<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 1996
REGISTRATION NO.: 2-66269
811-2978
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. 19 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 20 [X]
DEAN WITTER AMERICAN VALUE FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES 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)
X on February 27, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule 485.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (A)(1) OF RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT FILED THE RULE 24F-2 NOTICE,
FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1995, WITH THE SECURITIES AND EXCHANGE
COMMISSION ON FEBRUARY 7, 1996.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- ------------- ------------------------------------------------------------------
<S> <C>
Part A Prospectus
1. .... Cover Page
2. .... Prospectus Summary; Summary of Fund Expenses
3. .... Financial Highlights; Performance Information
Investment Objective and Policies; The Fund and its Management;
4. .... Cover Page; Investment Restrictions; Prospectus Summary
The Fund and Its Management; Back Cover; Investment Objective and
5. .... Policies
6. .... Dividends, Distributions and Taxes; Additional Information
7. .... Purchase of Fund Shares; Shareholder Services
8. .... Redemptions and Repurchases; Shareholder Services
9. .... Not applicable
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Part B Statement of Additional Information
10. .... Cover Page
11. .... Table of Contents
12. .... The Fund and Its Management
Investment Practices and Policies; Investment Restrictions;
13. .... Portfolio Transactions and Brokerage
14. .... The Fund and Its Management; Trustees and Officers
15. .... The Fund and Its Management; Trustees and Officers
The Fund and Its Management; The Distributor; Shareholder
16. .... Services; Custodian and Transfer Agent; Independent Accountants
17. .... Portfolio Transactions and Brokerage
18. .... Shares of the Fund
The Distributor; Redemptions and Repurchases; Financial
19. .... Statements; Determination of Net Asset Value; Shareholder Services
20. .... Dividends, Distributions and Taxes
21. .... The Distributor
22. .... Performance Information
23. .... Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
FEBRUARY 27, 1996
Dean Witter American Value Fund (the "Fund") is an open-end diversified
management investment company whose investment objective is long-term capital
growth consistent with an effort to reduce volatility. The Fund invests
principally in common stock of companies in industries which, at the time of
the investment, are believed to be undervalued in the market place. (See
"Investment Objective and Policies.")
Shares of the Fund are continuously offered at net asset value without the
imposition of a sales charge. However, redemptions and/or repurchases are
subject in most cases to a contingent deferred sales charge, scaled down from
5% to 1% of the amount redeemed, if made within six years of purchase, which
charge will be paid to the Fund's Distributor, Dean Witter Distributors Inc.
(See "Redemptions and Repurchases--Contingent Deferred Sales Charge.") In
addition, the Fund pays the Distributor a distribution fee pursuant to a Plan
of Distribution at the annual rate of 1.0% of the lesser of (i) the average
daily aggregate net sales or (ii) the average daily net assets of the Fund.
(See "Purchase of Fund Shares--Plan of Distribution.")
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated February 27, 1996, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone numbers listed on this
page. The Statement of Additional Information is incorporated herein by
reference.
Dean Witter
American Value Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS
Table of Contents
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 5
Risk Considerations .................................................. 9
Investment Restrictions ............................................... 12
Purchase of Fund Shares ............................................... 12
Shareholder Services .................................................. 15
Redemptions and Repurchases ........................................... 17
Dividends, Distributions and Taxes .................................... 19
Performance Information ............................................... 20
Additional Information ................................................ 21
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURI- TIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPEC- TUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
DEAN WITTER DISTRIBUTORS INC.,
DISTRIBUTOR
<PAGE>
PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
- --------------- ---------------------------------------------------------------------------
The The Fund, a Massachusetts business trust, is an open-end diversified
Fund management investment company investing principally in industries which, at
the time of investment, are believed to be undervalued in the market place
(see page 5).
- --------------- ---------------------------------------------------------------------------
Shares Offered Shares of beneficial interest with $0.01 par value (see page 21).
