<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1999
REGISTRATION NOS.: 33-53295
811-7169
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 7 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 8 /X/
-------------------
MORGAN STANLEY DEAN WITTER
INTERNATIONAL SMALLCAP FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
-------------------
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
-------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
immediately upon filing pursuant to paragraph (b)
- -------
on (date), 1999 pursuant to paragraph (b)
- -------
X 60 days after filing pursuant to paragraph (a)
- -------
on , 1999 pursuant to paragraph (a) of rule 485.
- -------
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
-------------------------------------------------------
-------------------------------------------------------
<PAGE>
PROSPECTUS - AUGUST , 1999
Morgan Stanley Dean Witter
INTERNATIONAL SMALLCAP FUND
[COVER PHOTO]
A MUTUAL FUND THAT SEEKS LONG-TERM GROWTH OF CAPITAL
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>
<S> <C> <C>
The Fund Investment Objective.................................. 1
Principal Investment Strategies....................... 1
Principal Risks....................................... 2
Past Performance...................................... 4
Fees and Expenses..................................... 5
Additional Investment Strategy Information............ 6
Additional Risk Information........................... 7
Fund Management....................................... 8
Shareholder Information Pricing Fund Shares................................... 10
How to Buy Shares..................................... 10
How to Exchange Shares................................ 12
How to Sell Shares.................................... 13
Distributions......................................... 15
Tax Consequences...................................... 16
Share Class Arrangements.............................. 16
Financial Highlights ...................................................... 24
Our Family of Funds ...................................................... Inside Back Cover
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUND.
PLEASE READ IT CAREFULLY AND KEEP IT FOR FUTURE REFERENCE.
</TABLE>
<PAGE>
(SIDEBAR)
CAPITAL GROWTH
AN INVESTMENT OBJECTIVE HAVING THE GOAL OF SELECTING SECURITIES WITH THE
POTENTIAL TO RISE IN PRICE RATHER THAN PAY OUT INCOME.
(END SIDEBAR)
THE FUND
[ICON] INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter International SmallCap Fund seeks
long-term growth of capital.
[ICON] PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund will normally invest at least 65% of its total assets in
common stocks and other equity securities (including depository
receipts) of "small capitalization" companies located outside the
United States. A company is considered to be a "small capitalization"
company if it is among the companies, located in a particular
country, with aggregate capitalizations that comprise no more than
35% of the total market capitalization of that country. The Fund will
invest in at least three countries located outside the United States,
and currently may invest more than 25% of total assets in securities
of companies located in each of the United Kingdom and Japan. A
company is considered to be located in a particular country if it (a)
is organized under the laws of the country, (b) has securities which
are principally traded on a stock exchange in the country, (c)
derives at least 50% of its revenues from goods produced or sold,
investments made, or services performed in the country, or (d)
maintains at least 50% of its assets in the country.
The Fund's "Sub-Advisor," Morgan Stanley Dean Witter Investment
Management Inc., utilizes an investment strategy that primarily
emphasizes stock research and selection, in combination with
quantitative analysis. The Sub-Advisor seeks securities of companies
with long-term growth prospects, attractive valuation comparisons and
adequate market liquidity. The Sub-Advisor finds stocks attractive
that generally have valuations lower than the Sub-Advisor's
perception of their fundamental value, as reflected in price-to-cash
flow, price-to-book ratios or other stock valuation measures.
Common stock is a share ownership or equity interest in a
corporation. It may or may not pay dividends, as some companies
reinvest all of their profits back into their businesses, while
others pay out some of their profits to shareholders as dividends. A
depository receipt is generally issued by a bank or financial
institution and represents an ownership interest in the common stock
or other equity securities of a foreign company.
In addition, the Fund may invest in equity securities of companies
which have medium or large market capitalizations, fixed-income
securities issued or guaranteed by foreign governments, lower-rated
convertible securities and forward currency contracts.
In pursuing the Fund's investment objective, the Sub-Advisor has
considerable leeway in deciding which investments it buys, holds or
sells on a day-to-day basis -- and which trading strategies it uses.
For example, the Sub-Advisor in its discretion may determine to use
some permitted trading strategies while not using others.
1
<PAGE>
[ICON] PRINCIPAL RISKS
- --------------------------------------------------------------------------------
There is no assurance that the Fund will achieve its investment
objective. The Fund's share price will fluctuate with changes in the
market value of the Fund's portfolio securities. When you sell Fund
shares, they may be worth less than what you paid for them and,
accordingly, you can lose money investing in this Fund.
A principal risk of investing in the Fund is associated with its
foreign small-cap securities.
FOREIGN SECURITIES. The Fund's investments in foreign securities
(including depository receipts) involve risks that are in addition to
the risks associated with domestic securities. One additional risk is
currency risk. While the price of Fund shares is quoted in U.S.
dollars, the Fund generally converts U.S. dollars to a foreign
market's local currency to purchase a security in that market. If the
value of that local currency falls relative to the U.S. dollar, the
U.S. dollar value of the foreign security will decrease. This is true
even if the foreign security's local price remains unchanged.
Foreign securities also have risks related to economic and political
developments abroad, including expropriations, confiscatory taxation,
exchange control regulation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies, in general, are not subject to the
regulatory requirements of U.S. companies and, as such, there may be
less publicly available information about these companies. Moreover,
foreign accounting, auditing and financial reporting standards
generally are different from those applicable to U.S. companies.
Finally, in the event of a default of any foreign debt obligations,
it may be more difficult for the Fund to obtain or enforce a judgment
against the issuers of the securities.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be
more volatile. Furthermore, foreign exchanges and broker-dealers are
generally subject to less government and exchange scrutiny and
regulation than their U.S. counterparts.
The Fund's investments in Japanese and United Kingdom companies will
in particular subject the Fund to the risks of adverse social,
political or economic events which occur in those countries.
Specifically, investments in the Japanese stock market may entail a
higher degree of risk than investments in other markets. The prices
of securities traded on the Japanese markets may be more volatile
than many other markets. In addition, political and economic
developments occurring elsewhere in Europe, especially as they relate
to changes in the structure of the European Economic Community may
affect the Fund's investments in the United Kingdom.
Many European countries have adopted or are in the process of
adopting a single European currency, referred to as the "euro." The
consequences of the euro conversion
2
<PAGE>
for foreign exchange rates, interest rates and the value of European
securities the Fund may purchase are presently unclear. The
consequences may adversely affect the value and/or increase the
volatility of securities held by the Fund.
SMALL-CAP COMPANIES. In general, stock and other equity securities
values fluctuate in response to activities specific to the company as
well as general market, economic and political conditions. These
prices can fluctuate widely in response to these factors.
Investing in lesser-known, smaller capitalized companies may involve
greater risk of volatility of the Fund's share price than is
customarily associated with investing in larger, more established
companies. There is typically less publicly available information
concerning smaller companies than for larger, more established
companies. Some small companies have limited product lines,
distribution channels and financial and managerial resources and tend
to concentrate on fewer geographic markets than do larger companies.
Also, because smaller companies normally have fewer shares
outstanding than larger companies and trade less frequently, it may
be more difficult for the Fund to buy and sell significant amounts of
shares without an unfavorable impact on prevailing market prices.
Some of the companies in which the Fund may invest may distribute,
sell or produce products which have recently been brought to market
and may be dependent on key personnel with varying degrees of
experience.
OTHER RISKS. The performance of the Fund also will depend on whether
the Sub-Advisor is successful in pursuing the Fund's investment
strategy. The Fund is subject to other risks from its permissible
investments including the risks associated with its other equity,
fixed-income and forward currency contracts. For more information
about these risks, see the "Additional Risk Information" section.
Shares of the Fund are not bank deposits and are not guaranteed or
insured by the FDIC or any other government agency.
3
<PAGE>
(SIDEBAR)
ANNUAL TOTAL RETURNS
THIS CHART SHOWS HOW THE PERFORMANCE OF THE FUND'S CLASS B SHARES HAS VARIED
FROM YEAR TO YEAR OVER THE PAST 4 CALENDAR YEARS.
AVERAGE ANNUAL
TOTAL RETURNS
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL RETURNS WITH THOSE OF A BROAD
MEASURE OF MARKET PERFORMANCE OVER TIME, AS WELL AS WITH AN INDEX OF FUNDS WITH
SIMILAR INVESTMENT OBJECTIVES. THE FUND'S RETURNS INCLUDE THE MAXIMUM APPLICABLE
SALES CHARGE FOR EACH CLASS AND ASSUME YOU SOLD YOUR SHARES AT THE END OF EACH
PERIOD.
(END SIDEBAR)
[ICON] PAST PERFORMANCE
- --------------------------------------------------------------------------------
The bar chart and table below provide some indication of the risks of
investing in the Fund. The Fund's past performance does not indicate
how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CALENDAR YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1990* -10.42%
91 -4.41%
92 -9.95%
93 55.90%
94 -11.54%
95 4.97%
96 1.62%
97 -43.13%
98 -14.39%
</TABLE>
The bar chart reflects the performance of Class B shares; the performance of the
other Classes will differ because the Classes have different ongoing fees. The
performance information in the bar chart does not reflect the deduction of sales
charges; if these amounts were reflected, returns would be less than shown.
During the periods shown in the bar chart, the highest return for a
calendar quarter was % (quarter ended ) and the
lowest return for a calendar quarter was % (quarter ended
). Year-to-date total return as of June 30, 1999 was
%.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1998)
- -----------------------------------------------------------------------
PAST 1 YEAR LIFE OF FUND
(SINCE 7/29/94)
<S> <C> <C>
- -----------------------------------------------------------------------
Class A(1) --
- -----------------------------------------------------------------------
Class B
- -----------------------------------------------------------------------
Class C(1) --
- -----------------------------------------------------------------------
Class D(1) --
- -----------------------------------------------------------------------
NatWest IX(2) %
- -----------------------------------------------------------------------
Lipper International Small-Cap Fund
Average(3) -12.80%
- -----------------------------------------------------------------------
EAFE SmallCap Index(4)
- -----------------------------------------------------------------------
</TABLE>
1 Classes A, C and D commenced operations on July 28, 1997.
2 The NatWest Markets Euro-Pacific Small Cap Index was specifically designed
for use as a benchmark for non-U.S. small cap portfolios. The Index does
not include any expenses, fees or charges or reinvestment of dividends. The
Index is unmanaged and should not be considered an investment.
3 The Lipper International Small-Cap Fund Average tracks the performance of
all funds which invest at least 65% of their assets in equity securities of
non-U.S. companies with market capitalizations less than U.S. $1 billion at
the time of purchase.
4
<PAGE>
(SIDEBAR)
SHAREHOLDER FEES
THESE FEES ARE PAID DIRECTLY FROM YOUR INVESTMENT.
ANNUAL FUND
OPERATING EXPENSES
THESE EXPENSES ARE DEDUCTED FROM THE FUND'S ASSETS AND ARE BASED ON EXPENSES
PAID FOR THE FISCAL YEAR ENDED MAY 31, 1999.
(END SIDEBAR)
[ICON] FEES AND EXPENSES
- --------------------------------------------------------------------------------
The table below briefly describes the fees and expenses that you may
pay if you buy and hold shares of the Fund. The Fund offers four
Classes of shares: Classes A, B, C and D. Each Class has a different
combination of fees, expenses and other features. The Fund does not
charge account or exchange fees. See the "Share Class Arrangements"
section for further fee and expense information.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES
- ---------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) 5.25%(1) None None None
- ---------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage based
on the lesser of the offering price or net asset value at
redemption) None(2) 5.00%(3) 1.00%(4) None
- ---------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------------------------------------------------------
Management Fee 1.15% 1.15% 1.15% 1.15%
- ---------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees % % 1.00% None
- ---------------------------------------------------------------------------------------------------------
Other expenses % % % %
- ---------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses % % % %
- ---------------------------------------------------------------------------------------------------------
</TABLE>
1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the time of
purchase are subject to a contingent deferred sales charge ("CDSC") of
1.00% that will be imposed if you sell your shares within one year after
purchase, except for certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of the
CDSC.
4 Only applicable if you sell your shares within one year after purchase.
EXAMPLE
This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your
investment has a 5% return each year, and the Fund's operating
expenses remain the same. Although your actual costs may be higher or
lower, the tables below show your costs at the end of each period
based on these assumptions depending upon whether or not you sell
your shares at the end of each period.
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES IF YOU HELD YOUR SHARES
----------------------------------------- -----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------- -----------------------------------------
CLASS A $ $ $ $ $ $ $ $
- ---------------------------------------------------------- -----------------------------------------
CLASS B $ $ $ $ $ $ $ $
- ---------------------------------------------------------- -----------------------------------------
CLASS C $ $ $ $ $ $ $ $
- ---------------------------------------------------------- -----------------------------------------
CLASS D $ $ $ $ $ $ $ $
- ---------------------------------------------------------- -----------------------------------------
</TABLE>
5
<PAGE>
Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of
the maximum front-end sales charges permitted by the National
Association of Securities Dealers.
[ICON] ADDITIONAL INVESTMENT STRATEGY INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to the Fund's
principal strategies.
OTHER INVESTMENTS. The Fund may invest up to 35% of its total assets
in equity securities of medium- and large-cap companies and in fixed
income securities issued or guaranteed by foreign governments.
Additionally, this portion of the Fund may be invested in other
financial instruments such as forward foreign exchange contracts,
futures contracts and options.
LOWER RATED CONVERTIBLE SECURITIES. The Fund may also invest up to
35% of its assets in convertible securities rated below investment
grade. Securities below investment grade are commonly known as "junk
bonds."
FORWARD CURRENCY CONTRACTS. The Fund's investments also may include
forward currency contracts, which involve the purchase or sale of a
specific amount of foreign currency at the current price with
delivery at a specified future date. The Fund may use these contracts
to hedge against adverse price movements in its portfolio securities
or securities it may purchase and the currencies in which they are
denominated or to gain exposure to currencies underlying various
securities or financial instruments.
DEFENSIVE INVESTING. The Fund may take temporary "defensive"
positions in attempting to respond to adverse market conditions. The
Fund may invest any amount of its assets in cash or money market
instruments in a defensive posture when the Sub-Advisor believes it
is advisable to do so. Although taking a defensive posture is
designed to protect the Fund from an anticipated market downturn, it
could have the effect of reducing the benefit from any upswing in the
market.
PORTFOLIO TURNOVER. The Fund may engage in active and frequent
trading of portfolio securities to achieve its principal investment
strategies. The portfolio turnover rate is not expected to exceed
250% annually under normal circumstances. A high turnover rate will
increase Fund brokerage costs. It also may increase the Fund's
capital gains, which are passed along to Fund shareholders as
distributions. This, in turn, may increase your tax liability as a
Fund shareholder. See the sections on "Distributions" and "Tax
Consequences."
The percentage limitations relating to the composition of the Fund's
portfolio apply at the time the Fund acquires an investment and refer
to the Fund's net assets, unless otherwise noted. Subsequent
percentage changes that result from market fluctuations
6
<PAGE>
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.
[ICON] ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to the
principal risks of investing in the Fund.
MEDIUM AND LARGE-CAP EQUITY SECURITIES. Any Fund investments in
medium and large-cap companies involve substantially similar risk to
that of common stock. In general, equity security values fluctuate in
response to activities specific to the company as well as general
market, economic and political conditions. These prices can fluctuate
widely in response to these factors.
FIXED-INCOME SECURITIES. Any Fund investments in fixed-income
securities involve risk. All fixed-income securities are subject to
two types of risk: credit risk and interest rate risk. Credit risk
refers to the possibility that the issuer of a security will be
unable to make interest payments and repay the principal on its debt.
Interest rate risk refers to fluctuations in the value of a
fixed-income security resulting from changes in the general level of
interest rates. When the general level of interest rates goes up, the
price of most fixed-income securities goes down. When the general
level of interest rates goes down, the price of most fixed-income
securities goes up.
LOWER RATED CONVERTIBLE SECURITIES. Any Fund investments in lower
rated convertible securities known as "junk bonds" pose significant
risks. The prices of these securities are likely to be more sensitive
to adverse economic changes or individual corporate developments than
higher rated securities. During an economic downturn or substantial
period of rising interest rates, junk bond issuers and, in
particular, highly leveraged issuers may experience financial stress
that would adversely affect their ability to service their principal
and interest payment obligations, to meet their projected business
goals or to obtain additional financing. In the event of a default,
the Fund may incur additional expenses to seek recovery. The
illiquidity of the market may also adversely affect the ability of
the Fund's Trustees to arrive at a fair value for certain junk bonds
at certain times and could make it difficult for the Funds to sell
certain securities. In addition, periods of economic uncertainty and
change probably would result in an increased volatility of market
prices of high yield securities and a corresponding volatility in a
Fund's net asset value.
FORWARD CURRENCY CONTRACTS. The Fund's participation in forward
currency contracts also involves risks. If the Sub-Advisor employ a
strategy that does not correlate well with the Fund's investments or
the currencies in which the investments are denominated, currency
contracts could result in a loss. The contracts also may increase the
Fund's volatility and may involve a significant risk.
7
<PAGE>
(SIDEBAR)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
THE INVESTMENT MANAGER IS WIDELY RECOGNIZED AS A LEADER IN THE MUTUAL FUND
INDUSTRY AND TOGETHER WITH MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC., ITS
WHOLLY-OWNED SUBSIDIARY, HAS MORE THAN $ BILLION IN ASSETS UNDER MANAGEMENT OR
ADMINISTRATION AS OF JULY 31, 1999.
(END SIDEBAR)
YEAR 2000. The Fund could be adversely affected if the computer
systems necessary for the efficient operation of the Fund's
"Investment Manager" -- Morgan Stanley Dean Witter Advisors Inc., the
Sub-Advisor, the Fund's other service providers and the markets and
corporate and governmental issuers in which the Fund invests do not
properly process and calculate date-related information from and
after January 1, 2000. While year 2000-related computer problems
could have a negative effect on the Fund, the Investment Manager, the
Sub-Advisor and their affiliates are working hard to avoid any
problems and to obtain assurances from their service providers that
they are taking similar steps.
In addition, it is possible that the markets for securities in which
the Fund invests may be detrimentally affected by computer failures
throughout the financial services industry beginning January 1, 2000.
Improperly functioning trading systems may result in settlement
problems and liquidity issues. In addition, corporate and
governmental data processing errors also may result in production
problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs,
which may be substantial and may be reported inconsistently in U.S.
and foreign financial statements. Accordingly, the Fund's investments
may be adversely affected.
[ICON] FUND MANAGEMENT
- --------------------------------------------------------------------------------
The Fund has retained the Investment Manager -- Morgan Stanley Dean
Witter Advisors Inc. -- to provide administrative services and manage
its business affairs. The Investment Manager has, in turn, contracted
with the Sub-Advisor - Morgan Stanley Dean Witter Investment
Management Inc. - to invest the Fund's assets, including the placing
of orders for the purchase and sale of portfolio securities. Morgan
Stanley Dean Witter Investment Management Inc. has been the
Sub-Advisor of the Fund since December 1, 1997. 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, NY 10048.
