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
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3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. With respect to Securities held in a Depository, except as otherwise
provided in paragraph 5(b) of Article III hereof, the Custodian shall have no
responsibility and shall not be liable for ascertaining or acting upon any
calls, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to such Securities, unless the Custodian shall have actually
received timely notice from the Depository in which such Securities are held. In
no event shall the Custodian have any responsibility or liability for the
failure of a Depository to collect, or for the late collection or late
crediting by a Depository of any amount payable upon Securities deposited in a
Depository which may mature or be redeemed, retired, called or otherwise become
payable. However, upon receipt of a Certificate from the Fund of an overdue
amount on Securities held in a Depository the Custodian shall make a claim
against the Depository on behalf of the Fund, except that the Custodian shall
not be under any obligation to appear in, prosecute or defend any action, suit
or proceeding in respect to any Securities held by a Depository which in its
opinion may involve it in expense or liability, unless indemnity satisfactory to
it against all expense and liability be furnished as often as may be required,
or alternatively, the Fund shall be subrogated to the rights of the Custodian
with respect to such claim against the Depository should it so request in a
Certificate. This paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution by
the Transfer Agent of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are in default, or if payment is refused after the Custodian
has timely and properly, in accordance with this Agreement, made due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action, but the Custodian
shall
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have such a duty if the Securities were not in default on the payable date and
the Custodian failed to timely and properly make such demand for payment and
such failure is the reason for the non-receipt of payment.
7. The Custodian may appoint one or more banking institutions as
sub-custodian or sub-custodians, or as co-custodian or co-custodians including,
but not limited to, banking institutions located in foreign countries, of
Securities and money at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed institution.
8. (a) The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Securities and money
owned by the Fund. The Custodian shall be liable to the Fund for any loss which
shall occur as the result of the failure of a sub-custodian which is a banking
institution located in a foreign country and identified on Schedule A attached
hereto and as amended from time to time upon mutual agreement of the parties
(each, a "Sub-custodian") to exercise reasonable care with respect to the
safekeeping of such securities and money to the same extent that the Custodian
would be liable to the Fund if the Custodian were holding such Securities and
money in New York. In the event of any loss to the Fund by reason of the failure
of the Custodian or a Sub-custodian to utilize reasonable care, the Custodian
shall be liable to the Fund only to the extent of the Fund's direct damages, to
be determined based on the market value of the Securities and money which are
the subject of the loss at the date of discovery of such loss and without
reference to any special conditions or circumstances.
(b) The Custodian shall not be liable for any loss which results
from (i) the general risk of investing, or (ii) investing or holding Securities
and money in a particular country including, but not limited to, losses
resulting from nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency restrictions,
devaluations or fluctuations; or market conditions which prevent the orderly
execution of securities transactions or affect the value of Securities or money.
(c) Neither party shall be liable to the other for any loss due to
forces beyond its control including, but not limited to, strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God.
9. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it, for
the account of the Fund and specifically allocated to a Series are such as
properly may be
- 38 -
<PAGE>
held by the Fund or such Series under the provisions of its then current
prospectus, or (b) to ascertain whether any transactions by the Fund, whether
or not involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all reasonable out-of-pocket expenses and such compensation
as may be agreed upon from time to time between the Custodian and the Fund. The
Custodian may charge such compensation, and any such expenses with respect to a
Series incurred by the Custodian in the performance of its duties under this
Agreement against any money specifically allocated to such Series. The Custodian
shall also be entitled to charge against any money held by it for the account of
a Series the amount of any loss, damage, liability or expense, including counsel
fees, for which it shall be entitled to reimbursement under the provisions of
this Agreement attributable to, or arising out of, its serving as Custodian for
such Series. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
subcustodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund. Notwithstanding the foregoing or anything else contained
in this Agreement to the contrary, the Custodian shall, prior to effecting any
charge for compensation, expenses, or any overdraft or indebtedness or interest
thereon, submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing, Oral Instructions, or Written
Instructions received by the Custodian and reasonably believed by the Custodian
to be genuine. The Fund agrees to forward to the Custodian a Certificate or
facsimile thereof confirming Oral Instructions or Written Instructions in such
manner so that such Certificate or facsimile thereof is received by the
Custodian, whether by hand delivery, telecopier or other similar device, or
otherwise, by the close of business of the same day that such Oral Instructions
or Written Instructions are given to the Custodian. The Fund agrees that the
fact that such confirming instructions are not received by the Custodian shall
in no way affect the validity of the transactions or enforceability of the
transactions thereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions or Writ-
ten Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian
- 39 -
<PAGE>
and reasonably believed by the Custodian to be given in accordance with the
terms and conditions of any Margin Account Agreement. Without limiting the
generality of the foregoing, the Custodian shall be under no duty to inquire
into, and shall not be liable for, the accuracy of any statements or
representations contained in any such instrument or other notice including,
without limitation, any specification of any amount to be paid to a broker,
dealer, futures commission merchant or Clearing Member. This paragraph shall not
excuse any failure by the Custodian to have acted in accordance with any Margin
Agreement it has executed or any Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement.
13. The books and records pertaining to the Fund, as described in
Appendix E hereto, which are in the possession of the Custodian shall be the
property of the Fund. Such books and records shall be prepared and maintained by
the Custodian as required by the Investment Company Act of 1940, as amended, and
other applicable securities laws and rules and regulations. The Fund, or the
Fund's authorized representatives, shall have access to such books and records
during the Custodian's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by the Custodian to
the Fund or the Fund's authorized representative, and the Fund shall reimburse
the Custodian its expenses of providing such copies. Upon reasonable request
of the Fund, the Custodian shall provide in hard copy or on micro-film,
whichever the Custodian elects, any records included in any such delivery which
are maintained by the Custodian on a computer disc, or are similarly maintained,
and the Fund shall reimburse the Custodian for its expenses of providing such
hard copy or micro-film.