- --------------- ---------------------------------------------------------------------------
Offering At net asset value (see page 12). Shares redeemed within six years of
Price purchase are subject to a contingent deferred sales charge under most
circumstances (see page 18).
- --------------- ---------------------------------------------------------------------------
Minimum Minimum initial investment, $1,000 ($100 if the account is opened through
Purchase EasyInvest (Service Mark) ); minimum subsequent investment, $100 (see page
12).
- --------------- ---------------------------------------------------------------------------
Investment The investment objective of the Fund is capital growth consistent with an
Objective effort to reduce volatility.
- --------------- ---------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its
Manager wholly-owned subsidiary, Dean Witter Services Company Inc., serve in
various investment management, advisory, management and administrative
capacities to ninety-five investment companies and other portfolios with
assets of approximately $81.7 billion at January 31, 1996 (see page 5).
- --------------- ---------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at an annual rate of 0.625 of
Fee 1% of daily net assets up to $250 million in net assets and 0.50 of 1% of
daily net assets over $250 million (see page 5).
- --------------- ---------------------------------------------------------------------------
Dividends and It is anticipated that distributions of income and net short-term capital
Capital Gains gains, if any, will be made semi-annually. Net long-term capital gains, if
Distributions any, are distributed at least annually or retained for reinvestment by the
Fund. Dividends and capital gains distributions are automatically
reinvested in additional shares at net asset value unless the shareholder
elects to receive cash (see page 19).
- --------------- ---------------------------------------------------------------------------
Distributor and Dean Witter Distributors Inc. (the "Distributor"). For its services as
Distribution Distributor, which includes payment of sales commissions to account
Fee executives and various other promotional and sales related expenses, the
Distributor receives from the Fund a distribution fee accrued daily and
payable monthly at the rate of 1.0% per annum of the lesser of (a) the
average daily aggregate net sales or (b) the average daily net assets of
the Fund. The fee compensates the Distributor for services provided in
distributing shares of the Fund and for sales related expenses. The
Distributor also receives the proceeds of any contingent deferred sales
charges (see pages 12-14).
- --------------- ---------------------------------------------------------------------------
Redemption-- At net asset value; redeemable involuntarily if total value of the account
Contingent is less than $100 or, if the account was opened through EasyInvest, if
Deferred after twelve months the shareholder has invested less than $1,000 in the
Sales account. Although no commission or sales charge is imposed upon the
Charge purchase of shares, a contingent deferred sales charge (scaled down from 5%
to 1%) is imposed on any redemption of shares which causes the aggregate
current value of an account with the Fund to fall below the aggregate
amount of the investor's purchase payments made during the preceding six
years. There is no charge imposed on redemption of shares purchased through
reinvestment of dividends or distributions (see pages 17-19).
- --------------- ---------------------------------------------------------------------------
Retirement You can take advantage of tax benefits for personal retirement accounts by
Plans investing in the Fund through an IRA (Individual Retirement Account) or
Custodial Account under Section 403(b)(7) of the Internal Revenue Code (see
page 15).
- --------------- ---------------------------------------------------------------------------
Risks The net asset value of the Fund's shares will fluctuate with changes in the
market value of its portfolio securities. Emphasis on "undervalued"
industries reflects investment views frequently contrary to general market
assessments and may involve risks associated with departure from general
investment opinions. The Fund may invest in the securities of foreign
issuers which entails additional risks.The Fund may also invest in futures
and options which may be considered speculative in nature and may involve
greater risks than those customarily assumed by other investment companies
which do not invest in such instruments (see pages 6-11).
</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in the Prospectus
and in the Statement of Additional Information.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth in the table are for
the fiscal year ended December 31, 1995.