The Sub-Advisor, together with its institutional investment
management affiliates, manages assets of approximately $ billion as
of , 1999, for U.S. corporate and public employee
benefit plans, investment companies, endowments, foundations and
wealthy individuals. The Sub-Advisor is also a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co. Its main business
office is located at 1221 Avenue of the Americas, New York, New York
10020.
8
<PAGE>
The Fund's portfolio is managed by a team of portfolio managers
located in the Sub-Advisor's offices in London, Amsterdam, Singapore
and Tokyo. The Sub-Advisor's portfolio mangement team has been
responsible for managing the Fund since December 1, 1997.
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund,
and for Fund expenses assumed by the Investment Manager. The fee is
based on the Fund's average daily net assets. For the fiscal year
ended May 31, 1999 the Fund accrued total compensation to the
Investment Manager amounting to 1.15% of the Fund's average daily net
assets. The Investment Manager pays the Sub-Advisor compensation
equal to 40% of its compensation.
9
<PAGE>
(SIDEBAR)
CONTACTING A
FINANCIAL ADVISOR
IF YOU ARE NEW TO THE
MORGAN STANLEY DEAN
WITTER FAMILY OF FUNDS AND
WOULD LIKE TO CONTACT A
FINANCIAL ADVISOR, CALL
(800) THE-DEAN FOR THE
TELEPHONE NUMBER OF THE
MORGAN STANLEY DEAN
WITTER OFFICE NEAREST YOU.
YOU MAY ALSO ACCESS OUR
OFFICE LOCATOR ON OUR
INTERNET SITE AT:
WWW.DEANWITTER.COM/FUNDS
(END SIDEBAR)
SHAREHOLDER INFORMATION
[ICON] PRICING FUND SHARES
- --------------------------------------------------------------------------------
The price of Fund shares (excluding sales charges), called "net asset
value," is based on the value of the Fund's portfolio securities.
While the assets of each Class are invested in a single portfolio of
securities, the net asset value of each Class will differ because the
Classes have different ongoing distribution fees.
The net asset value per share of the Fund is determined once daily at
4:00 p.m. Eastern time on each day that the New York Stock Exchange
is open (or, on days when the New York Stock Exchange closes prior to
4:00 p.m., at such earlier time). Shares will not be priced on days
that the New York Stock Exchange is closed.
The value of the Fund's portfolio securities is based on the
securities' market price when available. When a market price is not
readily available, including circumstances under which the Investment
Manager and/or Sub-Advisor determine that a security's market price
is not accurate, a portfolio security is valued at its fair value, as
determined under procedures established by the Fund's Board of
Trustees. In these cases, the Fund's net asset value will reflect
certain portfolio securities' fair value rather than their market
price. In addition, if the Fund holds securities primarily listed on
foreign exchanges, the value of the Fund's portfolio securities may
change on days when you will not be able to purchase or sell your
shares.
An exception to the Fund's general policy of using market prices
concerns its short-term debt portfolio securities. Debt securities
with remaining maturities of sixty days or less at the time of
purchase are valued at amortized cost. However, if the cost does not
reflect the securities' market value, these securities will be valued
at their fair value.
[ICON] HOW TO BUY SHARES
- --------------------------------------------------------------------------------
You may open a new account to buy Fund shares or buy additional
Fund shares for an existing account by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Your Financial Advisor will assist you,
step-by-step, with the procedures to invest in the Fund. You may
also purchase shares directly by calling the Fund's transfer agent
and requesting an application.
Because every investor has different immediate financial needs and
long-term investment goals, the Fund offers investors four Classes
of shares: Classes A, B, C and D. Class D shares are only offered
to a limited group of investors. Each Class of shares offers a
distinct structure of sales charges, distribution and service fees,
and other features that are designed to address a variety of needs.
Your Financial Advisor or other authorized financial representative
can help you decide which Class may be most appropriate for you.
When purchasing Fund shares, you must specify which Class of shares
you wish to purchase.
10
<PAGE>
(SIDEBAR)
EASYINVEST-SM-
A PURCHASE PLAN THAT ALLOWS YOU TO TRANSFER MONEY AUTOMATICALLY FROM YOUR
CHECKING OR SAVINGS ACCOUNT OR FROM A MONEY MARKET FUND ON A SEMI-MONTHLY,
MONTHLY OR QUARTERLY BASIS. CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL
ADVISOR FOR FURTHER INFORMATION ABOUT THIS SERVICE.
(END SIDEBAR)
When you buy Fund shares, the shares are purchased at the next share
price calculated (less any applicable front-end sales charge for
Class A shares) after we receive your purchase order in proper form.
Your payment is due on the third business day after you place your
purchase order. We reserve the right to reject any order for the
purchase of Fund shares.
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
- ------------------------------------------------------------------------------------------------
MINIMUM INVESTMENT
----------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Regular Accounts $ 1,000 $ 100
- ------------------------------------------------------------------------------------------------
Individual Retirement Accounts: Regular IRAs $ 1,000 $ 100
Education IRAs $500 $ 100
- ------------------------------------------------------------------------------------------------
EASYINVEST-SM- (Automatically from your checking
or savings account or Money Market
Fund) $100* $ 100*
- ------------------------------------------------------------------------------------------------
</TABLE>
* Provided your schedule of investments totals $1,000 in twelve months.
There is no minimum investment amount if you purchase Fund shares
through: (1) the Investment Manager's mutual fund asset allocation
plan, (2) a program, approved by the Fund's distributor, in which you
pay an asset-based fee for advisory, administrative and/ or brokerage
services, or (3) employer-sponsored employee benefit plan accounts.
INVESTMENT OPTIONS FOR CERTAIN INSTITUTIONAL AND OTHER
INVESTORS/CLASS D SHARES. To be eligible to purchase Class D shares,
you must qualify under one of the investor categories specified in
the "Share Class Arrangements" section of this PROSPECTUS.
SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition to
buying additional Fund shares for an existing account by contacting
your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative, you may send a check directly to the Fund.
To buy additional shares in this manner:
- Write a "letter of instruction" to the Fund specifying the name(s)
on the account, the account number, the social security or tax
identification number, the Class of shares you wish to purchase and
the investment amount (which would include any applicable front-end
sales charge). The letter must be signed by the account owner(s).
- Make out a check for the total amount payable to: Morgan Stanley
Dean Witter International SmallCap Fund.
- Mail the letter and check to Morgan Stanley Dean Witter Trust FSB
at P.O. Box 1040, Jersey City, NJ 07303.
11
<PAGE>
[ICON] HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
PERMISSIBLE FUND EXCHANGES. You may exchange shares of any Class of
the Fund for the same Class of any other continuously offered
Multi-Class Fund, or for shares of a No-Load Fund, Money Market Fund,
North American Government Income Trust or Short-Term U.S. Treasury
Trust, without the imposition of an exchange fee. See the inside back
cover of this PROSPECTUS for each Morgan Stanley Dean Witter Fund's
designation as a Multi-Class Fund, No-Load Fund or Money Market Fund.
If a Morgan Stanley Dean Witter Fund is not listed, consult the
inside back cover of that Fund's PROSPECTUS for its designation. For
purposes of exchanges, shares of FSC Funds (subject to a front-end
sales charge) are treated as Class A shares of a Multi-Class Fund.
Exchanges may be made after shares of the Fund acquired by purchase
have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
The current PROSPECTUS for each fund describes its investment
objective(s), policies and investment minimums, and should be read
before investment.
EXCHANGE PROCEDURES. You can process an exchange by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative. Otherwise, you must forward an exchange
privilege authorization form to the Fund's transfer agent -- Morgan
Stanley Dean Witter Trust FSB -- and then write the transfer agent or
call (800) 869-NEWS to place an exchange order. You can obtain an
exchange privilege authorization form by contacting your Financial
Advisor or other authorized financial representative, or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a Money
Market Fund) is made on the basis of the next calculated net asset
values of the Funds involved after the exchange instructions are
accepted. When exchanging into a Money Market Fund, the Fund's shares
are sold at their next calculated net asset value and the Money
Market Fund's shares are purchased at their net asset value on the
following business day.
The Fund may terminate or revise the exchange privilege upon required
notice. Certain services normally available to shareholders of Money
Market Funds, including the check writing privilege, are not
available for Money Market Fund shares you acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley
Dean Witter Trust FSB, we will employ reasonable procedures to
confirm that exchange instructions communicated over the telephone
are genuine. These procedures may include requiring various forms of
personal identification such as name, mailing address, social
security or other tax identification number. Telephone instructions
also may be recorded.
Telephone instructions will be accepted if received by the Fund's
transfer agent between 9:00 a.m. and 4:00 p.m. Eastern time on any
day the New York Stock Exchange is open
12
<PAGE>
for business. During periods of drastic economic or market changes,
it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the
Fund in the past.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin
account, contact your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative regarding restrictions on
the exchange of such shares.
TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of the Fund
for shares of another Morgan Stanley Dean Witter Fund there are
important tax considerations. For tax purposes, the exchange out of
the Fund is considered a sale of Fund shares -- and the exchange into
the other Fund is considered a purchase. As a result, you may realize
a capital gain or loss.
You should review the "Tax Consequences" section and consult your own
tax professional about the tax consequences of an exchange.
FREQUENT EXCHANGES. A pattern of frequent exchanges may result in the
Fund limiting or prohibiting, at its discretion, additional purchases
and/or exchanges. The Fund will notify you in advance of limiting
your exchange privileges.
CDSC CALCULATIONS ON EXCHANGES. See the "Share Class Arrangements"
section of this PROSPECTUS for a further discussion of how applicable
contingent deferred sales charges (CDSCs) are calculated for shares
of one Morgan Stanley Dean Witter Fund that are exchanged for shares
of another.
For further information regarding exchange privileges, you should
contact your Morgan Stanley Dean Witter Financial Advisor, or call
(800) 869-NEWS.
[ICON] HOW TO SELL SHARES
- --------------------------------------------------------------------------------
You can sell some or all of your Fund shares at any time. If you sell
Class A, Class B or Class C shares, your net sale proceeds are
reduced by the amount of any applicable CDSC. Your shares will be
sold at the next price calculated after we receive your order to sell
as described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
- --------------------------------------------------------------------------------
Contact Your To sell your shares, simply call your Morgan Stanley Dean
Financial Advisor Witter Financial Advisor or other authorized financial
representative.
------------------------------------------------------------
[ICON]
Payment will be sent to the address to which the account is
registered or deposited in your brokerage account.
- --------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of
instruction" that includes:
- your account number;
[ICON]
- the dollar amount or the number of shares you wish to
sell;
- the Class of shares you wish to sell; and
- the signature of each owner as it appears on the account.
------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
- --------------------------------------------------------------------------------
<S> <C>
By Letter, If you are requesting payment to anyone other than the
continued registered owner(s) or that payment be sent to any address
other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature
guarantee. You can obtain a signature guarantee from an
eligible guarantor acceptable to Morgan Stanley Dean Witter
Trust FSB. (You should contact Morgan Stanley Dean Witter
Trust FSB at (800) 869-NEWS for a determination as to
whether a particular institution is an eligible guarantor.)
A notary public CANNOT provide a signature guarantee.
Additional documentation may be required for shares held by
a corporation, partnership, trustee or executor.
------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at
P.O. Box 983, Jersey City, NJ 07303. If you hold share
certificates, you must return the certificates, along with
the letter and any required additional documentation.
------------------------------------------------------------
A check will be mailed to the name(s) and address in which
the account is registered, or otherwise according to your
instructions.
- --------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter
Withdrawal Plan Family of Funds has a total market value of at least
$10,000, you may elect to withdraw amounts of $25 or more,
or in any whole percentage of a Fund's balance (provided the
amount is at least $25), on a monthly, quarterly,
semi-annual or annual basis, from any Fund with a balance of
$1,000. Each time you add a Fund to the plan, you must meet
the plan requirements.
------------------------------------------------------------
[ICON]
Amounts withdrawn are subject to any applicable CDSC. A CDSC
may be waived under certain circumstances. See the Class B
waiver categories listed in the "Share Class Arrangements"
section of this PROSPECTUS.
------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your
Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative, or call (800) 869-NEWS.
You may terminate or suspend your plan at any time. Please
remember that withdrawals from the plan are sales of shares,
not Fund "distributions," and ultimately may exhaust your
account balance. The Fund may terminate or revise the plan
at any time.
- --------------------------------------------------------------------------------
</TABLE>
PAYMENT FOR SOLD SHARES. After we receive your complete instructions
to sell as described above, a check will be mailed to you within
seven days, although we will attempt to make payment within one
business day. Payment may also be sent to your brokerage account.
Payment may be postponed or the right to sell your shares suspended
under unusual circumstances. If you request to sell shares that were
recently purchased by check, payment of the sale proceeds may be
delayed for the minimum time needed to verify that the check has been
honored (not more than fifteen days from the time we receive the
check).
TAX CONSIDERATIONS. Normally, your sale of Fund shares is subject to
federal and state income tax. You should review the "Tax
Consequences" section of this PROSPECTUS and consult your own tax
professional about the tax consequences of a sale.
REINSTATEMENT PRIVILEGE. If you sell Fund shares and have not
previously exercised the reinstatement privilege, you may, within 35
days after the date of sale, invest any portion of the proceeds in
the same Class of Fund shares at their net asset value and receive a
pro rata credit for any CDSC paid in connection with the sale.
14
<PAGE>
(SIDEBAR)
TARGETED DIVIDENDS-SM-
YOU MAY SELECT TO HAVE YOUR FUND DISTRIBUTIONS AUTOMATICALLY INVESTED IN OTHER
CLASSES OF FUND SHARES OR CLASSES OF ANOTHER MORGAN STANLEY DEAN WITTER FUND
THAT YOU OWN. CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR FOR
FURTHER INFORMATION ABOUT THIS SERVICE.
(END SIDEBAR)
INVOLUNTARY SALES. The Fund reserves the right, on sixty days'
notice, to sell the shares of any shareholder (other than shares held
in an IRA or 403(b) Custodial Account) whose shares, due to sales by
the shareholder, have a value below $100, or in the case of an
account opened through EASYINVEST-SM-, if after 12 months the
shareholder has invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner, we will
notify you and allow you sixty days to make an additional investment
in an amount that will increase the value of your account to at least
the required amount before the sale is processed. No CDSC will be
imposed on any involuntary sale.
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin
account, contact your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative regarding restrictions on
the sale of such shares.
[ICON] DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund passes substantially all of its earnings from income and
capital gains along to its investors as "distributions." The Fund
earns income from stocks and interest from fixed-income investments.
These amounts are passed along to Fund shareholders as "income
dividend distributions." The Fund realizes capital gains whenever it
sells securities for a higher price than it paid for them. These
amounts may be passed along as "capital gain distributions."
The Fund declares income dividends separately for each Class.
Distributions paid on Class A and Class D shares usually will be
higher than for Class B and Class C because distribution fees that
Class B and Class C pay are higher. Normally, income dividends and
capital gains are distributed annually in December. The Fund,
however, may retain and reinvest any long-term capital gains. The
Fund may at times make payments from sources other than income or
capital gains that represent a return of a portion of your
investment.
Distributions are reinvested automatically in additional shares of
the same Class and automatically credited to your account, unless you
request in writing that all distributions be paid in cash. If you
elect the cash option, the Fund will mail a check to you no later
than seven business days after the distribution is declared. No
interest will accrue on uncashed checks. If you wish to change how
your distributions are paid, your request should be received by the
Fund's transfer agent, Morgan Stanley Dean Witter Trust FSB, at least
five business days prior to the record date of the distributions.
15
<PAGE>
[ICON] TAX CONSEQUENCES
- --------------------------------------------------------------------------------
As with any investment, you should consider how your Fund investment
will be taxed. The tax information in this PROSPECTUS is provided as
general information. You should consult your own tax professional
about the tax consequences of an investment in the Fund.
Unless your investment in the Fund is through a tax-deferred
retirement account, such as a 401(k) plan or IRA, you need to be
aware of the possible tax consequences when:
- The Fund makes distributions; and
- You sell Fund shares, including an exchange to another Morgan
Stanley Dean Witter Fund.
TAXES ON DISTRIBUTIONS. Your distributions are normally subject to
federal and state income tax when they are paid, whether you take
them in cash or reinvest them in Fund shares. A distribution also may
be subject to local income tax. Any income dividend distributions and
any short-term capital gain distributions are taxable to you as
ordinary income. Any long-term capital gain distributions are taxable
as long-term capital gains, no matter how long you have owned shares
in the Fund.
Every January, you will be sent a statement (IRS Form 1099-DIV)
showing the taxable distributions paid to you in the previous year.
The statement provides full information on your dividends and capital
gains for tax purposes.
TAXES ON SALES. Your sale of Fund shares normally is subject to
federal and state income tax and may result in a taxable gain or loss
to you. A sale also may be subject to local income tax. Your exchange
of Fund shares for shares of another Morgan Stanley Dean Witter Fund
is treated for tax purposes like a sale of your original shares and a
purchase of your new shares. Thus, the exchange may, like a sale,
result in a taxable gain or loss to you and will give you a new tax
basis for your new shares.
When you open your Fund account, you should provide your social
security or tax identification number on your investment application.
By providing this information, you will avoid being subject to a
federal backup withholding tax of 31% on taxable distributions and
redemption proceeds. Any withheld amount would be sent to the IRS as
an advance tax payment.
[ICON] SHARE CLASS ARRANGEMENTS
- --------------------------------------------------------------------------------
The Fund offers several Classes of shares having different
distribution arrangements designed to provide you with different
purchase options according to your investment needs. Your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative can help you decide which Class may be appropriate for
you.
16
<PAGE>
(SIDEBAR)
FRONT-END SALES CHARGE
OR FSC
AN INITIAL SALES CHARGE YOU PAY WHEN PURCHASING CLASS A SHARES THAT IS BASED ON
A PERCENTAGE OF THE OFFERING PRICE. THE PERCENTAGE DECLINES BASED UPON THE
DOLLAR VALUE OF CLASS A SHARES YOU PURCHASE. WE OFFER THREE WAYS TO REDUCE YOUR
CLASS A SALES CHARGES - THE COMBINED PURCHASE PRIVILEGE, RIGHT OF ACCUMULATION
AND LETTER OF INTENT.
(END SIDEBAR)
The general public is offered three Classes: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales
charges and ongoing expenses. A fourth Class, Class D shares, is
offered only to a limited category of investors. Shares that you
acquire through reinvested distributions will not be subject to any
front-end sales charge or CDSC -- contingent deferred sales charge.
Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide
for the distribution financing of shares of that Class.