14. The Custodian shall provide the Fund with any report obtained by
the Custodian on the system of internal accounting control of the Book-Entry
System, each Depository or O.C.C., and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
15. The Custodian shall furnish upon request annually to the Fund a
letter prepared by the Custodian's accountants with respect to the Custodian's
internal systems and controls in the form generally provided by the Custodian to
other investment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising out of, or related to, the
Custodian's performance of its obligations under this Agreement, except for any
such liability, claim, loss and demand arising out of
- 40 -
<PAGE>
the Custodian's own negligence, bad faith, or willful misconduct or that of its
officers, employees, or agents.
17. Subject to the foregoing provisions of this Agreement, the
Custodian shall deliver and receive Securities, and receipts with respect to
such Securities, and shall make and receive payments only in accordance with the
customs prevailing from time to time among brokers or dealers in such Securi-
ties and, except as may otherwise be provided by this Agreement or as may be in
accordance with such customs, shall make payment for Securities only against
delivery thereof and deliveries of Securities only against payment therefor.
18. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XVIII.
TERMINATION
1. Except as provided in paragraph 3 of this Article, this Agreement
shall continue until terminated by either the Custodian giving to the Fund, or
the Fund giving to the Custodian, a notice in writing specifying the date of
such termination, which date shall be not less than 60 days after the date of
the giving of such notice. In the event such notice or a notice pursuant to
paragraph 3 of this Article is given by the Fund, it shall be accompanied by a
copy of a resolution of the Board of Trustees of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be eligible to serve as a custodian for the securities of a
management investment company under the Investment Company Act of 1940. In the
event such notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the Board
of Trustees of the Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon
the date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and money then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other
- 41 -
<PAGE>
amounts for the payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and money then owned by
the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this Agreement
upon the date specified in a written notice in the event of the "Bankruptcy" of
The Bank of New York. As used in this sub-paragraph, the term "Bankruptcy" shall
mean The Bank of New York's making a general assignment, arrangement or
composition with or for the benefit of its creditors, or instituting or having
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or the entry of a order for relief under any applicable bankruptcy
law or any other relief under any bankruptcy or insolvency law or other similar
law affecting creditors' rights, or if a petition is presented for the winding
up or liquidation of the party or a resolution is passed for its winding up or
liquidation, or it seeks, or becomes subject to, the appointment of an
administrator, receiver, trustee, custodian or other similar official for it or
for all or substantially all of its assets or its taking any action in
furtherance of, or indicating its consent to approval of, or acquiescence in,
any of the foregoing.
ARTICLE XIX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be entitled to rely and to
act upon Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in
- 42 -
<PAGE>
the last delivered Certificate to the extent provided by this Agreement.
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
Officer ceases to be an Officer of the Fund, or in the event that other or
additional Officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be entitled to rely and to act upon the
signatures of the Officers as set forth in the last delivered Certificate to the
extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, other than any Certificate or
Written Instructions, shall be sufficiently given if addressed to the Custodian
and mailed or delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from time to time
designate in writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund,
except that Appendices A and B may be amended unilaterally by the Fund without
such an approving resolution.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian or The Bank of New York without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Trustees. For purposes of this paragraph, no merger,
consolidation, or amalgamation of the Custodian, The Bank of New York, or the
Fund shall be deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any
- 43 -
<PAGE>
dispute arising hereunder and hereby waives its right to trial by jury.
8. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
- 44 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DISCOVER BROKERAGE INDEX SERIES
[SEAL] By:
----------------------------
Attest:
- -------------------------
THE BANK OF NEW YORK
[SEAL] By:
----------------------------
Attest:
- -------------------------
- 45 -
<PAGE>
APPENDIX A
I, , President and I, , of DISCOVER BROKERAGE INDEX SERIES, a
Massachusetts business trust (the "Fund"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of Trust and
By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund, except that those persons designated as being an "Officer of DWTC" shall
be an Authorized Person only for purposes of Articles XII and XIII. The
signatures set forth opposite their respective names are their true and correct
signatures:
Name Position Signature
- -------------------------- -------------------- -------------------------
<PAGE>
APPENDIX B
I, , President and I, , of DISCOVER BROKERAGE INDEX SERIES, a
Massachusetts business trust (the "Fund"), do hereby certify that:
The following individuals for whom a position other than "Officer of
DWTC" is specified serve in the following positions with the Fund and each has
been duly elected or appointed by the Board of Trustees of the Fund to each
such position and qualified therefor in conformity with the Fund's Declaration
of Trust and By-Laws. With respect to the following individuals for whom a
position of "Officer of DWTC" is specified, each such individual has been
designated by a resolution of the Board of Trustees of the Fund to be an Officer
for purposes of the Fund's Custody Agreement with The Bank of New York, but only
for purposes of Articles XII and XIII thereof and a certified copy of such
resolution is attached hereto. The signatures of each individual below set forth
opposite their respective names are their true and correct signatures:
Name Position Signature
- -------------------------- -------------------- -------------------------
<PAGE>
APPENDIX C
The undersigned, , hereby certifies
that he or she is the duly elected and acting
of DISCOVER BROKERAGE INDEX SERIES, a Massachusetts business trust
(the "Fund"), further certifies that the following resolutions were adopted by
the Board of Trustees of the Fund at a meeting duly held on , 1998, at which a
quorum was at all times present and that such resolutions have not been modified
or rescinded and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the
Custody Agreement between The Bank of New York and the Fund dated as of
, 1998 (the "Custody Agreement") is authorized and instructed on a
continuous and on-going basis to act in accordance with, and to rely on
Instructions (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of
such access codes only to Officers of the Fund as defined in the Custody
Agreement, shall establish internal safekeeping procedures to safeguard and
protect the confidentiality and availability of user and access codes, passwords
and authentication keys, and shall use Instructions only in a manner that does
not contravene the Investment Company Act of 1940, as amended, or the rules and
regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
DISCOVER BROKERAGE INDEX SERIES, as of the day of , 1999.