Shareholder Transaction Expenses
- --------------------------------
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases ...........................................None
Maximum Sales Charge Imposed on Reinvested Dividends ................................ None
Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds) . 5.0%
</TABLE>
A deferred sales charge is imposed at the following declining rates:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PERCENTAGE OF
PAYMENT MADE 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>
<TABLE>
<CAPTION>
<S> <C>
Redemption Fees ... None
Exchange Fee ....... None
</TABLE>
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Management Fees .............. 0.52%
12b-1 Fees* .................. 0.92%
Other Expenses ............... 0.17%
Total Fund Operating Expenses 1.61%
</TABLE>
- ------------
* A portion of the 12b-1 fee equal to 0.25% of the Fund's average daily
net assets is characterized as a service fee within the meaning of
National Association of Securities Dealers, Inc. ("NASD") guidelines
(see "Purchase of Fund Shares").
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, .
assuming (1) 5% annual return and (2) redemption at the end
of ...........................................................
each time period: ............................................ $66 $81 $108 $191
You would pay the following expenses on the same investment, .
assuming no redemption: ...................................... $16 $51 $ 88 $191
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
3
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following per share data and ratios for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements and notes thereto and the
unqualified report of the independent accountants which are contained in the
Statement of Additional Information. Further information about the
performance of the Fund is contained in the Fund's Annual Report to
Shareholders, which may be obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1994 1993 1992 1991
-------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $21.21 $23.10 $20.93 $20.66 $14.39
-------- --------- --------- -------- --------
Net investment income(loss) .......... 0.01 -- (0.09) 0.03 0.05
Net realized andunrealized gain
(loss) ............................. 8.87 (1.57) 3.94 0.71 7.90
-------- --------- --------- -------- --------
Total from investment operations .... 8.88 (1.57) 3.85 0.74 7.95
-------- --------- --------- -------- --------
Less dividends and distributions
from:
Net investment income ............... -- -- (0.01) (0.03) (0.03)
Net realized gain ................... (2.93) (0.32) (1.67) (0.44) (1.65)
Paid-in-capital ..................... -- -- -- -- --
-------- --------- --------- -------- --------
Total dividends and distributions ... (2.93) (0.32) (1.68) (0.47) (1.68)
-------- --------- --------- -------- --------
Net asset value,end of period ....... $27.16 $21.21 $23.10 $20.93 $20.66
======== ========= ========= ======== ========
TOTAL INVESTMENT RETURN+ 42.20% (6.75)% 18.70% 3.84% 56.26%
Ratios to Average Net Assets:
Expenses ............................. 1.61% 1.71% 1.61% 1.72% 1.58%
Net investment income(loss) .......... 0.06% 0.01% (0.59)% 0.18% 0.29%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions ......................... $2,389 $1,490 $1,218 $459 $227
Portfolio turnover rate .............. 256% 295% 276% 305% 264%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1990 1989 1988 1987 1986
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $14.81 $13.19 $12.21 $12.64 $12.67
--------- -------- -------- -------- --------
Net investment income(loss) .......... 0.24 0.34 0.29 0.19 0.28
Net realized andunrealized gain
(loss) ............................. (0.38) 2.99 1.03 0.20 1.76
--------- -------- -------- -------- --------
Total from investment operations .... (0.14) 3.33 1.32 0.39 2.04
--------- -------- -------- -------- --------
Less dividends and distributions
from:
Net investment income ............... (0.28) (0.32) (0.33) (0.23) (0.32)
Net realized gain ................... -- (1.39) -- (0.59) (1.75)
Paid-in-capital ..................... -- -- (0.01) -- --
--------- -------- -------- -------- --------
Total dividends and distributions ... (0.28) (1.71) (0.34) (0.82) (2.07)
--------- -------- -------- -------- --------
Net asset value,end of period ....... $14.39 $14.81 $13.19 $12.21 $12.64
========= ======== ======== ======== ========
TOTAL INVESTMENT RETURN+ (0.90)% 25.39% 10.84% 2.84% 15.82%
Ratios to Average Net Assets:
Expenses ............................. 1.70% 1.66% 1.78% 1.62% 1.39%
Net investment income(loss) .......... 1.67% 2.23% 2.15% 1.42% 2.10%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions ......................... $ 89 $ 100 $ 90 $ 109 $ 79
Portfolio turnover rate .............. 234% 196% 133% 203% 120%
</TABLE>
- ------------
+ Does not reflect the deduction of sales charge.