The chart below compares the sales charge and maximum annual 12b-1
fee applicable to each Class:
<TABLE>
<CAPTION>
MAXIMUM
CLASS SALES CHARGE ANNUAL 12b-1 FEE
<S> <C> <C>
- ------------------------------------------------------------------
A Maximum 5.25% initial sales charge
reduced for purchase of $25,000 or more;
shares sold without an initial sales
charge are generally subject to a 1.0%
CDSC during the first year 0.25%
- ------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year
decreasing to 0% after six years 1.0%
- ------------------------------------------------------------------
C 1.0% CDSC during the first year 1.0%
- ------------------------------------------------------------------
D None None
- ------------------------------------------------------------------
</TABLE>
CLASS A SHARES Class A shares are sold at net asset value plus an
initial sales charge of up to 5.25%. The initial sales charge is
reduced for purchases of $25,000 or more according to the schedule
below. Investments of $1 million or more are not subject to an initial
sales charge, but are generally subject to a contingent deferred sales
charge, or CDSC, of 1.0% on sales made within one year after the last
day of the month of purchase. The CDSC will be assessed in the same
manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25% of
the average daily net assets of the Class.
The offering price of Class A shares includes a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
------------------------------------------------
AMOUNT OF PERCENTAGE OF PUBLIC APPROXIMATE PERCENTAGE OF
SINGLE TRANSACTION OFFERING PRICE AMOUNT INVESTED
<S> <C> <C>
- ------------------------------------------------------------------------------------------
Less than $25,000 5.25% 5.54%
- ------------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.75% 4.99%
- ------------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17%
- ------------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
- ------------------------------------------------------------------------------------------
$250,000 but less than $1 million 2.00% 2.04%
- ------------------------------------------------------------------------------------------
$1 million and over 0.00% 0.00%
- ------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
The reduced sales charge schedule is applicable to purchases of Class
A shares in a single transaction by:
- A single account (including an individual, trust or fiduciary
account).
- Family member accounts (limited to husband, wife and children under
the age of 21).
- Pension, profit sharing or other employee benefit plans of
companies and their affiliates.
- Tax-exempt organizations.
- Groups organized for a purpose other than to buy mutual fund
shares.
COMBINED PURCHASE PRIVILEGE. You also will have the benefit of
reduced sales charges by combining purchases of Class A shares of the
Fund in a single transaction with purchases of Class A shares of
other Multi-Class Funds and shares of FSC Funds.
RIGHT OF ACCUMULATION. You also may benefit from a reduction of sales
charges if the cumulative net asset value of Class A shares of the
Fund purchased in a single transaction, together with shares of other
Funds you currently own which were previously purchased at a price
including a front-end sales charge (including shares acquired through
reinvestment of distributions), amounts to $25,000 or more. Also, if
you have a cumulative net asset value of all your Class A and Class D
shares equal to at least $5 million (or $25 million for certain
employee benefit plans), you are eligible to purchase Class D shares
of any Fund subject to the Fund's minimum initial investment
requirement.
You must notify your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative (or Morgan Stanley Dean
Witter Trust FSB if you purchase directly through the Fund), at the
time a purchase order is placed, that the purchase qualifies for the
reduced charge under the Right of Accumulation. Similar notification
must be made in writing when an order is placed by mail. The reduced
sales charge will not be granted if: (i) notification is not
furnished at the time of the order; or (ii) a review of the records
of Dean Witter Reynolds or other authorized dealer of Fund shares or
the Fund's transfer agent does not confirm your represented holdings.
LETTER OF INTENT. The schedule of reduced sales charges for larger
purchases also will be available to you if you enter into a written
"letter of intent." A letter of intent provides for the purchase of
Class A shares of the Fund or other Multi-Class Funds or shares of
FSC Funds within a thirteen-month period. The initial purchase under
a letter of intent must be at least 5% of the stated investment goal.
To determine the applicable sales charge reduction, you may also
include: (1) the cost of shares of other Morgan Stanley Dean Witter
Funds which were previously purchased at a price including a
front-end sales charge during the 90-day period prior to the
distributor receiving the letter of intent, and (2) the cost of
shares of other Funds you currently own acquired in exchange for
shares of Funds purchased during that period at a price including a
front-end sales
18
<PAGE>
charge. You can obtain a letter of intent by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you do not achieve
the stated investment goal within the thirteen-month period, you are
required to pay the difference between the sales charges otherwise
applicable and sales charges actually paid, which may be deducted
from your investment.
OTHER SALES CHARGE WAIVERS. In addition to investments of $1 million
or more, your purchase of Class A shares is not subject to a
front-end sales charge (or a CDSC upon sale) if your account
qualifies under one of the following categories:
- A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.
- Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including mandatory sale or
transfer restrictions on termination) approved by the Fund's
distributor pursuant to which they pay an asset-based fee for
investment advisory, administrative and/or brokerage services.
- Employer-sponsored employee benefit plans, whether or not qualified
under the Internal Revenue Code, for which Morgan Stanley Dean
Witter Trust FSB serves as trustee or Dean Witter Reynolds'
Retirement Plan Services serves as recordkeeper under a written
Recordkeeping Services Agreement ("MSDW Eligible Plans") which have
at least 200 eligible employees.
- An MSDW Eligible Plan whose Class B shares have converted to Class
A shares, regardless of the plan's asset size or number of eligible
employees.
- A client of a Morgan Stanley Dean Witter Financial Advisor who
joined us from another investment firm within six months prior to
the date of purchase of Fund shares, and you used the proceeds from
the sale of shares of a proprietary mutual fund of that Financial
Advisor's previous firm that imposed either a front-end or deferred
sales charge to purchase Class A shares, provided that: (1) you
sold the shares not more than 60 days prior to the purchase of Fund
shares, and (2) the sale proceeds were maintained in the interim in
cash or a money market fund.
- Current or retired Directors/Trustees of the Morgan Stanley Dean
Witter Funds, such persons' spouses and children under the age of
21, and trust accounts for which any of such persons is a
beneficiary.
- Current or retired directors, officers and employees of Morgan
Stanley Dean Witter & Co. and any of its subsidiaries, such
persons' spouses and children under the age of 21, and trust
accounts for which any of such persons is a beneficiary.
19
<PAGE>
(SIDEBAR)
CONTINGENT DEFERRED SALES
CHARGE OR CDSC
A FEE YOU PAY WHEN YOU SELL SHARES OF CERTAIN MORGAN STANLEY DEAN WITTER FUNDS
PURCHASED WITHOUT AN INITIAL SALES CHARGE. THIS FEE DECLINES THE LONGER YOU HOLD
YOUR SHARES AS SET FORTH IN THE TABLE.
(END SIDEBAR)
CLASS B SHARES Class B shares are offered at net asset value with no
initial sales charge but are subject to a contingent deferred sales
charge, or CDSC, as set forth in the table below. For the purpose of
calculating the CDSC, shares are deemed to have been purchased on the
last day of the month during which they were purchased.
<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE PAYMENT MADE OF AMOUNT REDEEMED
<S> <C>
- --------------------------------------------------------------
First 5.0%
- --------------------------------------------------------------
Second 4.0%
- --------------------------------------------------------------
Third 3.0%
- --------------------------------------------------------------
Fourth 2.0%
- --------------------------------------------------------------
Fifth 2.0%
- --------------------------------------------------------------
Sixth 1.0%
- --------------------------------------------------------------
Seventh and thereafter None
- --------------------------------------------------------------
</TABLE>
Each time you place an order to sell or exchange shares, shares with
no CDSC will be sold or exchanged first, then shares with the lowest
CDSC will be sold or exchanged next. For any shares subject to a
CDSC, the CDSC will be assessed on an amount equal to the lesser of
the current market value or the cost of the shares being sold.
CDSC WAIVERS. A CDSC, if otherwise applicable, will be waived in the
case of:
- Sales of shares held at the time you die or become disabled (within
the definition in Section 72(m)(7) of the Internal Revenue Code
which relates to the ability to engage in gainful employment), if
the shares are: (i) registered either in your name (not a trust) or
in the names of you and your spouse as joint tenants with right of
survivorship; or (ii) held in a qualified corporate or
self-employed retirement plan, IRA or 403(b) Custodial Account,
provided in either case that the sale is requested within one year
of your death or initial determination of disability.
- Sales in connection with the following retirement plan
"distributions": (i) lump-sum or other distributions from a
qualified corporate or self-employed retirement plan following
retirement (or, in the case of a "key employee" of a "top heavy"
plan, following attainment of age 59 1/2); (ii) distributions from
an IRA or 403(b) Custodial Account following attainment of age 59
1/2; or (iii) a tax-free return of an excess IRA contribution (a
"distribution" does not include a direct transfer of IRA, 403(b)
Custodial Account or retirement plan assets to a successor
custodian or trustee).
- Sales of shares held for you as a participant in an MSDW Eligible
Plan.
- Sales of shares in connection with the Systematic Withdrawal Plan
of up to 12% annually of the value of each Fund from which plan
sales are made. The percentage is determined on the date you
establish the Systematic Withdrawal Plan and based on the next
calculated share price. You may have this CDSC waiver applied in
amounts up to
20
<PAGE>
1% per month, 3% per quarter, 6% semi-annually or 12% annually.
Shares with no CDSC will be sold first, followed by those with the
lowest CDSC. As such, the waiver benefit will be reduced by the
amount of your shares that are not subject to a CDSC. If you
suspend your participation in the plan, you may later resume plan
payments without requiring a new determination of the account value
for the 12% CDSC waiver.
All waivers will be granted only following the Distributor receiving
confirmation of your entitlement. If you believe you are eligible for
a CDSC waiver, please contact your Financial Advisor or call (800)
869-NEWS.
DISTRIBUTION FEE. Class B shares are subject to an annual 12b-1 fee
of 1.0% of the lesser of: (a) the average daily aggregate gross
purchases by all shareholders of the Fund's Class B shares since the
inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares sold by all shareholders
since the Fund's inception upon which a CDSC has been imposed or
waived, or (b) the average daily net assets of Class B.
CONVERSION FEATURE. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales
charge. The ten year period runs from the last day of the month in
which the shares were purchased, or in the case of Class B shares
acquired through an exchange, from the last day of the month in which
the original Class B shares were purchased; the shares will convert
to Class A shares based on their relative net asset values in the
month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically
reinvested distributions will convert to Class A shares on the same
basis. (Class B shares held before May 1, 1997, however, will convert
to Class A shares in May 2007.)
In the case of Class B shares held in an MSDW Eligible Plan, the plan
is treated as a single investor and all Class B shares will convert
to Class A shares on the conversion date of the Class B shares of a
Morgan Stanley Dean Witter Fund purchased by that plan.
Currently, the Class B share conversion is not a taxable event; the
conversion feature may be cancelled if it is deemed a taxable event
in the future by the Internal Revenue Service.
If you exchange your Class B shares for shares of a Money Market
Fund, a No-Load Fund, North American Government Income Trust or
Short-Term U.S. Treasury Trust, the holding period for conversion is
frozen as of the last day of the month of the exchange and resumes on
the last day of the month you exchange back into Class B shares.
EXCHANGING SHARES SUBJECT TO A CDSC. There are special considerations
when you exchange Fund shares that are subject to a CDSC. When
determining the length of time you held the shares and the
corresponding CDSC rate, any period (starting at the end of
21
<PAGE>
the month) during which you held shares of a fund that does NOT
charge a CDSC WILL NOT BE COUNTED. Thus, in effect the "holding
period" for purposes of calculating the CDSC is frozen upon
exchanging into a fund that does not charge a CDSC.
For example, if you held Class B shares of the Fund for one year,
exchanged to Class B of another Morgan Stanley Dean Witter
Multi-Class Fund for another year, then sold your shares, a CDSC rate
of 4% would be imposed on the shares based on a two year holding
period -- one year for each Fund. However, if you had exchanged the
shares of the Fund for a Money Market Fund (which does not charge a
CDSC) instead of the Multi-Class Fund, then sold your shares, a CDSC
rate of 5% would be imposed on the shares based on a one year holding
period. The one year in the Money Market Fund would not be counted.
Nevertheless, if shares subject to a CDSC are exchanged for a Fund
that does not charge a CDSC, you will receive a credit when you sell
the shares equal to the distribution (12b-1) fees, if any, you paid
on those shares while in that Fund up to the amount of any applicable
CDSC.
In addition, shares that are exchanged into or from a Morgan Stanley
Dean Witter Fund subject to a higher CDSC rate will be subject to the
higher rate, even if the shares are re-exchanged into a Fund with a
lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value with no
initial sales charge but are subject to a CDSC of 1.0% on sales made
within one year after the last day of the month of purchase. The CDSC
will be assessed in the same manner and with the same CDSC waivers as
with Class B shares.
DISTRIBUTION FEE. Class C shares are subject to an annual
distribution (12b-1) fee of up to 1.0% of the average daily net
assets of that Class. The Class C shares' distribution fee may cause
that Class to have higher expenses and pay lower dividends than Class
A or Class D shares. Unlike Class B shares, Class C shares have no
conversion feature and, accordingly, an investor that purchases Class
C shares may be subject to distribution (12b-1) fees applicable to
Class C shares for an indefinite period.
CLASS D SHARES Class D shares are offered without any sales charge on
purchases or sales and without any distribution (12b-1) fee. Class D
shares are offered only to investors meeting an initial investment
minimum of $5 million ($25 million for MSDW Eligible Plans) and the
following investor categories:
- Investors participating in the Investment Manager's mutual fund
asset allocation program (subject to all of its terms and
conditions, including mandatory sale or transfer restrictions on
termination) pursuant to which they pay an asset-based fee.
22
<PAGE>
- Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including mandatory sale or
transfer restrictions on termination) approved by the Fund's
distributor pursuant to which they pay an asset-based fee for
investment advisory, administrative and/or brokerage services.
- Employee benefit plans maintained by Morgan Stanley Dean Witter &
Co. or any of its subsidiaries for the benefit of certain employees
of Morgan Stanley Dean Witter & Co. and its subsidiaries.
- Certain unit investment trusts sponsored by Dean Witter Reynolds.
- Certain other open-end investment companies whose shares are
distributed by the Fund's distributor.
- Investors who were shareholders of the Dean Witter Retirement
Series on September 11, 1998 for additional purchases for their
former Dean Witter Retirement Series accounts.
MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million ($25
million for MSDW Eligible Plans) initial investment to qualify to
purchase Class D shares you may combine: (1) purchases in a single
transaction of Class D shares of the Fund and other Morgan Stanley
Dean Witter Multi-Class Funds and/or (2) previous purchases of Class
A and Class D shares of Multi-Class Funds and shares of FSC Funds you
currently own, along with shares of Morgan Stanley Dean Witter Funds
you currently own that you acquired in exchange for those shares.
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a
cash payment representing an income dividend or capital gain and you
reinvest that amount in the applicable Class of shares by returning the
check within 30 days of the payment date, the purchased shares would
not be subject to an initial sales charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company
Act of 1940 with respect to the distribution of Class A, Class B and
Class C shares. The Plan allows the Fund to pay distribution fees for
the sale and distribution of these shares. It also allows the Fund to
pay for services to shareholders of Class A, Class B and Class C
shares. Because these fees are paid out of the Fund's assets on an
ongoing basis, over time these fees will increase the cost of your
investment in these Classes and may cost you more than paying other
types of sales charges.
23
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 fiscal years of the Fund. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate an investor would have earned or lost on
an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by , whose
report, along with the Fund's financial statements, is included in the annual
report, which is available upon request.
<TABLE>
<CAPTION>
CLASS B SHARES
- -------------------------------------------------------------------------------------------------------------------
FOR
THE
PERIOD
JULY
29,
1994*
THROUGH
MAY
31,
FOR THE YEAR ENDED MAY 31 1999++ 1998++ 1997**++ 1996++ 1995
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ $ $ $ $
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss
Net realized and unrealized gain (loss)
------ ------ ------ ------ ------
Total income (loss) from investment operations
- -------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income
Net realized gain
------ ------ ------ ------ ------
Total dividends and distributions
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ $ $ $ $
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ % % %(3) % %(1)
- -------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- -------------------------------------------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------------------------------------------
Net investment loss
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $ $ $ $ $
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate % % % % %
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charges. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Includes voluntary capital contribution from the predecessor to the
Sub-Advisor, the effect of which was to increase total return by 0.59%.
24
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES++
- ------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
SELECTED PER SHARE DATA: MAY 31, 1999 THROUGH MAY 31, 1998++
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ $ 7.95
- ------------------------------------------------------------------------------------------------------------------
LOSS FROM INVESTMENT OPERATIONS:
Net investment loss
Net realized and unrealized loss
------- -------
Total loss from investment operations
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ $
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ % %(1)
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ------------------------------------------------------------------------------------------------------------------
Expenses %(3) %(2)
- ------------------------------------------------------------------------------------------------------------------
Net investment loss %(3) %(2)
- ------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $ $
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charges. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
25
<PAGE>
<TABLE>
<CAPTION>
CLASS C SHARES++
- ------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
SELECTED PER SHARE DATA: MAY 31, 1999 THROUGH MAY 31, 1998++
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ $
- ------------------------------------------------------------------------------------------------------------------
LOSS FROM INVESTMENT OPERATIONS:
Net investment loss
Net realized and unrealized loss
------- -------
Total loss from investment operations
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ $
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ % %(1)
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ------------------------------------------------------------------------------------------------------------------
Expenses %(3) %(2)
- ------------------------------------------------------------------------------------------------------------------
Net investment loss %(3) %(2)
- ------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $ $
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate % %
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charges. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
26
<PAGE>
<TABLE>
<CAPTION>
CLASS D SHARES++
- ---------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
SELECTED PER SHARE DATA: MAY 31, 1999 THROUGH MAY 31, 1998++
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ $
- ---------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income
Net realized and unrealized loss
------- -------
Total loss from investment operations
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $ $
- ---------------------------------------------------------------------------------------------
TOTAL RETURN+ % %(1)
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------
Expenses %(3) %(2)
- ---------------------------------------------------------------------------------------------
Net investment income (loss) %(3) %(2)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $ $
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate % %
- ---------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
27
<PAGE>
NOTES
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28
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers
investors a wide range of investment choices. Come on
in and meet the family!
- --------------------------------------------------------------------------------
GROWTH FUNDS
- ---------------------------------
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Equity Fund
Growth Fund
Market Leader Trust
Mid-Cap Equity Trust
Special Value Fund
Value Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Precious Metals and Minerals Trust
Small Cap Growth Fund
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas"
Portfolio
European Growth Fund
Fund of Funds - International Portfolio
Global Dividend Growth Securities
International Fund
International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUNDS
- ---------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Return Trust
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Global Utilities Fund
Real Estate Fund
Utilities Fund
- --------------------------------------------------------------------------------
INCOME FUNDS
- ---------------------------------
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund (NL)
GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust (FSC)
Limited Term Municipal Trust (NL)
Multi-State Municipal Series Trust (FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
- ---------------------------------
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund (MM)
U.S. Government Money Market Trust (MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust (MM)
N.Y. Municipal Money Market Trust (MM)
Tax-Free Daily Income Trust (MM)
There may be Funds created after this PROSPECTUS was published. Please consult
the inside front cover of a new Fund's PROSPECTUS for its designation, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust, is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of Funds are: NL - No-Load (Mutual) Fund; MM - Money
Market Fund; FSC - A mutual fund sold with a front-end sales charge and a
distribution (12b-1) fee.