[SEAL]
----------------------------
<PAGE>
APPENDIX D
I, Vincent M. Blazewicz, a Vice President with THE BANK OF NEW YORK do
hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be prepared
and maintained by the Custodian and shall be the property of the Fund:
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting of ,
a Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of , 1998,
(the "Custody Agreement") is authorized and instructed on a continuous and
on-going basis to deposit in the Book-Entry System, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the Series
to which the same are specifically allocated, and to utilize the Book-Entry
System to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1999.
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that
he or she is the duly elected and acting of , a
Massachusetts business Trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of ,
1998, (the "Custody Agreement") is authorized and instructed on a continuous and
on-going basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in The Depository Trust Company
("DTC"), as a "Depository" as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize DTC to the extent possible in connection
with its performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1999.
----------------------------
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting of ,
a Massachusetts business Trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1998, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of ,
1998 (the "Custody Agreement") is authorized and instructed on a continuous and
on-going basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Participants Trust
Company as a Depository, as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Participants Trust Company to the
extent possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1998.
---------------------------
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of , a Massachusetts
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
, 1998, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect
as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of ,
1998, (the "Custody Agreement") is authorized and instructed on a continuous and
on-going basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary, to accept, utilize and act with respect to
Clearing Member confirmations for Options and transaction in Options, regardless
of the Series to which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1999.
----------------------------
[SEAL]
<PAGE>
Exhibit 8(a)
TRANSFER AGENCY AND SERVICE AGREEMENT
with
MORGAN STANLEY DEAN WITTER TRUST FSB
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Article 1 Terms of Appointment ................................................... 1
Article 2 Fees and Expenses ...................................................... 5
Article 3 Representations and Warranties of MSDW TRUST ........................... 6
Article 4 Representations and Warranties of the Fund ............................. 7
Article 5 Duty of Care and Indemnification ....................................... 7
Article 6 Documents and Covenants of the Fund and MSDW TRUST ..................... 10
Article 7 Duration and Termination of Agreement .................................. 13
Article 8 Assignment ............................................................. 14
Article 9 Affiliations ........................................................... 14
Article 10 Amendment .............................................................. 15
Article 11 Applicable Law ......................................................... 15
Article 12 Miscellaneous .......................................................... 15
Article 13 Merger of Agreement .................................................... 17
Article 14 Personal Liability ..................................................... 17
</TABLE>
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 19th day of May, 1999 by and between the Fund
listed on the signature page hereof, (hereinafter referred to as the "Fund"),
such Fund having its principal office and place of business at Two World Trade
Center, New York, New York 10048, and MORGAN STANLEY DEAN WITTER TRUST FSB
("MSDW TRUST"), a federally chartered savings bank, having its principal office
and place of business at Harborside Financial Center, Plaza Two, Jersey City,
New Jersey 07311.
WHEREAS, the Fund desires to appoint MSDW TRUST as its transfer agent,
dividend disbursing agent and shareholder servicing agent with respect to the
single omnibus account maintained by Discover Brokerage Direct, Inc. ("Discover
Brokerage") with MSDW TRUST (the "Account") and, as may subsequently be agreed
to by the parties, with respect to individual accounts of shareholders
("Shareholders"), and MSDW TRUST desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of MSDW TRUST
1.1 Subject to the terms and conditions set forth in this Agreement,
the Fund hereby employs and appoints MSDW TRUST to act as, and MSDW TRUST agrees
to act as, the transfer agent for each series and/or class of shares of the
Fund, whether now or hereafter
-1-
<PAGE>
authorized or issued ("Shares"), dividend disbursing agent and shareholder
servicing agent in connection with the Account or, as may be appropriate,
Shareholder accounts, or any accumulation, open-account or similar plans
provided to Shareholders and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund, including
without limitation any periodic investment plan or periodic withdrawal program.
1.2 MSDW TRUST agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and MSDW TRUST, MSDW TRUST shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the custodian
of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in book form in the Account or, as appropriate,
Shareholder Accounts;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies paid to it
by the Custodian with respect to any redemption, pay over or cause to be paid
over in the appropriate manner such monies as instructed by, as appropriate,
Discover Brokerage or the redeeming Shareholder;
-2-
<PAGE>
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(v) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vi) Calculate any sales charges payable by a Shareholder on purchases
and/or redemptions of Shares of the Fund as such charges may be reflected in the
prospectus;
(vii) Maintain records of account for and advise the Fund and, as
appropriate, its Shareholders as to the foregoing; and
(viii) Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934 Act") a
record of the total number of Shares of the Fund which are authorized, based
upon data provided to it by the Fund, and issued and outstanding. MSDW TRUST
shall also provide to the Fund on a regular basis the total number of Shares
that are authorized, issued and outstanding and shall notify the Fund in case
any proposed issue of Shares by the Fund would result in an overissue. In case
any issue of Shares would result in an overissue, MSDW TRUST shall refuse to
issue such Shares and shall not countersign and issue any certificates requested
for such Shares. When recording the issuance of Shares, MSDW TRUST shall have no
obligation to take cognizance of any Blue Sky laws relating to the issue of sale
of such Shares, which functions shall be the sole responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in the
above
-3-
<PAGE>
paragraph (a), MSDW TRUST shall:
(i) perform all of the customary services of a transfer agent, dividend
disbursing agent and, as may be agreed upon by the parties, shareholder
servicing agent in connection with dividend reinvestment, accumulation,
open-account or similar plans (including without limitation any periodic
investment plan or periodic withdrawal plan), including but not limited to,
maintaining all Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies, receiving and tabulating proxies, mailing shareholder reports
and prospectuses to current Shareholders, withholding taxes on U.S.-resident and
resident alien accounts, preparing and filing appropriate forms required with
respect to dividends and distributions by federal tax authorities for all
Shareholders, preparing and mailing confirmation forms and statements of account
to Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders and providing Shareholder account information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide, or cause to be provided, a system that will enable the
Fund to monitor the total number of Shares sold in each State or other
jurisdiction.