4
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
Dean Witter American Value Fund (the "Fund") is an open-end diversified
management investment company incorporated in Maryland on December 13, 1979.
The Fund was reorganized as a trust of the type commonly known as a
"Massachusetts business trust" on April 30, 1987, at which time its name was
changed from Dean Witter Industry- Valued Securities Inc. to Dean Witter
American Value Fund.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC") a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services
Company, Inc. ("DWSC"), serve in various investment management, advisory,
management and administrative capacities to a total of ninety-five investment
companies, thirty of which are listed on the New York Stock Exchange, with
combined total assets of approximately $79.1 billion as of January 31, 1996.
The Investment Manager also manages portfolios of pension plans, other
institutions and individuals which aggregated approximately $2.6 billion at
such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. InterCapital has retained DWSC, to perform the
aforementioned administrative services for the Fund.
The Fund's Board of Trustees reviews the various services provided by or
under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are being properly carried out and
that administrative services are being provided in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
following annual rates to the net assets of the Fund determined as of the
close of each business day: 0.625% of the portion of the daily net assets not
exceeding $250 million and 0.50% of the portion of the daily net assets
exceeding $250 million. For the fiscal year ended December 31, 1995, the Fund
accrued total compensation to the Investment Manager amounting to 0.52% of
the Fund's average daily net assets and the Fund's total expenses amounted to
1.61% of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
The investment objective of the Fund is long- term capital growth
consistent with an effort to reduce volatility. There is no assurance that
the Fund's objective will be achieved. The Fund seeks to achieve its
investment objective by investing in a diversified portfolio of securities
consisting principally of common stocks. The Fund utilizes an investment
process that places primary emphasis on seeking to identify industries,
rather than individual companies, as prospects for capital appreciation and
whereby the Investment Manager seeks to invest assets of the Fund in
industries it considers to be undervalued at the time of purchase and to sell
those it considers overvalued.
After selection of the Fund's target industries, specific company
investments are selected. In this process, the Investment Manager seeks to
identify companies whose prospects are deemed attractive on the basis of an
evaluation of valuation screens and prospective company fundamentals.
Following selection of the Fund's specific investments, the Investment
Manager will attempt to allo-
5
<PAGE>
cate the assets of the Fund so as to reduce the volatility of its portfolio.
In doing so, the Fund may hold a portion of its portfolio in fixed-income
securities (including zero coupon securities) in an effort to moderate
extremes of price fluctuations. The Fund may invest up to 35% of its
portfolio in common stocks of non-U.S. companies, in companies in
non-classified industries, and in convertible debt securities, convertible
preferred securities, U.S. Government securities (securities issued or
guaranteed as to principal and interest by the United States or its agencies
and instrumentalities) and investment grade corporate debt securities when,
in the opinion of the Investment Manager, the projected total return on such
securities is equal to or greater than the expected total return on common
stocks, or when such holdings might be expected to reduce the volatility of
the portfolio, and in money market instruments under any one or more of the
following circumstances: (i) pending investment of proceeds of sale of Fund
shares or of portfolio securities; (ii) pending settlement of purchases of
portfolio securities; or (iii) to maintain liquidity for the purpose of
meeting anticipated redemptions. Greater than 35% of the Fund's total assets
may be invested in money market instruments to maintain, temporarily, a
"defensive" posture when, in the opinion of the Investment Manager, it is
advisable to do so because of economic or market conditions.
Because prices of stocks fluctuate from day to day, the value of an
investment in the Fund will vary based upon the Fund's investment
performance. The Fund's emphasis on "undervalued" industries reflects
investment views which are frequently contrary to general market assessments
and which may involve risks associated with departure from general investment
opinions.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for
a prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula. Convertible
securities rank senior to common stocks in a corporation's capital structure
and, therefore, entail less risk than the corporation's common stock. The
value of a convertible security is a function of its "investment value" (its
value as if it did not have a conversion privilege), and its "conversion
value" (the security's worth if it were to be exchanged for the underlying
security, at market value, pursuant to its conversion privilege). For a
discussion of the risks of investing in convertible securities, see "Risk
Considerations" below.