<PAGE>
PROSPECTUS - AUGUST , 1999
Additional information about the Fund's investments is available in the Fund's
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. In the Fund's ANNUAL REPORT, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's STATEMENT OF ADDITIONAL INFORMATION also provides additional information
about the Fund. The STATEMENT OF ADDITIONAL INFORMATION is incorporated herein
by reference (legally is part of this PROSPECTUS). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
www.deanwitter.com/funds
Information about the Fund (including the STATEMENT OF ADDITIONAL INFORMATION)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site
(www.sec.gov), and copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC, Washington,
DC 20549-6009.
TICKER SYMBOLS:
CLASS A: ISMAX CLASS C: ISMCX
- -------------------- --------------------
CLASS B: ISMBX CLASS D: ISMDX
- -------------------- --------------------
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7169)
Morgan Stanley Dean Witter
INTERNATIONAL SMALLCAP FUND
[BACK COVER PHOTO]
A MUTUAL FUND
THAT SEEKS LONG-TERM
GROWTH OF CAPITAL
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY
AUGUST , 1999 DEAN WITTER
INTERNATIONAL
SMALLCAP FUND
- --------------------------------------------------------------------------------
This STATEMENT OF ADDITIONAL INFORMATION is not a PROSPECTUS. The PROSPECTUS
(dated August , 1999) for the Morgan Stanley Dean Witter International SmallCap
Fund may be obtained without charge from the Fund at its address or telephone
number listed below or from Dean Witter Reynolds at any of its branch offices.
Morgan Stanley Dean Witter
International SmallCap Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
I. Fund History........................................................................ 4
II. Description of the Fund and Its Investments and Risks.............................. 4
A. Classification.................................................................... 4
B. Investment Strategies and Risks................................................... 4
C. Fund Policies/Investment Restrictions............................................. 13
III. Management of the Fund............................................................ 15
A. Board of Trustees................................................................. 15
B. Management Information............................................................ 15
C. Compensation...................................................................... 19
IV. Control Persons and Principal Holders of Securities................................ 21
V. Investment Management and Other Services............................................ 21
A. Investment Manager and Sub-Advisor................................................ 21
B. Principal Underwriter............................................................. 22
C. Services Provided by the Investment Manager and the Sub-Advisor and Fund Expenses
Paid by Third Parties............................................................. 22
D. Dealer Reallowances............................................................... 23
E. Rule 12b-1 Plan................................................................... 23
F. Other Service Providers........................................................... 27
VI. Brokerage Allocation and Other Practices........................................... 28
A. Brokerage Transactions............................................................ 28
B. Commissions....................................................................... 28
C. Brokerage Selection............................................................... 29
D. Directed Brokerage................................................................ 30
E. Regular Broker-Dealers............................................................ 30
VII. Capital Stock and Other Securities................................................ 30
VIII. Purchase, Redemption and Pricing of Shares....................................... 31
A. Purchase/Redemption of Shares..................................................... 31
B. Offering Price.................................................................... 31
IX. Taxation of the Fund and Shareholders.............................................. 32
X. Underwriters........................................................................ 35
XI. Calculation of Performance Data.................................................... 35
XII. Financial Statements.............................................................. 36
</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).
"CUSTODIAN"--The Chase Manhattan Bank.
"DEAN WITTER REYNOLDS"--Dean Witter Reynolds Inc., a wholly-owned broker-dealer
subsidiary of MSDW.
"DISTRIBUTOR"--Morgan Stanley Dean Witter Distributors Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"FINANCIAL ADVISORS"--Morgan Stanley Dean Witter authorized financial services
representatives.
"FUND"--Morgan Stanley Dean Witter International SmallCap Fund, a registered
open-end investment company.
"INVESTMENT MANAGER"--Morgan Stanley Dean Witter Advisors Inc., a wholly-owned
investment advisor subsidiary of MSDW.
"INDEPENDENT TRUSTEES"--Trustees who are not "interested persons" (as defined by
the Investment Company Act) of the Fund.
"MORGAN STANLEY & CO."--Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.
"MORGAN STANLEY DEAN WITTER FUNDS"--Registered investment companies (i) for
which the Investment Manager serves as the investment advisor and (ii) that hold
themselves out to investors as related companies for investment and investor
services.
"MSDW"--Morgan Stanley Dean Witter & Co., a preeminent global financial services
firm.
"MSDW SERVICES COMPANY"--Morgan Stanley Dean Witter Services Company Inc., a
wholly-owned fund services subsidiary of the Investment Manager.
"SUB-ADVISOR"--Morgan Stanley Dean Witter Investment Management Inc., a
wholly-owned subsidiary of MSDW.
"TRANSFER AGENT"--Morgan Stanley Dean Witter Trust FSB, a wholly-owned transfer
agent subsidiary of MSDW.
"TRUSTEES"--The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
- --------------------------------------------------------------------------------
The Fund was organized as a Massachusetts business trust, under a
Declaration of Trust, on April 21, 1994, with the name Dean Witter International
SmallCap Fund. Effective June 22, 1998, the Fund's name was changed to Morgan
Stanley Dean Witter International SmallCap Fund.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end management investment company whose investment
objective is to seek long-term growth of capital.
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."
The Fund is currently managed as a diversified management company.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into
forward foreign currency exchange contracts ("forward contracts") as a hedge
against fluctuations in future foreign exchange rates. The Fund may conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large, commercial and investment banks) and their
customers. Forward contracts only will be entered into with United States banks
and their foreign branches, insurance companies and other dealers or foreign
banks whose assets total $1 billion or more. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for trades.
The Fund may enter into forward contracts under various circumstances. The
typical use of a forward contract is to "lock in" the price of a security in
U.S. dollars or some other foreign currency which the Fund is holding in its
portfolio. By entering into a forward contract for the purchase or sale, for a
fixed amount of dollars or other currency, of the amount of foreign currency
involved in the underlying security transactions, the Fund may be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar or other currency which is being used for
the security purchase and the foreign currency in which the security is
denominated during the period between the date on which the security is
purchased or sold and the date on which payment is made or received.
The Sub-Advisor also may from time to time utilize forward contracts for
other purposes. For example, they may be used to hedge a foreign security held
in the portfolio or a security which pays out principal tied to an exchange rate
between the U.S. dollar and a foreign currency, against a decline in value of
the applicable foreign currency. They also may be used to lock in the current
exchange rate of the currency in which those securities anticipated to be
purchased are denominated. At times, the Fund may enter into "cross-currency"
hedging transactions involving currencies other than those in which securities
are held or proposed to be purchased are denominated.
The Fund will not enter into forward currency contracts or maintain a net
exposure to these contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's portfolio securities.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will, however, do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the spread
between the prices at
4
<PAGE>
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to the Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to resell that currency to the dealer.
The Fund may be limited in its ability to enter into hedging transactions
involving forward contracts by the Internal Revenue Code requirements relating
to qualification as a regulated investment company.
Forward currency contracts may limit gains on portfolio securities that
could otherwise be realized had they not been utilized and could result in
losses. The contracts also may increase the Fund's volatility and may involve a
significant amount of risk relative to the investment of cash.
OPTIONS AND FUTURES TRANSACTIONS. The Fund may engage in transactions in
listed and OTC options on eligible portfolio securities and stock indexes.
Listed options are issued or guaranteed by the exchange on which they are traded
or by a clearing corporation such as the Options Clearing Corporation ("OCC").
Ownership of a listed call option gives the Fund the right to buy from the OCC
(in the U.S.) or other clearing corporation or exchange, the underlying security
or currency covered by the option at the stated exercise price (the price per
unit of the underlying security) by filing an exercise notice prior to the
expiration date of the option. The writer (seller) of the option would then have
the obligation to sell to the OCC (in the U.S.) or other clearing corporation or
exchange, the underlying security or currency at that exercise price prior to
the expiration date of the option, regardless of its then current market price.
Ownership of a listed put option would give the Fund the right to sell the
underlying security or currency to the OCC (in the U.S.) or other clearing
corporation or exchange, at the stated exercise price. Upon notice of exercise
of the put option, the writer of the put would have the obligation to purchase
the underlying security or currency from the OCC (in the U.S.) or other clearing
corporation or exchange, at the exercise price.
COVERED CALL WRITING. The Fund is permitted to write covered call options
on portfolio securities and on the U.S. dollar and foreign currencies in which
they are denominated, without limit.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium;" i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (or currencies) alone.
Moreover, the premium received will offset a portion of the potential loss
incurred by the Fund if the securities (or currencies) underlying the option
decline in value.
The Fund may be required, at any time during the option period, to deliver
the underlying security (or currency) against payment of the exercise price on
any calls it has written. This obligation is terminated upon the expiration of
the option period or at such earlier time when the writer effects a closing
purchase transaction. A closing purchase transaction is accomplished by
purchasing an option of the same series as the option previously written.
However, once the Fund has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction.
A call option is "covered" if the Fund owns the underlying security subject
to the option or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional consideration (in cash,
Treasury bills or other liquid portfolio securities) held in a segregated
account on the Fund's books) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund holds a call on
the same security as the call written where the exercise price of the call held
is (i) equal to or less than the exercise price of the call written or (ii)
greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, Treasury bills or other liquid portfolio
securities in a segregated account on the Fund's books.
Options written by the Fund normally have expiration dates of from up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.
COVERED PUT WRITING. A writer of a covered put option Fund incurs an
obligation to buy the security underlying the option from the purchaser of the
put, at the option's exercise price at any time during the option period, at the
purchaser's election. Through the writing of a put option, the Fund would
receive income from the premium paid by purchasers. The potential gain on a
covered put option is limited to
5
<PAGE>
the premium received on the option (less the commissions paid on the
transaction). During the option period, the Fund may be required, at any time,
to make payment of the exercise price against delivery of the underlying
security. A put option is "covered" if the Fund maintains cash, Treasury bills
or other liquid portfolio securities with a value equal to the exercise price in
a segregated account on the Fund's books, or holds a put on the same security as
the put written where the exercise price of the put held is equal to or greater
than the exercise price of the put written. The operation of and limitations on
covered put options in other respects are substantially identical to those of
call options.
PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC call
and put options in amounts equaling up to 10% of its total assets. The purchase
of a call option would enable the Fund, in return for the premium paid to lock
in a purchase price for a security or currency during the term of the option.
The purchase of a put option would enable the Fund, in return for a premium
paid, to lock in a price at which it may sell a security or currency during the
term of the option.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts.
OTC OPTIONS. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Fund.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Fund and the transacting dealer, without the
intermediation of a third party such as the OCC. The Fund will engage in OTC
option transactions only with member banks of the Federal Reserve Bank System or
primary dealers in U.S. Government securities or with affiliates of such banks
or dealers.
RISKS OF OPTIONS TRANSACTIONS. The successful use of options depends on the
ability of the Sub-Advisor to forecast correctly interest rates, currency
exchange rates and/or market movements. If the market value of the portfolio
securities (or the currencies in which they are denominated) upon which call
options have been written increases, the Fund may receive a lower total return
from the portion of its portfolio upon which calls have been written than it
would have had such calls not been written. During the option period, the
covered call writer has, in return for the premium on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security (or the value of its denominated currency)
increase, but has retained the risk of loss should the price of the underlying
security (or the value of its denominated currency) decline. The covered put
writer also retains the risk of loss should the market value of the underlying
security decline below the exercise price of the option less the premium
received on the sale of the option. In both cases, the writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. Prior to exercise or expiration, an option position can only be
terminated by entering into a closing purchase or sale transaction. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. In the case of OTC
options, if the transacting dealer fails to make or take delivery of the
securities underlying an option it has written, in accordance with the terms of
that option, due to insolvency or otherwise, the Fund would lose the premium
paid for the option as well as any anticipated benefit of the transaction.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security which may be
written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). An
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exchange may order the liquidation of positions found to be in violation of
these limits and it may impose other sanctions or restrictions. These position
limits may restrict the number of listed options which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market.
There can be no assurance that a liquid secondary market will exist for a
particular option at any specific time.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and have no relationship to the investment merits of a foreign security. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
STOCK INDEX OPTIONS. The Fund may invest in options on broadly based
indexes. Options on stock indexes are similar to options on stock except that,
rather than the right to take or make delivery of stock at a specified price, an
option on a stock index gives the holder the right to receive, upon exercise of
the option, an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. This amount of cash is equal to
such difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount.
RISKS OF OPTIONS ON INDEXES. Because exercises of stock index options are
settled in cash, the Fund could not, if it wrote a call option, provide in
advance for its potential settlement obligations by acquiring and holding the
underlying securities. A call writer can offset some of the risk of its writing
position by holding a diversified portfolio of stocks similar to those on which
the underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk that the value of the securities
held will vary from the value of the index. Even if an index call writer could
assemble a stock portfolio that exactly reproduced the composition of the
underlying index, the writer still would not be fully covered from a risk
standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level on the date when the option is exercised. As with
other kinds of options, the writer will not learn that it had been assigned
until the next business day, at the earliest. The time lag between exercise and
notice of assignment poses no risk for the writer of a covered call on a
specific underlying security, such as a common stock, because there the writer's
obligation is to deliver the underlying security, not to pay its value as of a
fixed
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time in the past. So long as the writer already owns the underlying security, it
can satisfy its settlement obligations by simply delivering it, and the risk
that its value may have declined since the exercise date is borne by the
exercising holder. In contrast, even if the writer of an index call holds stocks
that exactly match the composition of the underlying index, it will not be able
to satisfy its assignment obligations by delivering those stocks against payment
of the exercise price. Instead, it will be required to pay cash in an amount
based on the closing index value on the exercise date; and by the time it learns
that it has been assigned, the index may have declined, with a corresponding
decrease in the value of its stock portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding stock positions.
A holder of an index option who exercises it before the closing index value
for that day is available runs the risk that the level of the underlying index
may subsequently change. If a change causes the exercised option to fall
out-of-the-money, the exercising holder will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
If dissemination of the current level of an underlying index is interrupted,
or if trading is interrupted in stocks accounting for a substantial portion of
the value of an index, the trading of options on that index will ordinarily be
halted. If the trading of options on an underlying index is halted, an exchange
may impose restrictions prohibiting the exercise of such options.
FUTURES CONTRACTS. The Fund may purchase and sell interest rate, currency
and index futures contracts that are traded on U.S. and foreign commodity
exchanges on such underlying securities as U.S. Treasury bonds, notes, bills and
GNMA Certificates and/or any foreign government fixed-income security, on
various currencies and on such indexes of U.S. and foreign securities as may
exist or come into existence.
A futures contract purchaser incurs an obligation to take delivery of a
specified amount of the obligation underlying the contract at a specified time
in the future for a specified price. A seller of a futures contract incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price. The purchase of a futures
contract enables the Fund, during the term of the contract, to lock in a price
at which it may purchase a security or currency and protect against a rise in
prices pending purchase of portfolio securities. The sale of a futures contract
enables the Fund to lock in a price at which it may sell a security or currency
and protect against declines in the value of portfolio securities.
Although most futures contracts call for actual delivery or acceptance of
securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. Index futures contracts provide for
the delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the open or close of the last trading day
of the contract and the futures contract price. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery date.
If the sale price exceeds the offsetting purchase price, the seller would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller would pay the difference and would realize a
loss. Similarly, a futures contract purchase is closed out by effecting a
futures contract sale for the same aggregate amount of the specific type of
security (currency) and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that the Fund will be able to enter into a closing
transaction.
MARGIN. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities or
other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges on
which futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required by
the exchanges.
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Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits of cash or U.S. Government
securities, called "variation margin," which are reflective of price
fluctuations in the futures contract.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect to
such options to terminate an existing position. An option on a futures contract
gives the purchaser the right (in return for the premium paid), and the writer
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option is accompanied by delivery of the accumulated balance in
the writer's futures margin account, which represents the amount by which the
market price of the futures contract at the time of exercise exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.
The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
However, there is no overall limitation on the percentage of the Fund's net
assets which may be subject to a hedge position.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The prices
of securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash prices
of the Fund's portfolio securities (and the currencies in which they are
denominated). Also, prices of futures contracts may not move in tandem with the
changes in prevailing interest rates, market movements and/or currency exchange
rates against which the Fund seeks a hedge. A correlation may also be distorted
(a) temporarily, by short-term traders' seeking to profit from the difference
between a contract or security price objective and their cost of borrowed funds;
(b) by investors in futures contracts electing to close out their contracts
through offsetting transactions rather than meet margin deposit requirements;
(c) by investors in futures contracts opting to make or take delivery of
underlying securities rather than engage in closing transactions, thereby
reducing liquidity of the futures market; and (d) temporarily, by speculators
who view the deposit requirements in the futures markets as less onerous than
margin requirements in the cash market. Due to the possibility of price
distortion in the futures market and because of the possible imperfect
correlation between movements in the prices of securities and movements in the
prices of futures contracts, a correct forecast of interest rate, currency
exchange rate and/or market movement trends by the Sub-Advisor may still not
result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Fund may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position and, in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. The absence of a
liquid market in futures contracts might cause the Fund to make or take delivery
of the underlying securities (currencies) at a time when it may be
disadvantageous to do so.
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Exchanges also limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin on open
futures positions. In these situations, if the Fund has insufficient cash, it
may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition, the
Fund may be required to take or make delivery of the instruments underlying
interest rate futures contracts it holds at a time when it is disadvantageous to
do so. The inability to close out options and futures positions could also have
an adverse impact on the Fund's ability to effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit the Fund's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may occasion delays in the
settlement of the Fund's transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
MONEY MARKET SECURITIES. The Fund may invest in various money market
securities for cash management purposes or when assuming a temporary defensive
position, which among others may include commercial paper, bank acceptances,
bank obligations, corporate debt securities, certificates of deposit, U.S.
Government securities, obligations of savings institutions, and repurchase
agreements. Such securities are limited to:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;
EURODOLLAR CERTIFICATES OF DEPOSIT. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the FDIC), limited to $100,000 principal amount per certificate and to 10% or
less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate;
COMMERCIAL PAPER. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grades by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, issued by a company having
an outstanding debt issue rated at least AA by S&P or Aa by Moody's; and
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REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a bank,
savings and loan association or broker-dealer. The agreement provides that the
Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although this
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions whose
financial condition will be continually monitored by the Sub-Advisor subject to
procedures established by the Trustees. In addition, as described above, the
value of the collateral underlying the repurchase agreement will be at least
equal to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
financial institution, the Fund will seek to liquidate such collateral. However,
the exercising of the Fund's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase were less than the repurchase price, the
Fund could suffer a loss.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. The Fund may use reverse
repurchase agreements and dollar rolls as part of its investment strategy.
Reverse repurchase agreements and dollar rolls are speculative techniques
involving leverage and are considered borrowings by the Fund.