(c) In addition, the Fund shall:
(i) identify to MSDW TRUST in writing those transactions and assets
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<PAGE>
to be treated as exempt from Blue Sky reporting for each State; and
(ii) verify the inclusion on the system prior to activation of each
State in which Fund shares may be sold and thereafter monitor the daily
purchases and sales for shareholders in each State. The responsibility of MSDW
TRUST for the Fund's status under the securities laws of any State or other
jurisdiction is limited to the inclusion on the system of each State as to which
the Fund has informed MSDW TRUST that shares may be sold in compliance with
state securities laws and the reporting of purchases and sales in each such
State to the Fund as provided above and as agreed from time to time by the Fund
and MSDW TRUST.
(d) MSDW TRUST shall provide such additional services and functions not
specifically described herein as may be mutually agreed between MSDW TRUST and
the Fund. Procedures applicable to such services may be established from time to
time by agreement between the Fund and MSDW TRUST.
Article 2 Fees and Expenses
2.1 For performance by MSDW TRUST pursuant to this Agreement, each Fund
agrees to pay MSDW TRUST an annual maintenance fee as set out in the respective
fee schedule attached hereto as Schedule A. Such fees and out-of-pocket expenses
and advances identified under Section 2.2 below may be changed from time to time
subject to mutual written agreement between the Fund and MSDW TRUST.
2.2 In addition to the fees paid under Section 2.1 above, the Fund
agrees to reimburse MSDW TRUST for out-of-pocket expenses in connection with the
services rendered
-5-
<PAGE>
by MSDW TRUST hereunder. In addition, any other expenses incurred by MSDW TRUST
at the request or with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses within a
reasonable period of time following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to MSDW TRUST and/or its
agents or subcontractors by the Fund upon request prior to the mailing date of
such materials.
Article 3 Representations and Warranties of MSDW TRUST
MSDW TRUST represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal office is
in New Jersey.
3.2 It is and will remain registered with the U.S. Securities and
Exchange Commission ("SEC") as a Transfer Agent pursuant to the requirements of
Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and
By-Laws to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary
facilities,
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<PAGE>
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to MSDW TRUST that:
4.1 It is a corporation duly organized and existing and in good
standing under the laws of Delaware or Maryland or a trust duly organized and
existing and in good standing under the laws of Massachusetts, as the case may
be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its By-Laws
to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to enter into
and perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under the
Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933 (the
"1933 Act") is currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
Article 5 Duty of Care and Indemnification
5.1 MSDW TRUST shall not be responsible for, and the Fund shall
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<PAGE>
indemnify and hold MSDW TRUST harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to:
(a) All actions of MSDW TRUST or its agents or subcontractors required
to be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by MSDW TRUST or its agents or
subcontractors of information, records and documents which (i) are received by
MSDW TRUST or its agents or subcontractors and furnished to it by or on behalf
of the Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by MSDW TRUST or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities or Blue Sky laws of
any State or other jurisdiction that notice of offering of such Shares in such
State or other jurisdiction or in violation of any stop order or other
determination or ruling by any federal agency or any State or other jurisdiction
with respect to the offer or sale of such Shares in such State or other
jurisdiction.
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<PAGE>
5.2 MSDW TRUST shall indemnify and hold the Fund harmless from or
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by MSDW TRUST as a result of the lack of good faith,
negligence or willful misconduct of MSDW TRUST, its officers, employees or
agents.
5.3 At any time, MSDW TRUST may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by MSDW TRUST
under this Agreement, and MSDW TRUST and its agents or subcontractors shall not
be liable and shall be indemnified by the Fund for any action taken or omitted
by it in reliance upon such instructions or upon the opinion of such counsel.
MSDW TRUST, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instruction, information, data, records or documents
provided to MSDW TRUST or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. MSDW TRUST, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signature of the officers of the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
5.4 In the event either party is unable to perform its obligations
under
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<PAGE>
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.5 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder.
5.6 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Documents and Covenants of the Fund and MSDW TRUST
6.1 The Fund shall promptly furnish to MSDW TRUST the following:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of the
Fund authorizing the appointment of MSDW TRUST and the execution and delivery of
this
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<PAGE>
Agreement;
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of any certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the Secretary of the
Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of MSDW TRUST and the execution and delivery of
this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on
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<PAGE>
behalf of the Fund;
(iv) A specimen of any certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the Secretary of the
Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the 1933
Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered or
to be offered by the Fund; and
(e) Such other certificates, documents or opinions as MSDW TRUST deems
to be appropriate or necessary for the proper performance of its duties.
6.2 MSDW TRUST hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of Share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.3 MSDW TRUST shall prepare and keep records relating to the services
to be performed hereunder, in the form and manner as it may deem advisable and
as required by applicable laws and regulations. To the extent required by
Section 31 of the 1940 Act,
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<PAGE>
and the rules and regulations thereunder, MSDW TRUST agrees that all such
records prepared or maintained by MSDW TRUST relating to the services
performed by MSDW TRUST hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section 31 of
the 1940 Act, and the rules and regulations thereunder, and will be surrendered
promptly to the Fund on and in accordance with its request.
6.4 MSDW TRUST and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to any other person
except as may be required by law or with the prior consent of MSDW TRUST and the
Fund.