The Fund may purchase securities on a when- issued or delayed delivery
basis, may purchase or sell securities on a forward commitment basis and may
purchase securities on a "when, as and if issued" basis as discussed under
"Risk Considerations" below.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on debt and
equity securities which are listed on Exchanges or are written in over-the-
counter transactions ("OTC Options"). Listed options, which are currently
listed on several different Exchanges, are issued by the Options Clearing
Corporation ("OCC"). Ownership of a listed call option gives the Fund the
right to buy from the OCC the underlying security 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 the underlying security 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 to the OCC at the stated exercise price. The Fund will not write
covered options on portfolio securities exceeding in the aggregate 25% of the
value of its total assets.
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
6
<PAGE>
such as the OCC. The Fund will engage in OTC option transactions only with
primary U.S. Government securities dealers recognized by the Federal Reserve
Bank of New York.
Covered Call Writing. The Fund is permitted to write covered call options
on portfolio securities in order to aid it in achieving its investment
objective. As a writer of a call option, the Fund has the obligation, upon
notice of exercise of the option, to deliver the security underlying the
option (certain listed and OTC call options written by the Fund will be
exercisable by the purchaser only on a specific date).
Covered Put Writing. As a writer of covered put options, the 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.
The Fund will write put options for two purposes: (1) to receive the premiums
paid by purchasers; and (2) when the Investment Manager wishes to purchase
the security underlying the option at a price lower than its current market
price, in which case it will write the covered put at an exercise price
reflecting the lower purchase price sought.
Purchasing Call and Put Options. The Fund may invest up to 10% of its
total assets in the purchase of put and call options on securities and stock
indexes, with a maximum of 5% of the Fund's total assets invested in stock
index options. The Fund may purchase put options on securities which it holds
(or has the right to acquire) in its portfolio only to protect itself against
a decline in the value of the security. The Fund may also purchase put
options to close out written put positions in a manner similar to call option
closing purchase transactions. There are no other limits on the Fund's
ability to purchase call and put options.
Stock Index Options. The Fund may purchase and write options on stock
indexes for hedging purposes. 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. See "Risks of Options on Indexes" in the Statement of Additional
Information.
Futures Contracts. The Fund may purchase and sell interest rate and stock
index futures contracts ("futures contracts") that are traded on U.S.
commodity exchanges on such underlying securities as U.S. Treasury bonds,
notes, and bills and GNMA Certificates ("interest rate" futures) and such
indexes as the S&P 500 Index and the New York Stock Exchange Composite Index
("stock index" futures) and the Moody's Investment-Grade Corporate Bond Index
("bond index" futures). As a futures contract purchaser, the Fund 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. As a seller of a futures contract, the Fund incurs an obligation to
deliver the specified amount of the underlying obligation at a specified time
in return for an agreed upon price. The Fund will purchase or sell interest
rate futures contracts and bond index futures contracts for the purpose of
hedging its fixed-income portfolio securities (or anticipated portfolio
securities) against changes in prevailing interest rates. The Fund will
purchase or sell stock index futures contracts for the purpose of hedging its
equity portfolio securities (or anticipated portfolio securities) against
changes in their prices.
The Fund also 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.
Risks of Options and Futures Transactions. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures
contract only if a liquid secondary market exists for options or futures
contracts of that series. There is no assurance that such a market will
exist. Also, exchanges may limit the amount by which the price of many
7
<PAGE>
futures contracts 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.
The extent to which the Fund may enter into transactions involving options
and futures contracts may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the
Fund's intention to qualify as such. See "Dividends, Distributions and
Taxes."
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk is that the Investment Manager could be incorrect
in its expectations as to the direction or extent of various interest rate or
price movements or the time span within which the movements take place. For
example, if the Fund sold futures contracts for the sale of securities in
anticipation of an increase in interest rates, and then interest rates went
down, causing bond prices to rise, the Fund would incur a loss on the sale.