Reverse repurchase agreements involve sales by the Fund of assets
concurrently with an agreement by the Fund to repurchase the same assets at a
later date at a fixed price. Reverse repurchase agreements involve the risk that
the market value of the securities the Fund is obligated to purchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, the Fund's use of the proceeds of the agreement may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities.
Dollar rolls involve the Fund selling securities for delivery in the current
month and simultaneously contracting to repurchase substantially similar (same
type and coupon) securities on a specified future date. During the roll period,
the Fund will forgo principal and interest paid on the securities. The Fund is
compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial sale.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities in
an amount not to exceed 25% of the value of its total assets. 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.
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As with any extensions of credit, there are risks of delay in recovery and,
in some cases, even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Fund's management to be creditworthy and
when the income which can be earned from such loans justifies the attendant
risks. Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of the rights
if the matters involved would have a material effect on the Fund's investment in
the loaned securities. The Fund will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time the Fund may purchase securities on a when-issued or delayed
delivery basis or may purchase or sell securities on a forward commitment basis.
When these transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention of
acquiring the securities, the Fund may sell the securities before the settlement
date, if it is deemed advisable. The securities so purchased or sold are subject
to market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date.
At the time the Fund makes the commitment to purchase or sell securities on
a when-issued, delayed delivery or forward commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase securities
on a when-issued, delayed delivery or forward commitment basis.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Sub-Advisor 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 establish a segregated account on the Fund's books in which it
will maintain 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 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of its net asset
value. The Fund may also sell securities on a "when, as and if issued" basis
provided that the issuance of the security will result automatically from the
exchange or conversion of a security owned by the Fund at the time of sale.
PRIVATE PLACEMENTS. The Fund may invest up to 15% of its net assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933 (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for resale
pursuant to Rule 144A under the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of these
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securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering the securities for resale and the risk of
substantial delays in effecting the registration.
Rule 144A permits the Fund to sell restricted securities to qualified
institutional buyers without limitation. The Sub-Advisor, pursuant to procedures
adopted by the Trustees, will make a determination as to the liquidity of each
restricted security purchased by the Fund. If a restricted security is
determined to be "liquid," the security will not be included within the category
"illiquid securities," which may not exceed 15% of the Fund's net assets.
However, investing in Rule 144A securities could have the effect of increasing
the level of Fund illiquidity to the extent the Fund, at a particular point in
time, may be unable to find qualified institutional buyers interested in
purchasing such securities.
WARRANTS AND SUBSCRIPTION RIGHTS. The Fund may acquire warrants and
subscription rights attached to other securities. A warrant is, in effect, an
option to purchase equity securities at a specific price, generally valid for a
specific period of time, and has no voting rights, pays no dividends and has no
rights with respect to the corporation issuing it.
A subscription right is a privilege granted to existing shareholders of a
corporation to subscribe to shares of a new issue of common stock before it is
offered to the public. A subscription right normally has a life of two to four
weeks and a subscription price lower than the current market value of the common
stock. A subscription right is freely transferable.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and Sub-Advisor and the services provided to shareholders by
the Distributor and the Transfer Agent depend on the smooth functioning of their
computer systems. Many computer software systems in use today cannot recognize
the year 2000, but revert to 1900 or some other date, due to the manner in which
dates were encoded and calculated. That failure could have a negative impact on
the handling of securities trades, pricing and account services. The Investment
Manager, the Sub-Advisor, the Distributor and the Transfer Agent have been
actively working on necessary changes to their own computer systems to prepare
for the year 2000 and expect that their systems will be adapted before that
date, but there can be no assurance that they will be successful, or that
interaction with other non-complying computer systems will not impair their
services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act of
1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund.
The Investment Company Act defines a majority as the lesser of (a) 67% or more
of the shares present at a meeting of shareholders, if the holders of 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b) more
than 50% of the outstanding shares of the Fund. For purposes of the following
restrictions: (i) all percentage limitations apply immediately after a purchase
or initial investment; and (ii) any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.
The Fund will:
1. Seek long-term growth of capital.
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The Fund may not:
1. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry (other than obligations issued or guaranteed
by the United States government, its agencies or instrumentalities).
2. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation of the United States government, its agencies or
instrumentalities.
3. 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.
4. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
5. Borrow money, except that the Fund, (i) may borrow from a bank for
temporary or emergency purposes and (ii) may engage in reverse repurchase
agreements and dollar rolls, in amounts not exceeding 5% (taken at the lower
of cost or current value) of its total assets (not including the amount
borrowed).
6. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. For the purpose of this restriction, collateral
arrangements with respect to the writing of options and collateral
arrangements with respect to initial or variation margin for futures are not
deemed to be pledges of assets.
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 or reverse repurchase agreement;
(b) purchasing any securities on a when-issued or delayed delivery basis;
(c) purchasing or selling futures contracts, forward foreign exchange
contracts or options; (d) borrowing money; or (e) lending portfolio
securities.
8. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations; (b) by investment in repurchase
agreements; or (c) by lending its portfolio securities.
9. Make short sales of securities.
10. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the purchase
of a security on margin.
11. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act in disposing of a
portfolio security.
12. Invest for the purpose of exercising control or management of any
other issuer.
13. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets or in accordance with the provisions of Section 12(d) of the
Investment Company Act and any Rules promulgated thereunder.
14. Purchase or sell commodities or commodities contracts except that
the Fund may purchase or sell futures contracts or options on futures.
In addition, as a non-fundamental policy, the Fund may not invest in other
investment companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or
12(d)(1)(J) of the Investment Company Act. Further, as a non-fundamental policy,
the Fund may not, as to 75% of its total assets, purchase more than 10% of the
voting securities of any issuer.
14
<PAGE>
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided to
the Fund in a satisfactory manner.
Under state law, the duties of the Trustees are generally characterized as a
duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's own
interest or the interest of another person or organization. A Trustee satisfies
his or her duty of care by acting in good faith with the care of an ordinarily
prudent person and in a manner the Trustee reasonably believes to be in the best
interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (75% of the total number)
have no affiliation or business connection with the Investment Manager or any of
its affiliated persons and do not own any stock or other securities issued by
the Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other two Trustees (the "management Trustees") are
affiliated with the Investment Manager. All of the Trustees also serve as
Trustees of "Discover Brokerage Index Series," a mutual fund for which the
Investment Manager is the investment advisor.
The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the 90 Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series, are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Michael Bozic (58) ................................... Vice Chairman of Kmart Corporation (since December, 1998);
Trustee Director or Trustee of the Morgan Stanley Dean Witter
c/o Kmart Corporation Funds and Trustee of Discover Brokerage Index Series;
3100 West Big Beaver Road formerly Chairman and Chief Executive Officer of Levitz
Troy, Michigan Furniture Corporation (November, 1995-November, 1998) and
President and Chief Executive Officer of Hills Department
Stores (May, 1991-July, 1995); formerly variously
Chairman, Chief Executive Officer, President and Chief
Operating Officer (1987-1991) of the Sears Merchandise
Group of Sears, Roebuck and Co.; Director of Eaglemark
Financial Services, Inc. and Weirton Steel Corporation.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (66) ......................... Chairman, Director or Trustee and Chief Executive Officer
Chairman of the Board, of the Morgan Stanley Dean Witter Funds and Discover
Chief Executive Officer and Trustee Brokerage Index Series; formerly Chairman, Chief Executive
Two World Trade Center Officer and Director of the Investment Manager, the
New York, New York Distributor and MSDW Services Company; Executive Vice
President and Director of Dean Witter Reynolds; Chairman
and Director of the Transfer Agent; formerly Director
and/or officer of various MSDW subsidiaries (until June
1998).
Edwin J. Garn (66) ................................... Director or Trustee of the Morgan Stanley Dean Witter
Trustee Funds and Discover Brokerage Index Series; formerly United
c/o Huntsman Corporation States Senator (R-Utah)(1974-1992) and Chairman, Senate
500 Huntsman Way Banking Committee (1980-1986); formerly Mayor of Salt Lake
Salt Lake City, Utah City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Discovery (April 12-19, 1985); Vice Chairman, Huntsman
Corporation (chemical company); Director of Franklin Covey
(time management systems), BMW Bank of North America, Inc.
(industrial loan corporation); United Space Alliance
(joint venture between Lockheed Martin and the Boeing
Company) and Nuskin Asia Pacific (multilevel marketing);
member of the board of various civic and charitable
organizations.
Wayne E. Hedien (65) ................................. Retired; Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds and Discover Brokerage Index Series; Director
c/o Gordon Altman Butowsky of The PMI Group, Inc. (private mortgage insurance);
Weitzen Shalov & Wein Trustee and Vice Chairman of The Field Museum of Natural
Counsel to the Independent Trustees History; formerly associated with the Allstate Companies
114 West 47th Street (1966-1994), most recently as Chairman of The Allstate
New York, New York Corporation (March, 1993-December, 1994) and Chairman and
Chief Executive Officer of its wholly-owned subsidiary,
Allstate Insurance Company (July, 1989-December, 1994);
director of various other business and charitable
organizations.
Dr. Manuel H. Johnson (50) ........................... Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Co-Chairman and a founder of the Group of
c/o Johnson Smick International, Inc. Seven Council (G7C), an international economic commission;
1133 Connecticut Avenue, N.W. Chairman of the Audit Committee and Director or Trustee of
Washington, D.C. the Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series; Director of Greenwich Capital
Markets, Inc. (broker-dealer) and NVR, Inc. (home
construction); Chairman and Trustee of the Financial
Accounting Foundation (oversight organization of the
Financial Accounting Standards Board); formerly Vice
Chairman of the Board of Governors of the Federal Reserve
System (1986-1990) and Assistant Secretary of the U.S.
Treasury.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Michael E. Nugent (63) ............................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan Stanley
237 Park Avenue Dean Witter Funds and Discover Brokerage Index Series;
New York, New York 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
Trustee Officer of MSDW, Dean Witter Reynolds and Novus Credit
1585 Broadway Services Inc.; Director of the Distributor; Director or
New York, New York Trustee of the Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series; Director and/or officer
of various MSDW subsidiaries.
John L. Schroeder (69) ............................... Retired; Chairman of the Derivatives Committee and
Trustee Director or Trustee of the Morgan Stanley Dean Witter
c/o Gordon Altman Butowsky Funds and Discover Brokerage Index Series; Director of
Weitzen Shalov & Wein Citizens Utilities Company (telecommunications, gas,
Counsel to the Independent Trustees electric and water utilities company); formerly Executive
114 West 47th Street Vice President and Chief Investment Officer of the Home
New York, New York Insurance Company (August, 1991-September, 1995).
Mitchell M. Merin (46) ............................... President and Chief Operating Officer of Asset Management
President of MSDW (since December, 1998); President and Director
Two World Trade Center (since April, 1997) and Chief Executive Officer (since
New York, New York June, 1998) of the Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and Director of
the Distributor (since June, 1998); Chairman and Chief
Executive Officer (since June, 1998) and Director (since
January, 1998) of the Transfer Agent; Director of various
MSDW subsidiaries; President of the Morgan Stanley Dean
Witter Funds and Discover Brokerage Index Series (since
May, 1999); previously Chief Strategic Officer of the
Investment Manager and MSDW Services Company and Executive
Vice President of the Distributor (April, 1997-June,
1998), Vice President of the Morgan Stanley Dean Witter
Funds and Discover Brokerage Index Series (May 1997-April,
1999), and Executive Vice President of Dean Witter,
Discover & Co.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Barry Fink (44) ...................................... Senior Vice President (since March, 1997) and Secretary
Vice President, and General Counsel (since February, 1997) and Director
Secretary and General Counsel (since July, 1998) of the Investment Manager and MSDW
Two World Trade Center Services Company; Senior Vice President (since March,
New York, New York 1997) and Assistant Secretary and Assistant General
Counsel (since February, 1997) of the Distributor;
Assistant Secretary of Dean Witter Reynolds (since August,
1996); Vice President, Secretary and General Counsel of
the Morgan Stanley Dean Witter Funds (since February,
1997); Vice President, Secretary and General Counsel of
Discover Brokerage Index Series; previously First Vice
President (June, 1993-February, 1997), Vice President and
Assistant Secretary and Assistant General Counsel of the
Investment Manager and MSDW Services Company and Assistant
Secretary of the Morgan Stanley Dean Witter Funds.
Thomas F. Caloia (53) ................................ First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW Services
Two World Trade Center Company; Treasurer of the Morgan Stanley Dean Witter Funds
New York, New York and Discover Brokerage Index Series.
</TABLE>
- ------------------------
*Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.
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 Fund.
In addition, FRANK BRUTTOMESSO, MARILYN K. CRANNEY, LOU ANNE D. MCINNIS,
CARSTEN OTTO and RUTH ROSSI, First Vice Presidents and Assistant General
Counsels of the Investment Manager and MSDW Services Company, and TODD LEBO,
Vice President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, are Assistant Secretaries of the Fund.
INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The Morgan
Stanley Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; these are people whose advice and counsel are in demand by others and
for whom there is often competition. To accept a position on the Funds' Boards,
such individuals may reject other attractive assignments because the Funds make
substantial demands on their time. All of the Independent Trustees serve as
members of the Audit Committee. Three of them also serve as members of the
Derivatives Committee. In addition, three of the Trustees, including two
Independent Trustees, serve as members of the Insurance Committee.
The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill any
Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1 plan
of distribution. Most of the Morgan Stanley Dean Witter Funds have a Rule 12b-1
plan.
18
<PAGE>
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
The Board of each Fund has a Derivatives Committee to approve parameters for
and monitor the activities of the Fund with respect to derivative investments,
if any, made by the Fund.
Finally, the Board of each Fund has formed an Insurance Committee to review
and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL MORGAN
STANLEY DEAN WITTER FUNDS. The Independent Trustees and the Funds' management
believe that having the same Independent Trustees for each of the Morgan Stanley
Dean Witter Funds avoids the duplication of effort that would arise from having
different groups of individuals serving as Independent Trustees for each of the
Funds or even of sub-groups of Funds. They believe that having the same
individuals serve as Independent Trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent Trustees
serve on all Fund Boards enhances the ability of each Fund to obtain, at modest
cost to each separate Fund, the services of Independent Trustees, of the
caliber, experience and business acumen of the individuals who serve as
Independent Trustees of the Morgan Stanley Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties. It
also provides that all third persons shall look solely to the Fund property for
satisfaction of claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than one
Committee meeting, take place on a single day, the Trustees are paid a single
meeting fee by the Fund. The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by the
Investment Manager or an affiliated company receive no compensation or expense
reimbursement from the Fund for their services as Trustee.
19
<PAGE>
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended May 31, 1999.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $
Edwin J. Garn.................................................
Wayne E. Hedien...............................................
Dr. Manuel H. Johnson.........................................
Michael E. Nugent.............................................
John L. Schroeder.............................................
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 90 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1998. No compensation was paid to the Fund's Independent Trustees by
Discover Brokerage Index Series for the calendar year ended December 31, 1998.
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES
TO
90 MORGAN
STANLEY
NAME OF DEAN WITTER
INDEPENDENT TRUSTEE FUNDS
- --------------------------- -------------
<S> <C>
Michael Bozic.............. $120,150
Edwin J. Garn.............. 132,450
Wayne E. Hedien............ 132,350
Dr. Manuel H. Johnson...... 155,681
Michael E. Nugent.......... 159,731
John L. Schroeder.......... 160,731
</TABLE>
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, 55 of the Morgan
Stanley Dean Witter Funds, not including the Fund, have adopted a retirement
program under which an Independent Trustee who retires after serving for at
least five years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Morgan Stanley Dean Witter Fund that has
adopted the retirement program (each such Fund referred to as an "Adopting Fund"
and each such Trustee referred to as an "Eligible Trustee") is entitled to
retirement payments upon reaching the eligible retirement age (normally, after
attaining age 72). Annual payments are based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years up
to a maximum of 60.44% after ten years of service. The foregoing percentages may
be changed by the Board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are accrued as expenses by the Adopting
Funds. Such benefits are accrued as expenses by the Adopting Funds but 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.
20
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 55 Morgan Stanley Dean Witter Funds (not
including the Fund) for the fiscal year ended May 31, 1999, and the estimated
retirement benefits for the Independent Trustees, to commence upon their
retirement, from the 55 Morgan Stanley Dean Witter Funds as of May 31, 1999.
RETIREMENT BENEFITS FROM THE MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
FOR ALL ADOPTING FUNDS RETIREMENT ANNUAL
--------------------------------- BENEFITS BENEFITS
ESTIMATED ACCRUED AS UPON
CREDITED YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- ------------------------------------------------------ --------------- --------------- ------------ --------
<S> <C> <C> <C> <C>
Michael Bozic......................................... 10 60.44% $ 22,377 $52,250
Edwin J. Garn......................................... 10 60.44 35,225 52,250
Wayne E. Hedien....................................... 9 51.37 41,979 44,413
Dr. Manuel H. Johnson................................. 10 60.44 14,047 52,250
Michael E. Nugent..................................... 10 60.44 25,336 52,250
John L. Schroeder..................................... 8 50.37 45,117 44,343
</TABLE>
- ------------------------
2 Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------
[5% ownership list]
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1% of the Fund's shares of beneficial
interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
- --------------------------------------------------------------------------------
A. INVESTMENT MANAGER AND SUB-ADVISOR
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New York,
New York 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
The Sub-Advisor is Morgan Stanley Dean Witter Investment Management Inc., a
subsidiary of MSDW and an affiliate of the Investment Manager, whose address is
1221 Avenue of the Americas, New York New York 10020.
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 supervise the investment of the Fund's
assets. The Fund pays the Investment Manager monthly compensation calculated
daily at the annual rate of 1.15% of the daily net assets of the Fund. The
management fee is allocated among the Classes pro rata based on the net assets
of the Fund attributable to each Class. For the fiscal years ended May 31, 1997,
1998 and 1999, the Investment Manager accrued total compensation under the
Management Agreement in the amounts of $1,584,086, $985,364 and $ ,
respectively.
Pursuant to a sub-advisory agreement (the "Sub-Advisory Agreement") between
the Investment Manager and the Sub-Advisor, the Sub-Advisor has been retained,
subject to the overall supervision of the Investment Manager and the Trustees of
the Fund, to continuously furnish investment advice
21
<PAGE>
concerning individual security selections, asset allocations and overall
economic trends with respect to international small-cap issuers and to manage
the Fund's portfolio. As compensation for its service, the Investment Manager
pays the Sub-Advisor monthly compensation equal to 40% of the Investment
Manger's monthly compensation. For the period November 1, 1997 through May 31,
1998 and for the fiscal year ended May 31, 1999, the Sub-Advisor accrued total
compensation under the Sub-Advisory Agreement in the amounts of $159,791 and
$ , respectively. For the fiscal year ended May 31, 1997 and for the
period June 1, 1997 through October 31, 1997, compensation of $633,634 and
$234,354, respectively, was paid to a former Sub-Advisor.