6.5 In case of any request or demands for the inspection of the
Shareholder records of the Fund, MSDW TRUST will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. MSDW TRUST reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 7 Duration and Termination of Agreement
7.1 This Agreement shall remain in full force and effect until August
1, 2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days written
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<PAGE>
notice, and by MSDW TRUST on 90 days written notice, to the other party without
payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and other materials will be
borne by the Fund. Additionally, MSDW TRUST reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 Assignment
8.1 Except as provided in Section 8.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
8.2 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
8.3 MSDW TRUST may, in its sole discretion and without further consent
by the Fund, subcontract, in whole or in part, for the performance of its
obligations and duties hereunder with any person or entity including but not
limited to companies which are affiliated with MSDW TRUST; provided, however,
that such person or entity has and maintains the qualifications, if any,
required to perform such obligations and duties, and that MSDW TRUST shall be as
fully responsible to the Fund for the acts and omissions of any agent or
subcontractor as it is for its own acts or omissions under this Agreement.
Article 9 Affiliations
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<PAGE>
9.1 MSDW TRUST may now or hereafter, without the consent of or notice
to the Fund, function as transfer agent and/or shareholder servicing agent for
any other investment company registered with the SEC under the 1940 Act and for
any other issuer, including without limitation any investment company whose
adviser, administrator, sponsor or principal underwriter is or may become
affiliated with Morgan Stanley Dean Witter & Co. or any of its direct or
indirect subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees (as the
case may be), officers, employees, agents and shareholders of the Fund, and the
directors, officers, employees, agents and shareholders of the Fund's investment
adviser and/or distributor, are or may be interested in MSDW TRUST as directors,
officers, employees, agents and shareholders or otherwise, and that the
directors, officers, employees, agents and shareholders of MSDW TRUST may be
interested in the Fund as Directors or Trustees (as the case may be), officers,
employees, agents and shareholders or otherwise, or in the investment adviser
and/or distributor as directors, officers, employees, agents, shareholders or
otherwise.
Article 10 Amendment
10.1 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors or the Board of Trustees (as the case may be) of the Fund.
Article 11 Applicable Law
11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
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<PAGE>
Article 12 Miscellaneous
12.1 In the event that one or more additional investment companies
managed or administered by Morgan Stanley Dean Witter Advisors Inc. or any of
its affiliates ("Additional Funds") desires to retain MSDW TRUST to act as
transfer agent, dividend disbursing agent and/or shareholder servicing agent,
and MSDW TRUST desires to render such services, such services shall be provided
pursuant to a letter agreement, substantially in the form of Exhibit A hereto,
between MSDW TRUST and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to MSDW TRUST an affidavit of loss or non-receipt by
the holder of Shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond satisfactory to MSDW TRUST and the
Fund issued by a surety company satisfactory to MSDW TRUST, except that MSDW
TRUST may accept an affidavit of loss and indemnity agreement executed by the
registered holder (or legal representative) without surety in such form as MSDW
TRUST deems appropriate indemnifying MSDW TRUST and the Fund for the issuance of
a replacement certificate, in cases where the alleged loss is in the amount of
$1,000 or less.
12.3 In the event that any check or other order for payment of money on
the account of any Shareholder or new investor is returned unpaid for any
reason, MSDW TRUST will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as MSDW TRUST may, in its sole
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<PAGE>
discretion, deem appropriate or as the Fund and, if applicable, the Distributor
may instruct MSDW TRUST.
12.4 Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or to MSDW TRUST shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To MSDW TRUST:
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 Merger of Agreement
13.1 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 14 Personal Liability
14.1 In the case of a Fund organized as a Massachusetts business trust,
a copy of the Declaration of Trust of the Fund is on file with the Secretary of
The Commonwealth of
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<PAGE>
Massachusetts, and notice is hereby given that this instrument is executed on
behalf of the Board of Trustees of the Fund as Trustees and not individually
and that the obligations of this instrument are not binding upon any of the
Trustees or shareholders individually but are binding only upon the assets and
property of the Fund; provided, however, that the Declaration of Trust of the
Fund provides that the assets of a particular Series of the Fund shall under no
circumstances be charged with liabilities attributable to any other Series of
the Fund and that all persons extending credit to, or contracting with or
having any claim against, a particular Series of the Fund shall look only to
the assets of that particular Series for payment of such credit, contract or
claim.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
DISCOVER BROKERAGE INDEX SERIES
By:
----------------------------------
Barry Fink
Vice President and General Counsel
ATTEST:
- --------------------------
Assistant Secretary
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
---------------------------------
John Van Heuvelen
President
ATTEST:
- --------------------------
Executive Vice President
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<PAGE>
Exhibit A
---------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (inset name of investment company) a (Massachusetts
business trust/Maryland corporation) (the "Fund"), desires to employ and appoint
Morgan Stanley Dean Witter Trust FSB ("MSDW TRUST") to act as transfer agent for
each series and class of shares of the Fund, whether now or hereafter authorized
or issued ("Shares"), dividend disbursing agent and, as appropriate, shareholder
servicing agent, registrar and agent in connection with any accumulation,
open-account or similar plan provided to the holders of Shares, including
without limitation any periodic investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the
Fund to MSDW TRUST of fees as set out in the fee schedule attached hereto as
Schedule A, MSDW TRUST shall provide such services to the Fund pursuant to the
terms and conditions set forth in the Transfer Agency and Service Agreement
annexed hereto, as if the Fund was a signatory thereto.
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<PAGE>
Please indicate MSDW TRUST's acceptance of employment and appointment
by the Fund in the capacities set forth above by so indicating in the space
provided below.
Very truly yours,
(name of fund)
--------------
By:
----------------------------------
Barry Fink
Vice President and General Counsel
ACCEPTED AND AGREED TO:
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
---------------------------------
Its:
--------------------------------
Date:
-------------------------------
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Schedule A
----------
Fee Schedule
------------
1. For such time as MSDW TRUST provides transfer agency, dividend
disbursing and shareholder servicing services to the single omnibus account
maintained by Discover Brokerage Direct, Inc., an annual maintenance fee of
$500 per annum. Fees for additional services to individual Shareholder
accounts shall be as negotiated between the parties.