Another risk which may arise in employing futures contracts to protect
against the price volatility of portfolio securities is that 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. See the Statement of Additional
Information for a further discussion of risks.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any
such futures, options or products as may be developed, to the extent
consistent with its investment objective and applicable regulatory
requirements.
Repurchase Agreements. The Fund may enter into repurchase agreements,
which may be viewed as a type of secured lending by the Fund, and which
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
at a specified price and at a fixed time in the future, usually not more than
seven days from the date of purchase. While repurchase agreements involve
certain risks not associated with direct investments in debt securities, the
Fund follows procedures designed to minimize those risks. These procedures
include effecting repurchase transactions only with large, well-capitalized
and well-established financial institutions whose financial condition will be
continually monitored by the Investment Manager subject to procedures
established by the Board of Trustees of the Fund.
Private Placements. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (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 such 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 such
securities for resale and the risk of substantial delays in effecting such
registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, 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," such
security will not be included within the category "illiquid securities,"
which under current policy may not exceed 15% of the Fund's net assets.
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Foreign Securities. The Fund may invest up to 35% of the value of its
total assets, at the time of purchase, in securities issued by foreign
issuers. Foreign securities investments may be affected by changes in
currency rates or exchange control regulations, changes in governmental
administration or economic or monetary policy (in the United States and
abroad) or changed circumstances in dealings between nations. Costs may be
incurred in connection with conversions between various currencies held by
the Fund. For a discussion of the risks of investing in foreign securities,
see "Risk Considerations" below.
SPECIFIC INVESTMENT POLICIES
The Fund has adopted the following specific policies which are not
fundamental investment policies and may be changed by the Board of Trustees.
1. At least 65% of the Fund's total assets will be invested in common
stocks of U.S. companies which, at the time of purchase, were in undervalued
or moderately valued industries as determined by the Investment Manager,
except as stated in Paragraph (3) below.
2. Up to 35% of the value of the Fund's total assets may be invested in:
(a) common stocks of non-U.S. companies, or companies in non-classified
industries, including American Depository Receipts (which are custody
receipts with respect to foreign securities) (the Fund's investments in
unlisted foreign securities are deemed to be illiquid securities, which under
the Fund's current investment policies may not in the aggregate amount to
more than 15% of the Fund's net assets); (b) convertible debt securities
(bonds, debentures, corporate notes, preferred stock and other securities)
which are convertible into common stock; (c) U.S. Government securities and
investment grade corporate debt securities when, in the opinion of the
Investment Manager, the projected total return on such securities is equal to
or greater than the expected total return on equity securities, or when such
holdings might be expected to reduce the volatility of the portfolio; and (d)
money market instruments under any one or more of the following
circumstances: (i) pending investment of proceeds of sale of shares of the
Fund or of portfolio securities; (ii) pending settlement of purchases of
portfolio securities; or (iii) to maintain liquidity for the purpose of
meeting anticipated redemptions.
3. Notwithstanding any of the foregoing limitations, the Fund may invest
more than 35% of the Fund's total assets in money market instruments to
maintain, temporarily, a "defensive" posture when, in the opinion of the
Investment Manager, it is advisable to do so because of economic or market
conditions, including, for example, times during which the Investment Manager
believes the risk, or volatility, relative to expected returns of the
securities it monitors, is excessive.
The foregoing limitations apply at the time of acquisition based on the
last determined market value of the Fund's assets, and any subsequent change
in any applicable percentage resulting from market fluctuations or other
changes in total assets will not require elimination of any security from the
portfolio.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in
the market value of its portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. The Fund is intended
for long-term investors who can accept the risks involved in seeking
long-term growth of capital through investment primarily in the securities of
small and medium-sized growth companies. It should be recognized that
investing in such companies involves greater risk than is customarily
associated with investing in more established companies.