The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.
B. PRINCIPAL UNDERWRITER
The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. These expenses include the payment of commissions
for sales of the Fund's shares and incentive compensation to Financial Advisors.
The Distributor also pays certain expenses in connection with the distribution
of the Fund's shares, including the costs of preparing, printing and
distributing advertising or promotional materials, and the costs of printing and
distributing prospectuses and supplements thereto used in connection with the
offering and sale of the Fund's shares. The Fund bears the costs of initial
typesetting, printing and distribution of prospectuses and supplements thereto
to shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws and pays filing fees in
accordance with state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER AND SUB-ADVISOR AND FUND EXPENSES
PAID BY THIRD PARTIES
The Investment Manager manages the Fund's business affairs and supervises
the investment of the Fund's assets. The Sub-Advisor manages the investment of
the Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Sub-Advisor obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective.
Under the terms of the Management Agreement, the Investment Manager
maintains certain of the Fund's books and records and furnishes, at its own
expense, the office space, facilities, equipment, clerical help, bookkeeping and
certain legal services as the Fund may reasonably require in the conduct of its
business, including the preparation of prospectuses, proxy statements and
reports required to be filed with federal and state securities commissions
(except insofar as the participation or assistance of independent accountants
and attorneys is, in the opinion of the Investment Manager, necessary or
desirable). In addition, the Investment Manager pays the salaries of all
personnel, including officers of the Fund, who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone service, heat,
light, power and other utilities provided to the Fund.
22
<PAGE>
Expenses not expressly assumed by the Investment Manager under the
Management Agreement, the Sub-Advisor under the Sub-Advisory Agreement or by the
Distributor, will be paid by the Fund. These expenses will be allocated among
the four Classes of shares pro rata based on the net assets of the Fund
attributable to each Class, except as described below. Such expenses include,
but are not limited to: expenses of the Plan of Distribution pursuant to Rule
12b-1; charges and expenses of any registrar, custodian, stock transfer and
dividend disbursing agent; brokerage commissions; taxes; engraving and printing
share certificates; registration costs of the Fund and its shares under federal
and state securities laws; the cost and expense of printing, including
typesetting, and distributing prospectuses of the Fund and supplements thereto
to the Fund's shareholders; all expenses of shareholders' and Trustees' meetings
and of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, withdrawal or redemption options; charges and expenses of any outside
service used for pricing of the Fund's shares; fees and expenses of legal
counsel, including counsel to the Trustees who are not interested persons of the
Fund or of the Investment Manager or the Sub-Advisor (not including compensation
or expenses of attorneys who are employees of the Investment Manager or the Sub-
Advisor); fees and expenses of the Fund's independent accountants; membership
dues of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation. The 12b-1 fees
relating to a particular Class will be allocated directly to that Class. In
addition, other expenses associated with a particular Class (except advisory or
custodial fees) may be allocated directly to that Class, provided that such
expenses are reasonably identified as specifically attributable to that Class
and the direct allocation to that Class is approved by the Trustees.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
The Management Agreement remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees.
D. DEALER REALLOWANCES
Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is defined
in the Securities Act.
E. RULE 12b-1 PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act (the "Plan") pursuant to which each Class, other than
Class D, pays the Distributor compensation accrued daily and payable monthly at
the following annual rates: 0.25% and 1.0% of the average daily net assets of
Class A and Class C, respectively, and, with respect to Class B, 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
shares since the inception of the Fund (not including reinvestment of dividends
or capital gains distributions), less the average daily aggregate net asset
value of the Fund's Class B shares redeemed since the Fund's inception upon
which a contingent deferred sales charge has been imposed or upon which such
charge has been waived, or (b) the average daily net assets of Class B.
The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or
23
<PAGE>
Dean Witter Reynolds received the proceeds of CDSCs and FSCs, for the last three
fiscal years ended May 31, in approximate amounts as provided in the table below
(the Distributor did not retain any of these amounts).
<TABLE>
<CAPTION>
1999 1998 1997
------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Class A................................ FSCs:(1) $ FSCs: $ 3,572 FSCS: N/A(2)
CDSCs: $ CDSCs: $ 0 CDSC: N/A(2)
Class B................................ CDSCs: $ CDSCs: $ 365,257 CDSCs: $ 441,738
Class C................................ CDSCs: $ CDSCs: $ 270 CDSC: N/A(2)
</TABLE>
- ------------------------
(1) FSCs apply to Class A only.
(2) This Class commenced operations on July 28, 1997.
The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. Class B shares of the Fund accrued amounts
payable to the Distributor under the Plan, during the fiscal year ended May 31,
1999, of $ . This amount is equal to % of the average daily net assets
of Class B for the fiscal year and was calculated pursuant to clause ( ) of the
compensation formula under the Plan. For the fiscal year ended May 31, 1999,
Class A and Class C shares of the Fund accrued payments under the Plan amounting
to $ and $ , respectively, which amounts are equal to % and % of the
average daily net assets of Class A and Class C, respectively, for the fiscal
year.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.
With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for the
sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value of
the respective accounts for which they are the Financial Advisors or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by employer-sponsored employee benefit
plans, whether or not qualified under the Internal Revenue Code, for which the
Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement ("MSDW Eligible Plans"), the Investment Manager compensates Financial
Advisors by paying them, from its own funds, a gross sales credit of 1.0% of the
amount sold.
With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased by MSDW Eligible Plans, Dean
Witter Reynolds compensates its Financial Advisors by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.
24
<PAGE>
With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.
With respect to Class D shares other than shares held by participants in the
Investment Manager's mutual fund asset allocation program, the Investment
Manager compensates Dean Witter Reynolds's Financial Advisors by paying them,
from its own funds, commissions for the sale of Class D shares, currently a
gross sales credit of up to 1.0% of the amount sold. There is a chargeback of
100% of the amount paid if the Class D shares are redeemed in the first year and
a chargeback of 50% of the amount paid if the Class D shares are redeemed in the
second year after purchase. The Investment Manager also compensates Dean Witter
Reynolds's Financial Advisors by paying them, from its own funds, an annual
residual commission, currently up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record (not
including accounts of participants in the Investment Manager's mutual fund asset
allocation program).
The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds's
Fund-associated distribution-related expenses, including sales compensation, and
overhead and other branch office distribution-related expenses including (a) the
expenses of operating Dean Witter Reynolds's branch offices in connection with
the sale of Fund shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares and (d) other expenses relating to branch
promotion of Fund sales.
The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on behalf
of the Fund and, in the case of Class B shares, opportunity costs, such as the
gross sales credit and an assumed interest charge thereon ("carrying charge").
In the Distributor's reporting of the distribution expenses to the Fund, in the
case of Class B shares, such assumed interest (computed at the "broker's call
rate") has been calculated on the gross credit as it is reduced by amounts
received by the Distributor under the Plan and any contingent deferred sales
charges received by the Distributor upon redemption of shares of the Fund. No
other interest charge is included as a distribution expense in the Distributor's
calculation of its distribution costs for this purpose. The broker's call rate
is the interest rate charged to securities brokers on loans secured by
exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 1.0%, in the case of Class C, of the average net assets of the respective
Class during the month. No interest or other financing charges, if any, incurred
on any distribution expenses on behalf of Class A and Class C will be
reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to Financial Advisors and other authorized financial
representatives, such amounts shall be determined at the beginning of each
calendar quarter by the Trustees, including, a majority of the Independent
Trustees. Expenses representing the service fee (for Class A) or a gross sales
credit or a residual to Financial Advisors and other authorized financial
representatives (for Class C) may be reimbursed without prior determination. In
the event that the Distributor proposes that monies shall be reimbursed for
other than such expenses, then in making quarterly determinations of the amounts
that may be reimbursed by the Fund, the Distributor will provide and the
Trustees will review a quarterly budget of projected distribution expenses to be
incurred on behalf of the Fund, together with a report explaining the purposes
and anticipated benefits of
25
<PAGE>
incurring such expenses. The Trustees will determine which particular expenses,
and the portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended May 31, 1999 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $ on behalf of Class B since the inception of the Plan. It is
estimated that this amount was spent in approximately the following ways: (i)
% ($ )-- advertising and promotional expenses; (ii) %
($ )--printing of prospectuses for distribution to other than current
shareholders; and (iii) % ($ )--other expenses, including the gross
sales credit and the carrying charge, of which % ($ ) represents
carrying charges, % ($ ) represents commission credits to Dean Witter
Reynolds branch offices and other selected broker-dealers for payments of
commissions to Financial Advisors and other authorized financial
representatives, and % ($ ) represents overhead and other branch
office distribution-related expenses. The amounts accrued by Class A and a
portion of the amounts accrued by Class C under the Plan were service fees
during the fiscal year ended May 31, 1999. The remainder of the amounts accrued
by Class C were for expenses which relate to compensation of sales personnel and
associated overhead expenses.
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totaled $ as of May 31, 1999 (the end of the
Fund's fiscal year), which was equal to % of the net assets of Class B on
such date. Because there is no requirement under the Plan that the Distributor
be reimbursed for all distribution expenses with respect to Class B shares or
any requirement that the Plan be continued from year to year, this excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made to
the Distributor under the Plan and the proceeds of CDSCs paid by investors upon
redemption of shares, if for any reason the Plan is terminated, the Trustees
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees or
CDSCs, may or may not be recovered through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net
assets of Class A or Class C, respectively, will not be reimbursed by the Fund
through payments in any subsequent year, except that expenses representing a
gross sales commission credited to Morgan Stanley Dean Witter Financial Advisors
and other authorized financial representatives at the time of sale may be
reimbursed in the subsequent calendar year. The Distributor has advised the Fund
that there were no unreimbursed expenses representing a gross sales commission
credited to Morgan Stanley Dean Witter Financial Advisors and other authorized
financial representatives at the time of sale in the case of Class C at December
31, 1998 (the end of the calendar year), and that there were no such expenses
that may be reimbursed in the subsequent year in the case of Class A on such
date. No interest or other financing charges will be incurred on any Class A or
Class C distribution expenses incurred by the Distributor under the Plan or on
any unreimbursed expenses due to the Distributor pursuant to the Plan.
No interested person of the Fund nor any Independent Trustee has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, the Investment Manager, Dean Witter
26
<PAGE>
Reynolds, MSDW Services Company or certain of their employees may be deemed to
have such an interest as a result of benefits derived from the successful
operation of the Plan or as a result of receiving a portion of the amounts
expended thereunder by the Fund.
On an annual basis the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated; (2)
the benefits the Fund had obtained, was obtaining and would be likely to obtain
under the Plan, including that: (a) the Plan is essential in order to give Fund
investors a choice of alternatives for payment of distribution and service
charges and to enable the Fund to continue to grow and avoid a pattern of net
redemptions which, in turn, are essential for effective investment management;
and (b) without the compensation to individual brokers and the reimbursement of
distribution and account maintenance expenses of Dean Witter Reynolds's branch
offices made possible by the 12b-1 fees, Dean Witter Reynolds could not
establish and maintain an effective system for distribution, servicing of Fund
shareholders and maintenance of shareholder accounts; and (3) what services had
been provided and were continuing to be provided under the Plan to the Fund and
its shareholders. Based upon their review, the Trustees, including each of the
Independent Trustees, determined that continuation of the Plan would be in the
best interest of the Fund and would have a reasonable likelihood of continuing
to benefit the Fund and its shareholders. In the Trustees' quarterly review of
the Plan, they will consider its continued appropriateness and the level of
compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.
F. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans. The principal business address of the Transfer Agent is Harborside
Financial Center, Plaza Two, Jersey City, New Jersey 07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Chase Manhattan Bank, One Chase Plaza, New York, New York 10005 is the
Custodian of the Fund's assets. The Custodian has contracted with various
foreign banks and depositaries to hold portfolio securities of non-U.S. issuers
on behalf of the Fund. Any of the Fund's cash balances with the Custodian in
excess of $100,000 are unprotected by federal deposit insurance. These balances
may, at times, be substantial.
serves as the independent accountants of the Fund. The independent accountants
are responsible for auditing the annual financial statements of the Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, the
Sub-Advisor and of the Distributor. As Transfer Agent and Dividend Disbursing
Agent, the Transfer Agent's responsibilities include maintaining shareholder
accounts, disbursing cash dividends and reinvesting dividends, processing
account
27
<PAGE>
registration changes, handling purchase and redemption transactions, mailing
prospectuses and reports, mailing and tabulating proxies, processing share
certificate transactions, and maintaining shareholder records and lists. For
these services, the Transfer Agent receives a per shareholder account fee from
the Fund and is reimbursed for its out-of-pocket expenses in connection with
such services.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------
A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
and the Sub-Advisor are responsible for decisions to buy and sell securities for
the Fund, the selection of brokers and dealers to effect the transactions, and
the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes a profit to the dealer. The Fund also expects that securities will be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as the underwriter's concession or
discount. Options and futures transactions will usually be effected through a
broker and a commission will be charged. On occasion, the Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid.
For the fiscal years ended May 31, 1997, 1998 and 1999, the Fund paid a
total of $481,984, $441,172 and $ , respectively, in brokerage
commissions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds. The Fund will
limit its transactions with Dean Witter Reynolds to U.S. Government and
government agency securities, bank money instruments (i.e., certificates of
deposit and bankers' acceptances) and commercial paper. The transactions will be
effected with Dean Witter Reynolds only when the price available from Dean
Witter Reynolds is better than that available from other dealers.
During the fiscal years ended May 31, 1997, 1998 and 1999, the Fund did not
effect any principal transactions with Dean Witter Reynolds.
Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds, Morgan
Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
an exchange during a comparable period of time. This standard would allow the
affiliated broker or dealer to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Trustees, including the Independent
Trustees, have adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to an affiliated broker or
dealer are consistent with the foregoing standard. The Fund does not reduce the
management fee it pays to the Investment Manager by any amount of the brokerage
commissions it may pay to an affiliated broker or dealer.
During the fiscal years ended May 31, 1997, 1998 and 1999, the Fund paid a
total of $ , $ and $ , respectively, in brokerage commissions to
Dean Witter Reynolds. During the fiscal year ended May 31, 1999, the brokerage
commissions paid to Dean Witter Reynolds represented approximately % of the
total brokerage commissions paid by the Fund during the year and were paid on
account of transactions having an aggregate dollar value equal to approximately
% of the aggregate dollar value of all portfolio transactions of the Fund
during the year for which commissions were paid.
28
<PAGE>
During the fiscal years ended May 31, 1998 and 1999, the Fund paid a total
of $15,696 and $ , respectively, in brokerage commissions to Morgan Stanley &
Co., which broker-dealer became an affiliate of the Investment Manager on May
31, 1997 upon consummation of the merger of Dean Witter, Discover & Co. with
Morgan Stanley Group Inc. During the fiscal year ended May 31, 1999, the
brokerage commissions paid to Morgan Stanley & Co. represented approximately
% of the total brokerage commissions paid by the Fund for this period and
were paid on account of transactions having an aggregate dollar value equal to
approximately % of the aggregate dollar value of all portfolio transactions
of the Fund during the year for which commissions were paid.
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager and/or the Sub-Advisor from
obtaining a high quality of brokerage and research services. In seeking to
determine the reasonableness of brokerage commissions paid in any transaction,
the Investment Manager and/or the Sub-Advisor rely upon its experience and
knowledge regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. These determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on securities exchanges. Fixed commissions on such
transactions are generally higher than negotiated commissions on domestic
transactions. There is also generally less government supervision and regulation
of foreign securities exchanges and brokers than in the United States.
In seeking to implement the Fund's policies, the Investment Manager and/or
the Sub-Advisor effect transactions with those brokers and dealers who the
Investment Manager and/or the Sub-Advisor believe provide the most favorable
prices and are capable of providing efficient executions. If the Investment
Manager and/or the Sub-Advisor believe the prices and executions are obtainable
from more than one broker or dealer, it may give consideration to placing
portfolio transactions with those brokers and dealers who also furnish research
and other services to the Fund, the Investment Manager or the Sub-Advisor. The
services may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities. The information
and services received by the Investment Manager and/or the Sub-Advisor from
brokers and dealers may be of benefit them in the management of accounts of some
of their other clients and may not in all cases benefit the Fund directly.
The Investment Manager and the Sub-Advisor currently serve as investment
manager to a number of clients, including other investment companies, and may in
the future act as investment manager or advisor to others. It is the practice of
the Investment Manager and the Sub-Advisor to cause purchase and sale
transactions to be allocated among the Fund and others whose assets they manage
in such manner as they deem equitable. In making such allocations among the Fund
and other client accounts, various factors may be considered, including the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
In the case of certain initial and secondary public offerings, the Investment
Manager and the Sub-Advisor utilize a pro rata allocation process based on the
size of the Morgan Stanley Dean Witter Funds involved and the number of shares
available from the public offering.
29
<PAGE>
D. DIRECTED BROKERAGE
During the fiscal year ended May 31, 1999, the Fund paid $ in
brokerage commissions in connection with transactions in the aggregate amount of
$ to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
During the fiscal year ended May 31, 1999, the Fund did not purchase
securities issued by brokers or dealers that were among the ten brokers or the
ten dealers that executed transactions for or with the Fund in the largest
dollar amounts during the year. As of May 31, 1999, the Fund did not own any
securities issued by any of these issuers.
VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
of beneficial interest held. The Fund is authorized to issue an unlimited number
of shares of beneficial interest. All shares of beneficial interest of the Fund
are of $0.01 par value and are equal as to earnings, assets and voting
privileges except that each Class will have exclusive voting privileges with
respect to matters relating to distribution expenses borne solely by such Class
or any other matter in which the interests of one Class differ from the
interests of any other Class. In addition, Class B shareholders will have the
right to vote on any proposed material increase in Class A's expenses, if such
proposal is submitted separately to Class A shareholders. Also, Class A, Class B
and Class C bear expenses related to the distribution of their respective
shares.
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series. The Trustees have not presently authorized any such
additional series or Classes of shares other than as set forth in the
PROSPECTUS.
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series. The Trustees have not presently authorized any such
additional series or Classes of shares other than as set forth in the
PROSPECTUS.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances the Trustees may be removed by action of the
Trustees. In addition, under certain circumstances the shareholders may call a
meeting to remove Trustees and the Fund is required to provide assistance in
communicating with shareholders about such a meeting. The voting rights of
shareholders are not cumulative, so that holders of more than 50 percent of the
shares voting can, if they choose, elect all Trustees being selected, while the
holders of the remaining shares would be unable to elect any Trustees.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for the obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that notice
of such Fund obligations include such disclaimer, and provides for
indemnification out of the Fund's property for any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Given the above limitations on shareholder personal liability, and the nature of
the Fund's assets and operations, the possibility of the Fund being unable to
meet its obligations is remote and thus, in the opinion of Massachusetts counsel
to the Fund, the risk to Fund shareholders of personal liability is remote.