2 Out-of-pocket expenses in accordance with Section 2.2 of the Agreement
3. Fees for additional services not set forth in this Transfer Agency
Agreement shall be as negotiated between the parties.
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<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995, and amended as of June
22, 1998, by and between Morgan Stanley Dean Witter Advisors Inc., a Delaware
corporation (herein referred to as "MSDW Advisors"), and Morgan Stanley Dean
Witter Services Company Inc., a Delaware corporation (herein referred to as
"MSDW Services").
WHEREAS, MSDW Advisors has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement")
with certain investment companies as set forth on Schedule A (each such
investment company being herein referred to as a "Fund" and, collectively, as
the "Funds") pursuant to which MSDW Advisors is to perform, or supervise the
performance of, among other services, administrative services for the Funds
(and, in the case of Funds with multiple portfolios, the Series or Portfolios
of the Funds (such Series and Portfolio being herein individually referred to
as "a Series" and, collectively, as "the Series"));
WHEREAS, MSDW Advisors desires to retain MSDW Services to perform the
administrative services as described below; and
WHEREAS, MSDW Services desires to be retained by MSDW Advisors to perform
such administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. MSDW Services agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, MSDW
Services shall (i) administer the Fund's business affairs and supervise the
overall day-to-day operations of the Fund (other than rendering investment
advice); (ii) provide the Fund with full administrative services, including the
maintenance of certain books and records, such as journals, ledger accounts and
other records required under the Investment Company Act of 1940, as amended
(the "Act"), the notification to the Fund and MSDW Advisors of available funds
for investment, the reconciliation of account information and balances among
the Fund's custodian, transfer agent and dividend disbursing agent and MSDW
Advisors, and the calculation of the net asset value of the Fund's shares;
(iii) provide the Fund with the services of persons competent to perform such
supervisory, administrative and clerical functions as are necessary to provide
effective operation of the Fund; (iv) oversee the performance of administrative
and professional services rendered to the Fund by others, including its
custodian, transfer agent and dividend disbursing agent, as well as accounting,
auditing and other services; (v) provide the Fund with adequate general office
space and facilities; (vi) assist in the preparation and the printing of the
periodic updating of the Fund's registration statement and prospectus (and, in
the case of an open-end Fund, the statement of additional information), tax
returns, proxy statements, and reports to its shareholders and the Securities
and Exchange Commission; and (vii) monitor the compliance of the Fund's
investment policies and restrictions.
In the event that MSDW Advisors enters into an Investment Management
Agreement with another investment company, and wishes to retain MSDW Services
to perform administrative services hereunder, it shall notify MSDW Services in
writing. If MSDW Services is willing to render such services, it shall notify
MSDW Advisors in writing, whereupon such other Fund shall become a Fund as
defined herein.
2. MSDW Services shall, at its own expense, maintain such staff and employ
or retain such personnel and consult with such other persons as it shall from
time to time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of MSDW Services shall be deemed to include
officers of MSDW Services and persons employed or otherwise retained by MSDW
Services (including officers and employees of MSDW Advisors, with the consent
of MSDW Advisors) to furnish services, statistical and other factual data,
information with respect to technical and scientific developments, and such
other information, advice and assistance as MSDW Services may desire. MSDW
Services shall maintain each Fund's records and books of account (other than
those maintained by the Fund's transfer agent, registrar, custodian and other
agencies). All such books and records so maintained shall be the property of
the Fund and, upon request therefor, MSDW Services shall surrender to MSDW
Advisors or to the Fund such of the books and records so requested.
1
<PAGE>
3. MSDW Advisors will, from time to time, furnish or otherwise make
available to MSDW Services such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as MSDW Services
may reasonably require in order to discharge its duties and obligations to the
Fund under this Agreement or to comply with any applicable law and regulation
or request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by MSDW Services, MSDW Advisors shall pay to MSDW Services
monthly compensation calculated daily (in the case of an open-end Fund) or
weekly (in the case of a closed-end Fund) by applying the annual rate or rates
set forth on Schedule B to the net assets of each Fund. Except as hereinafter
set forth, (i) in the case of an open-end Fund, compensation under this
Agreement shall be calculated by applying 1/365th of the annual rate or rates
to the Fund's or the Series' daily net assets determined as of the close of
business on that day or the last previous business day and (ii) in the case of
a closed-end Fund, compensation under this Agreement shall be calculated by
applying the annual rate or rates to the Fund's average weekly net assets
determined as of the close of the last business day of each week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth on Schedule B. Subject to the
provisions of paragraph 5 hereof, payment of MSDW Services' compensation for
the preceding month shall be made as promptly as possible after completion of
the computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to MSDW Advisors pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof
imposed by state securities laws or regulations thereunder, as such limitations
may be raised or lowered from time to time, or, in the case of InterCapital
Income Securities Inc. or Morgan Stanley Dean Witter Variable Investment Series
or any Series thereof, the expense limitation specified in the Fund's
Investment Management Agreement, the fee payable hereunder shall be reduced on
a pro rata basis in the same proportion as the fee payable by the Fund under
the Investment Management Agreement is reduced.
6. MSDW Services shall bear the cost of rendering the administrative
services to be performed by it under this Agreement, and shall, at its own
expense, pay the compensation of the officers and employees, if any, of the
Fund employed by MSDW Services, and such clerical help and bookkeeping services
as MSDW Services shall reasonably require in performing its duties hereunder.