Foreign Securities. Foreign securities investments may be affected by
changes in currency rates or exchange control regulations, changes in
governmental administration or economic or monetary policy (in the United
States and abroad) or changed circumstances in dealings between nations.
Fluctuations in the relative rates of exchange between the
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<PAGE>
currencies of different nations will affect the value of the Fund's
investments denominated in foreign currency. Changes in foreign currency
exchange rates relative to the U.S. dollar will affect the U.S. dollar value
of the Fund's assets denominated in that currency and thereby impact upon the
Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade. The Fund will incur costs in
connection with conversions between various currencies.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available
information about such companies. Moreover, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards and
requirements comparable to 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
such 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
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign
markets may occasion delays in settlements of the Fund's trades effected in
such markets. As such, the inability to dispose of portfolio securities due
to settlement delays could result in losses to the Fund due to subsequent
declines in value of such securities and the inability of the Fund to make
intended security purchases due to settlement problems could result in a
failure of the Fund to make potentially advantageous investments. Investments
in certain issuers may be speculative due to certain political risks and may
be subject to substantial price fluctuations.
Convertible Securities. To the extent that a convertible security's
investment value is greater than its conversion value, its price will be
primarily a reflection of such investment value and its price will be likely
to increase when interest rates fall and decrease when interest rates rise,
as with a fixed- income security (the credit standing of the issuer and other
factors may also have an effect on the convertible security's value). If the
conversion value exceeds the investment value, the price of the convertible
security will rise above its investment value and, in addition, the
convertible security will sell at some premium over its conversion value.
(This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege.) At such times the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security.
Zero Coupon Securities. A portion of the fixed- income securities
purchased by the Fund may be zero coupon securities. Such securities are
purchased at a discount from their face amount, giving the purchaser the
right to receive their full value at maturity. The interest earned on such
securities is, implicitly, automatically compounded and paid out at maturity.
While such compounding at a constant rate eliminates the risk of receiving
lower yields upon reinvestment of interest if prevailing interest rates
decline, the owner of a zero coupon security will be
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<PAGE>
unable to participate in higher yields upon reinvestment of interest received
on interest-paying securities if prevailing interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the Fund receives no interest payments in cash
on the security during the year.
When-Issued and Delayed Delivery Securities and Forward Commitments. From
time to time, in the ordinary course of business, 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 such 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 the commitment.
There is no overall limit on the percentage of the Fund's assets which may be
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis. 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 the Fund's net asset
value.
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, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. There is no overall limit on
the percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. 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 the Fund's net asset
value.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, including Dean
Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital, the
views of Trustees of the Fund and others regarding economic developments and
interest rate trends, and the Investment Manager's own analysis of factors it
deems relevant. No particular emphasis is given to investments in securities
for the purpose of earning current income. The Fund's portfolio is managed
within InterCapital's Growth Group, which manages 26 equity funds and fund
portfolios with approximately $9.3 billion in assets as of January 31, 1996.
Anita H. Kolleeny, Senior Vice President of InterCapital and a member of
InterCapital's Growth Group, has been the primary portfolio manager of the
Fund and a portfolio manager at InterCapital for over five years.
Although the Fund does not engage in substantial short-term trading as a
means of achieving its investment objective, it may sell portfolio securities
without regard to the length of time they have been held, in accordance with
the investment policies described earlier. It is anticipated that, under
normal circumstances, the Fund's portfolio turnover rate will not exceed 400%
in any one year. The Fund will incur brokerage costs commensurate with its
portfolio turnover rate. Short term gains and losses may result from such
portfolio transactions. See "Dividends, Distributions and Taxes" for a
discussion of the tax implications of the Fund's trading policy. A more
extensive discussion of the Fund's portfolio brokerage policies is set forth
in the Statement of Additional Information.
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Pursuant to an order of the Securities and Exchange Commission the Fund
may effect principal transactions in certain money market instruments with
DWR. In addition, the Fund may incur brokerage commissions on transactions
conducted through DWR.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities
of the Fund, as defined in the Act. For purposes of the following
limitations: (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 may not:
1. Invest more than 5% of the value of its total assets in the securities
of any one issuer (other than obligations issued, or guaranteed by, the
United States Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.