30
<PAGE>
All of the Trustees have been elected by the shareholders of the Fund, most
recently at a Special Meeting of Shareholders held on May 21, 1997. The Trustees
themselves have the power to alter the number and the terms of office of the
Trustees (as provided for in the Declaration of Trust), and they may at any time
lengthen or shorten their own terms or make their terms of unlimited duration
and appoint their own successors, provided that always at least a majority of
the Trustees has been elected by the shareholders of the Fund. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove the
Trustees in accordance with the provisions of Section 16(c) of the Investment
Company Act of 1940. The voting rights of shareholders are not cumulative, so
that holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being selected, while the holders of the remaining shares
would be unable to elect any Trustees.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------
A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's PROSPECTUS.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the Transfer
Agent to act as their agent in connection with the application of proceeds of
any redemption of Fund shares to the purchase of shares of any other Morgan
Stanley Dean Witter Fund and the general administration of the exchange
privilege. No commission or discounts will be paid to the Distributor or any
authorized broker-dealer for any transaction pursuant to the exchange privilege.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of Fund
shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the length
of time shares subject to the charge have been held), any transfer involving
less than all of the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same proportion that the transferred shares
bear to the total shares in the account immediately prior to the transfer). The
transferred shares will continue to be subject to any applicable CDSC as if they
had not been so transferred.
B. OFFERING PRICE
The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's Distributor, Dean
Witter Reynolds and other authorized dealers as described in the section "V.
Investment Management and Other Services -- E. Rule 12b-1 Plan."
The price of Fund shares, called "net asset value," is based on the value of
the Fund's portfolio securities. Net asset value per share of each Class is
calculated by dividing the value of the portion of the Fund's securities and
other assets attributable to that Class, less the liabilities attributable to
that Class, by the number of shares of that Class outstanding. The assets of
each Class of shares are invested in a single portfolio. The net asset value of
each Class, however, will differ because the Classes have different ongoing
fees.
31
<PAGE>
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange is valued at its latest sale price on that exchange, prior to the
time when assets are valued; if there were no sales that day, the security is
valued at the latest bid price (in cases where a security is traded on more than
one exchange, the security is valued on the exchange designated as the primary
market pursuant to procedures adopted by the Trustees); and (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price. When market quotations are not
readily available, including circumstances under which it is determined by the
Investment Manager and/or the Sub-Advisor that sale or bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Fund's Trustees. For valuation purposes,
quotations of foreign portfolio securities, other assets and liabilities and
forward contracts stated in foreign currency are translated into U.S. dollar
equivalents at the prevailing market rates prior to the close of the New York
Stock Exchange.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
Listed options on debt securities are valued at the latest sale price on the
exchange on which they are listed unless no sales of such options have taken
place that day, in which case they will be valued at the mean between their
latest bid and asked prices. Unlisted options on debt securities and all options
on equity securities are valued at the mean between their latest bid and asked
prices. Futures are valued at the latest sale price on the commodities exchange
on which they trade unless the Trustees determine such price does not reflect
their market value, in which case they will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events which may affect the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of the New York Stock Exchange and will therefore not be reflected in the
computation of the Fund's net asset value. If events that may affect the value
of such securities occur during such period, then these securities may be valued
at their fair value as determined in good faith under procedures established by
and under the supervision of the Trustees.
IX. TAXATION OF THE FUND AND SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Tax issues relating to the Fund
are not generally a consideration for shareholders such as tax exempt entities
and tax-advantaged retirement vehicles such as an IRA or 401(k) plan.
Shareholders are urged to consult their own tax professionals regarding specific
questions as to federal, state or local taxes.
32
<PAGE>
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
The Fund generally intends to distribute sufficient income and gains so that
the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have a tax holding period of more than one
year. Gains or losses on the sale of securities with a tax holding period of one
year or less will be short-term gains or losses.
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and losses,
change the character of certain gains or losses, or alter the holding period of
other investments held by the Fund. The application of these rules would
therefore also affect the amount, timing and character of distributions made by
the Fund. Under certain tax rules, the Fund may be required to accrue a portion
of any discount at which certain securities are purchased as income each year
even though the Fund receives no payments in cash on the security during the
year. To the extent that the Fund invests in such securities, it would be
required to pay out such accrued discount as an income distribution in each year
in order to avoid taxation at the Fund level. Such distributions will be made
from the available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Investment Manager will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have to
pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income or
short-term capital gains, are taxable to the shareholder as ordinary income
regardless of whether the shareholder receives such payments in additional
shares or in cash.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. The Taxpayer Relief Act of 1997 reduced the
maximum tax on long-term capital gains applicable to individuals from 28% to
20%.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short term capital
gains.
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 in United States
corporations. Distributions of net capital gains by the Fund will not be
eligible for the dividends received deduction.
33
<PAGE>
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.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment company
will have the effect of reducing the net asset value of the shareholder's stock
in that company by the exact amount of the dividend or capital gains
distribution. Furthermore, such dividends and capital gains distributions are
subject to federal income taxes. If the net asset value of the shares should be
reduced below a shareholder's cost as a result of the payment of dividends or
the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains or
losses and those held for more than one year generally result in long-term gain
or loss. Any loss realized by shareholders upon a redemption of shares within
six months of the date of their purchase will be treated as a long-term capital
loss to the extent of any distributions of net long-term capital gains with
respect to such shares during the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured by
the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the tax
basis of their shares. Under certain circumstances a shareholder may compute and
use an average cost basis in determining the gain or loss on the sale or
redemption of shares.
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS. In general, gains
from foreign currencies and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in stock,
securities or foreign currencies are currently considered to be qualifying
income for purposes of determining whether the Fund qualifies as a regulated
investment company. It is currently unclear, however, who will be treated as the
issuer of certain foreign currency instruments or how foreign currency options,
futures, or forward foreign currency contracts will be valued for purposes of
the regulated investment company diversification requirements applicable to the
Fund. The Fund may request a private letter ruling from the Internal Revenue
Service on some or all of these issues.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (I.E.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from forward contracts, from futures
contracts that are not "regulated futures contracts", and from unlisted options
will be treated as ordinary income or less under Code Section 988. Also, certain
foreign exchange gains or losses derived with respect to foreign fixed-income
securities are also subject to Section 988 treatment. In general, therefore,
Code Section 988 gains or losses will increase or decrease the amount of the
Fund's investment
34
<PAGE>
company taxable income available to be distributed to shareholders as ordinary
income, rather than increasing or decreasing the amount of the Fund's net
capital gain. Additionally, if Code Section 988 losses exceed other investment
company taxable income during a taxable year, the Fund would not be able to make
any ordinary dividend distributions.
If the Fund invests in an entity which is classified as a "passive foreign
investment company" ("PFIC") for U.S. tax purposes, the application of certain
technical tax provisions applying to such companies could result in the
imposition of federal income tax with respect to such investments at the Fund
level which could not be eliminated by distributions to shareholders. The U.S.
Treasury issued proposed regulation section 1.1291-8 which establishes a
mark-to-market regime which allows investment companies investing in PFICs to
avoid most, if not all, of the difficulties posed by the PFIC rules. In any
event, it is not anticipated that any taxes on the Fund with respect to
investments in PFICs would be significant.
X. UNDERWRITERS
- --------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 Plans."
XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------
From time to time, the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The Fund's "average annual total return"
represents an annualization of the Fund's total return over a particular period
and is computed by finding the annual percentage rate which will result in the
ending redeemable value of a hypothetical $1,000 investment made at the
beginning of a one, five or ten year period, or for the period from the date of
commencement of operations, if shorter than any of the foregoing. The ending
redeemable value is reduced by any contingent deferred sales charge ("CDSC") at
the end of the one, five, ten year or other period. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment (which in the case of Class A shares is reduced by the Class A
initial sales charge), 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. Based on this calculation, the average annual total returns for Class B
for the one year and life of the Fund periods commencing July 29, 1994 and ended
May 31, 1999 were % and %, respectively. The average annual total
returns of Class A for the fiscal year ended May 31, 1999 and for the period
July 28, 1997 (inception of the class) through May 31, 1999 were % and
%, respectively. The average annual total returns of Class C for the fiscal
year ended May 31, 1999 and for the period July 28, 1997 (inception of the
class) through May 31, 1999 were % and %, respectively. The average
annual total returns of Class D for the fiscal year ended May 31, 1999 and for
the period July 28, 1997 (inception of the class) through May 31, 1999 were
% and %, respectively.
In addition, the Fund may advertise its total return for each Class over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. These calculations may or may not reflect the
imposition of the maximum front-end sales charge for Class A or the deduction of
the CDSC for each of Class B and Class C which, if reflected, would reduce the
performance quoted. For example, the average annual total return of the Fund may
be calculated in the manner described above, but without deduction for any
applicable sales charge. Based on this calculation, the average annual total
returns for Class B for the one year and life of the Fund periods ended May 31,
1999 were % and %, respectively. The average annual total returns of
Class A for the fiscal year ended May 31, 1999 and for the period July 28, 1997
(inception of the class) through May 31, 1999 were % and
35
<PAGE>
%, respectively. The average annual total returns of Class B for the fiscal
year ended May 31, 1999 and for the period July 28, 1997 (inception of the
class) through May 31, 1999 were % and %, respectively. The average
annual total returns of Class D for the fiscal year ended May 31, 1999 and for
the period July 28, 1997 (inception of the class) through May 31, 1999 were
% and %, respectively.
In addition, the Fund may compute its aggregate total return for each Class
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on this calculation, the total returns
for Class B for the one year and life of the Fund periods ended May 31, 1999
were % and %, respectively. The total returns of Class A for the fiscal
year ended May 31, 1999 and for the period July 28, 1997 (inception of the
class) through May 31, 1999 were % and %, respectively. The total
returns of Class C for the fiscal year ended May 31, 1999 and for the period
July 28, 1997 (inception of the class) through May 31, 1999 were % and
%, respectively. The total returns of Class D for the fiscal year ended May
31, 1999 and for the period July 28, 1997 (inception of the class) through May
31, 1999 were % and %, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1 to
the Fund's aggregate total return to date (expressed as a decimal and without
taking into account the effect of any applicable CDSC) and multiplying by
$9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as the
case may be. Investments of $10,000, $50,000 and $100,000 in each Class at
inception of the Class would have grown (declined) to the following amounts at
May 31, 1999:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION -------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ------------------------------------------------------------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Class A............................................................ 07/28/97 $ $ $
Class B............................................................ 07/29/94
Class C............................................................ 07/28/97
Class D............................................................ 07/28/97
</TABLE>
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by recognized organizations.
XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended May
31, 1999 included in this STATEMENT OF ADDITIONAL INFORMATION and incorporated
by reference in the PROSPECTUS have been so included and incorporated in
reliance on the report of , independent accountants,
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.
36
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL SMALLCAP FUND
PART C OTHER INFORMATION
1(a). Declaration of Trust of the Registrant, dated April 19, 1994, is
incorporated by reference to Exhibit 1 to the Initial Registration
Statement on Form N-1A, filed on April 26, 1994.
1(b). Form of Instrument Establishing and Designating Additional Classes
is incorporated by reference to Exhibit (1) of Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A, filed
on July 23, 1997.
1(c). Amendment to the Declaration of Trust of the Registrant dated
April 19, 1994, is incorporated by reference to Exhibit 1 of
Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A, filed on July 30, 1998.
2. Amended and Restated By-Laws of the Registrant dated May 1, 1999,
to be filed herein.
3. Not applicable.
4(a). Amended Investment Management Agreement between the Registrant
and Morgan Stanley Dean Witter Advisors Inc. is incorporated by
reference to Exhibit 5 of Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A, filed on July 23, 1997.
4(b). Sub-Advisory Agreement between the Registrant and Morgan Stanley
Asset Management Inc. is incorporated by reference to Exhibit 5(b)
of Post-Effective Amendment No. 5 to the Registration Statement on
Form N-1A, filed on October 24, 1997.
5(a). Amended Distribution Agreement between the Registrant and Morgan
Stanley Dean Witter Distributors Inc., dated June 22, 1998, is I
incorporated by reference to Exhibit 6 of Post-Effective Amendment
No. 6 to the Registration Statement on Form N-1A, filed on July 30,
1998.
5(b). Selected Dealer Agreement between Dean Witter Distributors Inc.
and Dean Witter Reynolds Inc., is incorporated by reference to
Exhibit 6(b) of Pre-Effective Amendment No.1 to the Registration
Statement on Form N-1A, filed on June 6, 1994.
5(c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean
Witter Distributors Inc. and National Financial Services
Corporation, dated October 17, 1998, to be filed herein.
6. Not applicable.
7. Custody Agreement between the Registrant and Chase Manhattan
Bank, N.A., is incorporated by reference to Exhibit 8(a) of
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on June 6, 1994.
8(a). Amended and Restated Transfer Agency and Service Agreement the
Registrant and Morgan Stanley Dean Witter Trust FSB, dated June 22,
1998, is incorporated by reference to Exhibit 8 of Post-Effective
Amendment No. 6 to the Registration Statement on Form N-1A, filed
on July 30, 1998.
<PAGE>
8(b). Amended Services Agreement, dated June 22, 1998, between Morgan
Stanley Dean Witter Services Company Inc. and Morgan Stanley Dean
Witter Advisors Inc. is incorporated by reference to Exhibit 9 of
Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A, filed on July 30, 1998.
9(a). Opinion of Sheldon Curtis, Esq., dated June 2, 1994, is
incorporated by reference to Exhibit 10 of Pre-effective Amendment
No. 1 to the Registration Statement on Form N-1A, filed on June 6,
1994.
9(b). Opinion of Lane Altman & Owens, LLP, Massachusetts Counsel, dated
June 2, 1994, is incorporated by reference to Exhibit 10 of
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on June 6, 1994.
10. Not Applicable.
11. Not applicable.
12. Not applicable.
13. Amended and Restated Plan of Distribution pursuant to Rule 12b-1 is
incorporated by reference to Exhibit 15 of Post-Effective Amendment
No. 4 to the Registration Statement on Form N-1A, filed on July 23,
1997.
14. Multiple Class Plan pursuant to Rule 18f-3 is incorporated by
reference to Exhibit (Other) of Post-Effective Amendment No. 4 to
the Registration Statement on Form N-1A, filed on July 23, 1997.
Other. Powers of Attorney of Trustees are incorporated by reference to
Exhibit (Other) of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed on October 24, 1997 and
of Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on June 6, 1994.
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.
<PAGE>
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
<PAGE>
(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
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter North American Government Income Trust
(45) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(46) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(47) Morgan Stanley Dean Witter Real Estate Fund
(48) Morgan Stanley Dean Witter S&P 500 Index Fund
(49) Morgan Stanley Dean Witter S&P 500 Select Fund
(50) Morgan Stanley Dean Witter Select Dimensions Investment Series
(51) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(52) Morgan Stanley Dean Witter Short-Term Bond Fund
(53) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(54) Morgan Stanley Dean Witter Small Cap Growth Fund
(55) Morgan Stanley Dean Witter Special Value Fund
(56) Morgan Stanley Dean Witter Strategist Fund
(57) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(58) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(59) Morgan Stanley Dean Witter Total Return Trust
(60) Morgan Stanley Dean Witter U.S. Government Money Market Trust
<PAGE>
(61) Morgan Stanley Dean Witter U.S. Government Securities Trust
(62) Morgan Stanley Dean Witter Utilities Fund
(63) Morgan Stanley Dean Witter Value-Added Market Series
(64) Morgan Stanley Dean Witter Value Fund
(65) Morgan Stanley Dean Witter Variable Investment Series
(66) Morgan Stanley Dean Witter World Wide Income Trust
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ---------------------------------------------------------
<S> <C>
Mitchell M. Merin President and Chief Operating Officer of Asset Management
President, Chief of Morgan Stanley Dean Witter & Co. ("MSDW"); Chairman,
Executive Officer and Chief Executive Officer and Director of Morgan Stanley
Director 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 and Discover Brokerage Index Series;
Executive Vice President and Director of Dean Witter
Reynolds Inc. ("DWR"); Director of various MSDW
subsidiaries.
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds
Executive Vice President and Discover Brokerage Index Series; Director of MSDW
and Chief Investment Trust.
Officer
Ronald E. Robison President MSDW Trust; Executive Vice President, Chief
Executive Vice President, Administrative Officer and Director of MSDW Services;
Chief Administrative Vice President of the Morgan Stanley Dean Witter Funds
Officer and Director and Discover Brokerage Index Series.
Edward C. Oelsner, III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary, General Counsel and Director of MSDW
Secretary, General Services; Senior Vice President, Assistant Secretary and
Counsel and Director Assistant General Counsel of MSDW Distributors;
Vice President, Secretary and General Counsel of the
Morgan Stanley Dean Witter Funds and Discover Brokerage
Index Series.
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the High
Yield Group
Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ---------------------------------------------------------
<S> <C>
Douglas Brown
Senior Vice President
Rosalie Clough
Senior Vice President
and Director of Marketing
Richard Felegy
Senior Vice President
Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW Trust;
Vice President of the Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series.
Rajesh K. Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President, Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative Officer -
Investments
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds and Discover Brokerage Index Series.
Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of Sector
Rotation
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ---------------------------------------------------------
<S> <C>
Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Money
Market Group
Ira N. Ross Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
James Solloway
Senior Vice President
Jayne M. Stevlingson Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
and Income Group
Elizabeth A. Vetell
Senior Vice President
and Director of Shareholder
Communication
James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the
Tax-Exempt Fixed
Income Group
Frank Bruttomesso First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover Brokerage
Index Series.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ---------------------------------------------------------
<S> <C>
Thomas F. Caloia First Vice President and Assistant Treasurer of MSDW
First Vice President Services; Assistant Treasurer of MSDW Distributors;
and Assistant Treasurer and Chief Financial and Accounting Officer of
Treasurer the Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.
Thomas Chronert
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President and
First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of MSDW Distributors, the Morgan Stanley Dean
Witter Funds and Discover Brokerage Index Series.
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First Vice President
Michael Interrante First Vice President and Controller of MSDW Services;
First Vice President Assistant Treasurer of MSDW Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Lou Anne D. McInnis First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover Brokerage
Index Series.
Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of MSDW Distributors, the
and Assistant Secretary Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.
Ruth Rossi First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover Brokerage
Index Series.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ---------------------------------------------------------
<S> <C>
James P. Wallin
First Vice President
Robert Abreu
Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Armon Bar-Tur
Vice President
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
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ---------------------------------------------------------
<S> <C>
Aaron Clark
Vice President
William Connerly
Vice President
David Dineen
Vice President
Sheila Finnerty Vice President of Morgan Stanley Dean Witter Prime
Vice President Income Trust
Jeffrey D. Geffen
Vice President
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
Gail Gerrity
Vice President
Ellen Gold
Vice President
Stephen Greenhut
Vice President
Trey Hancock
Vice President
Matthew Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter Hermann Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
David T. Hoffman
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ---------------------------------------------------------
<S> <C>
Carol Espejo-Kane
Vice President
Nancy Karole-Kennedy
Vice President
Doug Ketterer
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Todd Lebo Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Nancy Login
Vice President
Sharon Loguercio
Vice President
Steven MacNamara
Vice President
Catherine Maniscalco Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
Teresa McRoberts Vice President of Morgan Stanley Dean Witter S&P 500
Vice President Select Fund.