7. MSDW Services will use its best efforts in the performance of
administrative activitives on behalf of each Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, MSDW Services shall not be liable to the Fund or any of
its investors for any error of judgment or mistake of law or for any act or
omission by MSDW Services or for any losses sustained by the Fund or its
investors. It is understood that, subject to the terms and conditions of the
Investment Management Agreement between each Fund and MSDW Advisors, MSDW
Advisors shall retain ultimate responsibility for all services to be performed
hereunder by MSDW Services. MSDW Services shall indemnify MSDW Advisors and
hold it harmless from any liability that MSDW Advisors may incur arising out of
any act or failure to act by MSDW Services in carrying out its responsibilities
hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, MSDW Services, and in any person
controlling, controlled by or under common control with MSDW Services, and that
MSDW Services and any person controlling, controlled by or under common control
with MSDW Services may have an interest in the Fund. It is also understood that
MSDW Services and any affiliated persons thereof or any persons controlling,
controlled by or under common control with MSDW Services have and may have
advisory, management, administration service or other contracts with other
organizations and persons, and may have other interests and businesses, and
further may purchase, sell or trade any securities or commodities for their own
accounts or for the account of others for whom they may be acting.
2
<PAGE>
9. This Agreement shall continue until April 30, 1999, and thereafter
shall continue automatically for successive periods of one year unless
terminated by either party by written notice delivered to the other party
within 30 days of the expiration of the then-existing period. Notwithstanding
the foregoing, this Agreement may be terminated at any time, by either party on
30 days' written notice delivered to the other party. In the event that the
Investment Management Agreement between any Fund and MSDW Advisors is
terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
11. This Agreement may be assigned by either party with the written
consent of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on June 22, 1998 in New York, New York.
MORGAN STANLEY DEAN WITTER ADVISORS
INC.
By:
--------------------------------
Attest:
- ----------------------------------------
MORGAN STANLEY DEAN WITTER SERVICES
COMPANY INC.
By:
--------------------------------
Attest:
- ----------------------------------------
3
<PAGE>
SCHEDULE A
MORGAN STANLEY DEAN WITTER FUNDS
AS AMENDED AS OF MAY 19, 1999
OPEN-END FUNDS
1. Discover Brokerage Index Series, Discover Brokerage S&P 500 Fund
[List of Funds]
A-1
<PAGE>
SCHEDULE B
MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES
AS AMENDED AS OF MAY 19, 1999
Monthly compensation calculated daily by applying the following annual
rates to a fund's daily net assets:
EQUITY FUNDS
Discover Brokerage Index Series 0.040% of the daily net assets.
--Discover Brokerage S&P 500
Fund
[List of Fund Fee Schedules]
B-1
<PAGE>
DISCOVER BROKERAGE INDEX SERIES
Two World Trade Center
New York, New York 10048
June 16, 1999
Discover Brokerage Index Series
Two World Trade Center
New York, New York 10048
Dear Sirs:
With respect to the Registration Statement on Form N-1A (File No.
333-65667) (the "Registration Statement") filed by Discover Brokerage Index
Series, a Massachusetts business trust (the "Fund"), with the Securities and
Exchange Commission for the purpose of registering under the Securities Act of
1933, as amended, an indefinite number of shares of Beneficial Interest of $0.01
par value of the Fund (the "Shares"), I, as your counsel, have examined such
Fund records, certificates and other documents and reviewed such questions of
law as I have considered necessary or appropriate for the purposes of this
opinion, and on the basis of such examination and review, I advise you that, in
my opinion, proper trust proceedings have been taken by the Fund so that the
Shares have been validly authorized; and when the Shares have been issued and
sold in accordance with the terms of the Underwriting Agreement referred to in
the Registration Statement, the Shares will be validly issued, fully paid and
non-assessable.
As to matters of Massachusetts law contained in the foregoing opinion,
I have relied upon the opinion of Lane Altman & Owens LLP dated May 21,1999
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Counsel" in the Statement of Additional Information forming a part of the
Registration Statement. In giving this consent, I do not thereby admit that I am
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Barry Fink
-----------------
Barry Fink
Vice President
and General Counsel
<PAGE>
Exhibit 99.9(b)
[Lane Altman & Owens LLP Letterhead]
May 21, 1999
Barry Fink, Vice President
and General Counsel
Morgan Stanley Dean Witter Advisors, Inc.
Two World Trade Center
New York, NY 10048
RE: DISCOVER BROKER INDEX SERIES
Dear Barry:
We understand that the trustees (the "Trustees") of Discover Brokerage
Index Series, a Massachusetts business trust (the "Trust"), intend, on or about
May 21, 1999, to cause to be filed on behalf of the Trust a Pre-effective
Amendment No. 1 to Registration Statement No. 333-65667 (as amended, the
"Registration Statement") for the purpose of registering for sale Shares of
Beneficial Interest, $.01 par value, of the Trust (the "Shares"). We further
understand that the Shares will be issued and sold pursuant to an underwriting
agreement (the "Underwriting Agreement") and a distribution agreement (the
"Distribution Agreement") to be entered into between the Trust and Morgan
Stanley Dean Witter Distributors Inc.
You have requested that we act as special counsel to the Trust
regarding certain matters of Massachusetts law respecting the organization of
the Trust, and in such capacity we are furnishing you with this opinion.
The Trust is organized under a written amended and restated declaration
of trust finally executed and filed in Boston, Massachusetts on October 13, 1998
(the "Trust Agreement"). The Trustees (as defined in the Trust Agreement) have
the powers set forth in the Trust Agreement, subject to the terms, provisions
and conditions therein provided.
In connection with the opinions set forth herein, you and the Trust
have provided to us originals, copies or facsimile transmissions of, and we have
reviewed and relied upon, among other things: a copy of the Trust Agreement; a
copy of the Amended and Restated By-laws of the Trust dated as of May 1, 1999;
forms of the Underwriting and Distribution Agreements; and the Registration
Statement (including the exhibits thereto). We have assumed that the amended and
restated by-laws have been duly adopted by the Trustees and will be filed as an
Exhibit to the
<PAGE>
[Lane Altman & Owens LLP Letterhead]
Barry Fink, Esq.
May 21, 1999
Page 2
Pre-effective Amendment No. 1. We have also reviewed and relied upon a
certificate of the Secretary of State of the Commonwealth of Massachusetts dated
May 18, 1999 attesting to the valid existence of the Trust.