Mark Mitchell
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ---------------------------------------------------------
<S> <C>
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Anne Pickrell Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Dawn Rorke
Vice President
John Roscoe Vice President of Morgan Stanley Dean Witter
Vice President Real Estate Fund
Hugh Rose
Vice President
Robert Rossetti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Patrice Saunders
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal
Vice President Securities Trust.
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Robert Stearns
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- -------------------- ---------------------------------------------------------
<S> <C>
Naomi Stein
Vice President
Michael Strayhorn
Vice President
Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Robert Vanden Assem
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
John Wong
Vice President
</TABLE>
The principal address of MSDW Advisors, MSDW Services, MSDW Distributors,
DWR, the Morgan Stanley Dean Witter Funds and Discover Brokerage Index Series is
Two World Trade Center, New York, New York 10048. The principal address of MSDW
is 1585 Broadway, New York, New York 10036. The principal address of MSDW Trust
is 2 Harborside Financial Center, Jersey City, New Jersey 07311.
Item 27. PRINCIPAL UNDERWRITERS
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
<PAGE>
(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
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter North American Government Income Trust
(45) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(46) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(47) Morgan Stanley Dean Witter Prime Income Trust
(48) Morgan Stanley Dean Witter Real Estate Fund
(49) Morgan Stanley Dean Witter S&P 500 Index Fund
(50) Morgan Stanley Dean Witter S&P 500 Select Fund
(51) Morgan Stanley Dean Witter Short-Term Bond Fund
(52) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(53) Morgan Stanley Dean Witter Small Cap Growth Fund
(54) Morgan Stanley Dean Witter Special Value Fund
(55) Morgan Stanley Dean Witter Strategist Fund
(56) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(57) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(58) Morgan Stanley Dean Witter Total Return Trust
(59) Morgan Stanley Dean Witter U.S. Government Money Market Trust
<PAGE>
(60) Morgan Stanley Dean Witter U.S. Government Securities Trust
(61) Morgan Stanley Dean Witter Utilities Fund
(62) Morgan Stanley Dean Witter Value-Added Market Series
(63) Morgan Stanley Dean Witter Value Fund
(64) Morgan Stanley Dean Witter Variable Investment Series
(65) Morgan Stanley Dean Witter World Wide Income Trust
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than Mr.
Purcell, who is a Trustee of the Registrant, none of the following persons has
any position or office with the Registrant.
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 certifies that it has duly caused
this Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 28th day of June, 1999.
MORGAN STANLEY DEAN WITTER INTERNATIONAL SMALLCAP FUND
By: /s/ Barry Fink
----------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer Chairman, Chief
Executive Officer,
and Trustee
By: /s/ Charles A. Fiumefreddo 06/28/99
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By: /s/ Thomas F. Caloia 06/28/99
----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By: /s/ Barry Fink 06/28/99
----------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder
By: /s/ David M. Butowsky 06/28/99
----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
MORGAN STANLEY DEAN WITTER INTERNATIONAL SMALLCAP FUND
EXHIBIT INDEX
2. Amended and Restated By-Laws of the Registrant dated May 1, 1999.
5(c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and National Financial Services Corporation, dated
October 17, 1998.
<PAGE>
BY-LAWS
OF
MORGAN STANLEY DEAN WITTER INTERNATIONAL SMALLCAP FUND
AMENDED AND RESTATED AS OF MAY 1, 1999
ARTICLE I
DEFINITIONS
The terms "COMMISSION," "DECLARATION," "DISTRIBUTOR," "INVESTMENT ADVISER,"
"MAJORITY SHAREHOLDER VOTE," "1940 ACT," "SHAREHOLDER," "SHARES," "TRANSFER
AGENT," "TRUST," "TRUST PROPERTY," AND "TRUSTEES" have the respective meanings
given them in the Declaration of Trust of Morgan Stanley Dean Witter
International SmallCap Fund dated April 21, 1994, 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
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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 Chairman and shall be called by the Chairman 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.
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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.
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(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 majtrity 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
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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 Morgan Stanley Dean Witter
International SmallCap Fund, dated April 21, 1994, a copy of which, together
with all amendments thereto, is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Morgan Stanley Dean Witter
International SmallCap Fund refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
Shareholder, officer, employee or agent of Morgan Stanley Dean Witter
International SmallCap Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim or otherwise, in connection with the affairs of said Morgan Stanley
Dean Witter International SmallCap Fund, but the Trust Estate only shall be
liable.
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MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.
OMNIBUS SELECTED DEALER AGREEMENT
Dear Sir or Madam:
We, Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") have a
distribution agreement (the "Distribution Agreement") with each of the open-end
investment companies listed in Schedule A attached hereto (each, a "Fund"),
pursuant to which we act as the Distributor for the sale of each Fund's shares
of common stock or beneficial interest, as the case may be, (the "Shares").
Under the Distribution Agreement, we have the right to distribute Shares for
resale.
Each Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to the
public are registered under the Securities Act of 1933, as amended (the
"Securities Act"). You have received a copy of the Distribution Agreements
between us and each Fund and reference is made herein to certain provisions of
such Distribution Agreements. The terms used herein, including "Prospectus" and
"Registration Statement" of each Fund and "Selected Dealer" shall have the same
meaning in this Agreement as in the Distribution Agreements. As principal, we
offer to sell Shares to your customers, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act on behalf of your
customers which for purposes of this Agreement are limited to customers for
which Nations Banc Investments, Inc. is the Introducing Broker, and in no
transaction shall you have any authority to act as agent for a Fund, for us or
for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the public offering price applicable to each order, as set forth in the
applicable current Prospectus. The procedure relating to the handling of orders
shall be subject to written instructions which we or the applicable Fund shall
forward from time to time to you. All orders are subject to acceptance or
rejection by us or a Fund in the sole discretion of either. The Distributor of
the Fund will promptly notify you in writing of any such rejection.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable public offering price
and subject to the terms hereof and of the applicable Distribution Agreement and
Prospectus. In connection herewith, you agree to abide by the terms of the
applicable Distribution Agreement and Prospectus to the extent required
hereunder. Furthermore, you agree that (i) you will offer or sell any of
the Shares only under circumstances that will result in compliance with all
applicable Federal and state securities laws; (ii) you will not furnish or cause
to be furnished to any person any information relating to the Shares which is
inconsistent in any respect with the information contained in the applicable
Prospectus (as then amended or supplemented) or cause any advertisements to be
published by radio or television or in any newspaper or posted in any public
place or use any sales promotional material without our consent and the consent
of the applicable Fund; and (iii) you will endeavor to obtain proxies from
purchasers of Shares. You also agree that you will be liable to Distributor for
payment of the purchase price for Shares purchased by customers and that you
shall make payment for such shares when due.
4. We will compensate you for sales of shares of the Funds and personal
services to Fund shareholders by paying you a sales charge and/or other
commission (which may be in the form of a gross sales credit and/or an annual
residual commission) and/or a service fee, each as separately agreed by you and
us with respect to each Fund.
5. If any Shares sold to your customers under the terms of this Agreement
are repurchased by us for the account of a Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and refund
to us, any commission received by you with respect to such Shares.
6. No person is authorized to make any representations concerning the
Shares or the Funds except those contained in the current applicable Prospectus
and in such printed information subsequently issued by us or a Fund as
information supplemental to such Prospectus. In selling Shares, you shall rely
solely on the representations contained in the applicable Prospectus and
supplemental information mentioned above. Any printed information which we
furnish you other than the Prospectus and the Funds' periodic reports and
<PAGE>
proxy solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall have no
liability or responsibility to you in these respects unless expressly assumed
in connection therewith.
7. You are hereby authorized (i) to place orders directly with a Fund or its
agent for shares of the Fund to be sold by us subject to the applicable terms
and conditions governing the placement of orders for the purchase of Fund
Shares, as set forth in the Distribution Agreement, and (ii) to tender Shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in the Distribution Agreement. We will provide you with
copies of any updates to the Distribution Agreement.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Shares entirely. Each party hereto has the right to
cancel this agreement with respect to one or more Funds upon fifteen days prior
written notice to the other party.
9. I. You shall indemnify and hold us harmless from and against any and all
losses, costs, (including reasonable attorney's fees) claims, damages and
liabilities which arise as a result of action taken pursuant to instructions
from you, or on your behalf to: (a)(i) place orders for Shares of a Fund with
the Fund's transfer agent or direct the transfer agent to receive instructions
for the order of Shares, and (ii) accept monies or direct that the transfer
agent accept monies as payment for the order of such Shares, all as contemplated
by and in accordance with Section 3 of the applicable Distribution Agreement;
(b)(i) place orders for the redemption of Shares of a Fund with the Fund's
transfer agent or direct the transfer agent to receive instruction for the
redemption of such Shares and (ii) to pay redemption proceeds or to direct that
the transfer agent pay redemption proceeds in connection with orders for the
redemption of Shares, all as contemplated by and in accordance with Section 4 of
the applicable Distribution Agreement; Distributor agrees to indemnify and hold
harmless you and your affiliates, officers, directors, control persons and
employees from and against any and all losses, costs (including reasonable
attorney's fees), claims, damages and liabilities which arise as a result of
Distributor's failure to fulfill its obligations hereunder and from any alleged
inaccuracy, omission or misrepresentation contained in any prospectus or any
advertising, or sales literature prepared by Distributor or the Fund provided,
however, that in no case, (i) is this indemnity in favor of you or us and any of
other party's such controlling persons to be deemed to protect us or any such
controlling persons against any liability to which we or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of our duties or by reason of reckless
disregard of our obligations and duties under this Agreement or the applicable
Distribution Agreement; or (ii) are you to be liable under the indemnity
agreement contained in this paragraph with respect to any claim made against us
or any such controlling persons, unless we or any such controlling persons, as
the case may be, shall have notified you in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon us or such controlling persons (or
after we or such controlling persons shall have received notice of such service
on any designated agent), notwithstanding the failure to notify you of any such
claim shall not relieve you from any liability which you may have to the person
against whom such action is brought otherwise than on account of the indemnity
agreement contained in this paragraph.
II. You will be entitled to participate at your own expense in the defense,
or, if you so elect, to assume the defense, of any suit brought to enforce any
such liability, but if you elect to assume the defense, such defense shall be
conducted by counsel chosen by you and reasonably satisfactory to us or such
controlling person or persons, defendant or defendants in the suit. In the event
you elect to assume the defense of any such suit and retain such counsel, we or
such controlling person or persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them, but, in
case you do not elect to assume the defense of any such suit, you will reimburse
us or such controlling person or persons, defendant or defendants in the suit,
for the reasonable fees and expenses of any counsel retained by them. Each party
shall promptly notify the other party to this Agreement of the commencement of
any litigation or proceedings against it or any of its officers or directors in
connection with the issuance or sale of the Shares pursuant to this Agreement.
2
<PAGE>
III. If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless the Distributor, as provided above in respect of
any losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to herein, then you shall contribute to the amount paid or
payable by us as a result of such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by you on the one hand and us on the
other from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law, then you
shall contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative benefits but
also your relative fault on the one hand and our relative fault on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. You and we agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. The amount paid or payable by us
as a result of the losses, claims, damages, liabilities or expenses (or actions
in respect thereof) referred to above shall be deemed to include any legal or
other expenses reasonably incurred by us in connection with investigating or
defending any such claim. Notwithstanding the provisions of this subsection
(III), you shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares distributed by you to the
public were offered to the public exceeds the amount of any damages which you
have otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
IV. Notwithstanding the provisions of subsections (I), (II) and (III), we
shall indemnify, defend and hold harmless you and your officers, directors,
employees, affiliates, agents, successors and assigns from and against any and
all claims and all related losses, expenses, damages, cost and liabilities
including reasonable attorneys' fees and expenses incurred in investigation or
defense, arising out of or related to any breach of any representation, warranty
or covenant by us contained in Section 15 of this Agreement.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Shares. Neither party shall be under any liability to the other
party except for lack of good faith and for obligations expressly assumed
herein. Nothing contained in this paragraph is intended to operate as, and the
provisions of this paragraph shall not in any way whatsoever constitute, a
waiver by you of compliance with any provision of the Securities Act, or of the
rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. Each party represents that it is a member in good standing of the
National Association of Securities Dealers, Inc. and, with respect to any sales
in the United States, each party hereby agrees to abide by the Rules of Fair
Practice of such Association relating to the performance of the obligations
hereunder.
13. We will inform you in writing as to the states in which we believe the
Shares have been qualified for sale under, or are exempt from the requirements
of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. Notwithstanding any other provision of this Agreement to the contrary,
we represent and warrant that the names and addresses of your customers (or
customers of your affiliates) which have or which may come to our attention in
connection with this Agreement are confidential and are your exclusive property
and shall not be utilized by us except in connection with the functions
performed by us in connection with this Agreement. Notwithstanding the
foregoing, should a customer request, that we or an organization affiliated with
us, provide services to such customer, we or such affiliated organization shall
in no way violate this representation and warranty, nor be considered in breach
of this Agreement.
15. We represent, warrant, and covenant to you that the marketing materials,
any communications distributed to the public and training materials designed by
us or our agents relating to the product sold under this Agreement are true and
accurate and do not omit to state a fact necessary to make the
3
<PAGE>
information contained therein not misleading and comply with applicable federal
and state laws. We further represent, warrant, and covenant to you that the
performance by us of our obligations under this Agreement in no way constitutes
an infringement on or other violation of copyright, trade secret, trademark,
proprietary information or non-disclosure rights of any other party.
16. We shall maintain a contingency disaster recovery plan, and, in the
event you are so required by any regulatory or governmental agency, we shall
make such plan available to you for inspection at your office upon reasonable
advance notice by you. Each party agrees that it will at all times conduct its
activities under this Agreement in an equitable, legal and professional manner.
17. We understand that the performance of your and our obligations under
this Agreement is subject to examination during business hours by your
authorized representatives and auditors and by federal and state regulatory
agencies, and we agree that upon being given reasonable notice and proper
identification we shall submit or furnish at a reasonable time and place to any
such representative or regulatory agency reports, information, or other data
relating to this Agreement as may reasonably be required or requested by you. We
shall maintain and make available to you upon reasonable notice all material,
data, files, and records relating to this Agreement for a period of not less
than three years after the termination of this Agreement.
18. The sales, advertising and promotional materials designed by either
party or its agents relating to products sold under this Agreement shall comply
with applicable federal and state laws. Each party agrees that the sales,
advertising and promotional materials shall be made available to the other party
prior to distribution to your employees or customers.
19. Any controversy or claim between or among the parties hereto arising out
of or relating to this Agreement, including any claim based on or arising from
an alleged tort, shall be determined by binding arbitration in accordance with
the rules of the National Association of Securities Dealers, Inc. Judgment upon
any arbitration award may be entered in any court having jurisdiction. Any party
to this Agreement may bring an action, including a summary or expedited
proceeding, to compel arbitration of any controversy or claim to which this
Agreement applies in any court having jurisdiction over such action.
20. All notices or other communications under this Agreement shall be in
writing and given as follows:
If to us: Morgan Stanley Dean Witter Distributors
Inc.
Attn: Barry Fink,
Two World Trade Center
New York, NY 10048
If to you: National Financial
Services Corporation
Attn: Robert Masabug
4201 Congress Street, Suite 245
Boston, MA
or such other address as the parties may hereafter specify in writing. Each such
notice to any party shall be either hand-delivered or transmitted, postage
prepaid, by registered or certified United States mail with return receipt
requested, and shall be deemed effective only upon receipt.
4
<PAGE>
21. This Agreement shall become effective as of the date of your acceptance
hereof, provided that you return to us promptly a signed and dated copy.
MORGAN STANLEY DEAN WITTER
DISTRIBUTORS INC.
By /s/
...................................
(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: National Financial Services Corp
.................................
By: /s/
........................................
Address: 200 Liberty Street
...................................
New York, New York
...................................
Date: October 17, 1998
......................................
5
<PAGE>
SCHEDULE A
<TABLE>
<C> <S>
Dean Witter Global Asset Allocation Fund
Morgan Stanley Dean Witter American Value Fund
Morgan Stanley Dean Witter Balanced Growth Fund
Morgan Stanley Dean Witter Balanced Income Fund
Morgan Stanley Dean Witter California Tax-Free Income Fund
Morgan Stanley Dean Witter Capital Appreciation Fund
Morgan Stanley Dean Witter Capital Growth Securities
Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas" Portfolio
Morgan Stanley Dean Witter Convertible Securities Trust
Morgan Stanley Dean Witter Developing Growth Securities Trust
Morgan Stanley Dean Witter Diversified Income Trust
Morgan Stanley Dean Witter Dividend Growth Securities Inc.
Morgan Stanley Dean Witter Equity Fund
Morgan Stanley Dean Witter European Growth Fund Inc.
Morgan Stanley Dean Witter Federal Securities Trust
Morgan Stanley Dean Witter Financial Services Trust
Morgan Stanley Dean Witter Fund of Funds
Morgan Stanley Dean Witter Global Dividend Growth Securities
Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
Morgan Stanley Dean Witter Global Utilities Fund
Morgan Stanley Dean Witter Growth Fund
Morgan Stanley Dean Witter Hawaii Municipal Trust
Morgan Stanley Dean Witter Health Sciences Trust
Morgan Stanley Dean Witter High Yield Securities Inc.
Morgan Stanley Dean Witter Income Builder Fund
Morgan Stanley Dean Witter Information Fund
Morgan Stanley Dean Witter Intermediate Income Securities Inc.
Morgan Stanley Dean Witter International SmallCap Fund
Morgan Stanley Dean Witter Japan Fund
Morgan Stanley Dean Witter Limited Term Municipal Trust
Morgan Stanley Dean Witter Market Leader Trust
Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
Morgan Stanley Dean Witter Mid-Cap Growth Fund
Morgan Stanley Dean Witter Multi-State Municipal Series Trust
Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
Morgan Stanley Dean Witter New York Tax-Free Income Fund
Morgan Stanley Dean Witter Pacific Growth Fund Inc.
Morgan Stanley Dean Witter Precious Metals and Minerals Trust
Morgan Stanley Dean Witter S&P 500 Index Fund
Morgan Stanley Dean Witter S&P 500 Select Fund
Morgan Stanley Dean Witter Short-Term Bond Fund
Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
Morgan Stanley Dean Witter Special Value Fund
Morgan Stanley Dean Witter Strategist Fund
Morgan Stanley Dean Witter Tax-Exempt Securities Trust
Morgan Stanley Dean Witter U.S. Government Securities Trust
Morgan Stanley Dean Witter Utilities Fund
Morgan Stanley Dean Witter Value-Added Market Series
Morgan Stanley Dean Witter Value Fund
Morgan Stanley Dean Witter World Wide Income Trust
</TABLE>
A-1