In rendering this opinion we have assumed, without independent
verification, (i) the due authority of all individuals signing in representative
capacities and the genuineness of signatures, (ii) the authenticity,
completeness and continued effectiveness of all documents or copies furnished to
us, (iii) that any resolutions provided have been duly adopted by the Trustees,
and (iv) that no amendments, agreements, resolutions or actions have been
approved, executed or adopted which would limit, supersede or modify the items
described above. We have also examined such questions of law as we have
concluded necessary or appropriate for purposes of the opinions expressed below.
Where documents are referred to in resolutions approved by the Trustees, or in
the Registration Statement, we assume such documents are the same as in the most
recent form provided to us, whether as an exhibit to the Registration Statement,
or otherwise. When any opinion set forth below relates to the existence or
standing of the Trust, such opinion is based entirely upon and is limited by the
items referred to above, and we understand that the foregoing assumptions,
limitations and qualifications are acceptable to you.
Based upon the foregoing, and with respect to Massachusetts law only
(except that no opinion is herein expressed with respect to compliance with the
Massachusetts Uniform Securities Act), to the extent that Massachusetts law may
be applicable, and without reference to the laws of any of the other several
states or of the United States of America, including State and Federal
securities laws, we are of the opinion that:
1. The Trust is a business trust with transferable shares, organized in
compliance with the requirements of The Commonwealth of Massachusetts and the
Trust Agreement is legal and valid.
2. The Shares to which the Registration Statement relates and which are
to be registered under the Securities Act of 1933, as amended, will be legally
and validly issued upon receipt by the Trust of consideration determined by the
Trustees in compliance with Article VI, Section 6.4 of the Trust Agreement. We
are further of the opinion that such Shares, when issued, will be fully paid and
non-assessable by the Trust.
We understand that you will rely on this opinion solely in connection
with your opinion to be filed with the Securities and Exchange Commission as an
Exhibit to the Registration Statement. We hereby consent to such use of this
opinion and we also consent to the filing of
<PAGE>
[Lane Altman & Owens LLP Letterhead]
Barry Fink, Esq.
May 21, 1999
Page 3
said opinion with the Securities and Exchange Commission. In so consenting, we
do not thereby admit to be within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Lane Altman & Owens LLP
-------------------------------
LANE ALTMAN & OWENS LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
June 14, 1999, relating to the statement of assets and liabilities of Discover
Brokerage Index Series - Discover Brokerage S&P 500 Fund, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings "Custodian
and Independent Accountants" and "Experts" in such Statement of Additional
Information.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
June 15, 1999
<PAGE>
MORGAN STANLEY DEAN WITTER ADVISORS
Two World Trade Center
New York, New York 10048
May 19, 1999
Discover Brokerage Index Series
Two World Trade Center
New York, New York 10048
Gentlemen:
We are purchasing from you today 10,000 shares of beneficial interest
of your Discover Brokerage Index Series - Discover Brokerage S&P 500 Fund, of
$0.01 par value, at a price of $10.00 per share, for an aggregate price of
$100,000, to provide the initial capital you require pursuant to Section 14 of
the Investment Company Act of 1940 in order to make a public offering of your
shares.
We hereby represent that we are acquiring said shares for investment
and not for distribution or resale to the public.
Very truly yours,
MORGAN STANLEY DEAN WITTER
ADVISORS INC.
By: /s/ Mitchell M. Merin
------------------------------
Mitchell M. Merin
President and Chief Executive
Officer
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that Charles A. Fiumefreddo, whose
signature appears below, constitutes and appoints Marilyn K. Cranney and Barry
Fink, or either of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution among himself and each of the persons appointed
herein, for him and in his name, place and stead, in any and all capacities, to
sign any amendments to any registration statement of DISCOVER BROKERAGE INDEX
SERIES, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, may
lawfully do or cause to be done by virtue hereof.
Dated: October 28, 1998
----------------
/s/ Charles A. Fiumefreddo
--------------------------
Charles A. Fiumefreddo
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that Manuel H. Johnson, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and
Stuart M. Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of DISCOVER
BROKERAGE INDEX SERIES, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Dated: October 28, 1998
----------------
/s/ Manuel H. Johnson
---------------------
Manuel H. Johnson
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that Michael E. Nugent, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and
Stuart M. Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of DISCOVER
BROKERAGE INDEX SERIES, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Dated: October 28, 1998
----------------
/s/ Michael E. Nugent
---------------------
Michael E. Nugent
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that Edwin J. Garn, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and
Stuart M. Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of DISCOVER
BROKERAGE INDEX SERIES, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Dated: October 28, 1998
----------------
/s/ Edwin J. Garn
-----------------
Edwin J. Garn
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that Michael Bozic, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and
Stuart M. Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of DISCOVER
BROKERAGE INDEX SERIES, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Dated: October 28, 1998
----------------
/s/ Michael Bozic
-----------------
Michael Bozic
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that John L. Schroeder, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and
Stuart M. Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of DISCOVER
BROKERAGE INDEX SERIES, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Dated: October 28, 1998
----------------
/s/ John L. Schroeder
---------------------
John L. Schroeder
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that Philip J. Purcell, whose signature
appears below, constitutes and appoints Marilyn K. Cranney and Barry Fink, or
either of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution among himself and each of the persons appointed herein,
for him and in his name, place and stead, in any and all capacities, to sign any
amendments to any registration statement of DISCOVER BROKERAGE INDEX SERIES, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or either of them, may lawfully do
or cause to be done by virtue hereof.
Dated: October 28, 1998
----------------
/s/ Philip J. Purcell
---------------------
Philip J. Purcell
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that Wayne E. Hedien, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald M. Feiman and
Stuart M. Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of DISCOVER
BROKERAGE INDEX SERIES, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Dated: October 28, 1998
----------------
/s/ Wayne E. Hedien
-------------------
Wayne E. Hedien