3. Invest more than 25% of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities or to cash equivalents.
4. 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.
PURCHASE OF FUND SHARES
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The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other brokers and dealers which have entered into agreements with the
Distributor ("Selected Broker- Dealers"). The principal executive office of
the Distributor is located at Two World Trade Center, New York, New York
10048.
The minimum initial purchase is $1,000. Subsequent purchases of $100 or
more may be made by sending a check, payable to Dean Witter American Value
Fund, directly to Dean Witter Trust Company (the "Transfer Agent") at P.O.
Box 1040, Jersey City, NJ 07303 or by contacting a DWR or other Selected
Broker-Dealer account executive. The minimum initial purchase in the case of
investments through EasyInvest, an automatic purchase plan (see "Shareholder
Services"), is $100, provided that the schedule of automatic investments will
result in investments totalling at least $1,000 within the first twelve
months. In the case of investments pursuant to Systematic Payroll Deduction
Plans (including Individual Retirement Plans), the Fund, in its discretion,
may accept investments without regard to any minimum amounts which would
otherwise be required, if the Fund has reason to believe that additional
investments will increase the investment in each account under such Plans to
at least $1,000. Certificates for shares purchased
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<PAGE>
will not be issued unless requested by the shareholder in writing to the
Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Shares
of the Fund purchased through the Distributor are entitled to dividends
beginning on the next business day following settlement date. Since DWR and
other Selected Broker- Dealers forward investors' funds on settlement date,
they will benefit from the temporary use of the funds if payment is made
prior thereto. As noted above, orders placed directly with the Transfer Agent
must be accompanied by payment. Shares of the Fund purchased through the
Distributor are entitled to any dividend declared beginning on the next
business day following settlement date. Shares purchased through the Transfer
Agent will be entitled to receive income dividends and capital gains
distributions if their order is received by the close of business on the day
prior to the record date for such distributions. The offering price will be
the net asset value per share next determined following receipt of an order
(see "Determination of Net Asset Value" below).
While no sales charge is imposed at the time shares are purchased, a
contingent deferred sales charge may be imposed at the time of redemption
(see "Redemptions and Repurchases"). Sales personnel are compensated for
selling shares of the Fund at the time of their sale by the Distributor
and/or Selected Broker-Dealer. In addition, some sales personnel of the
Selected Broker-Dealer will receive various types of non-cash compensation as
special sales incentives, including trips, educational and/or business
seminars and merchandise. The Fund and the Distributor reserve the right to
reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution, pursuant to Rule 12b-1 under
the Act (the "Plan"), under which the Fund will pay the Distributor a fee,
which is accrued daily and payable monthly, at an annual rate of 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's shares
since the inception of the Fund's original plan of distribution on April 30,
1984 (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the
Fund's shares redeemed since that plan's inception upon which a contingent
deferred sales charge has been imposed or waived, or (b) the average daily
net assets of the Fund attributable to shares issued, net of related shares
redeemed, since inception of the Fund's original plan of distribution. This
fee is treated by the Fund as an expense in the year it is accrued. Of the
amount accrued under the Plan, 0.25% of the Fund's average daily net assets
is characterized as a service fee within the meaning of the NASD guidelines.
The service fee is a payment made for personal service and/or the maintenance
of Shareholder accounts.
Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided and the expenses borne by the Distributor and
others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of DWR's account executives and others who engage in or support
distribution of shares or who service shareholder accounts, including
overhead and telephone expenses; printing and distribution of prospectuses
and reports used in connection with the offering of the Fund's shares to
other than current shareholders; and preparation, printing and distribution
of sales literature and advertising materials. In addition, the Distributor
may utilize fees paid pursuant to the Plan to compensate DWR and other
Selected Broker-Dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed distribution expenses incurred.
For the fiscal year ended December 31, 1995, the Fund accrued payments
under the Plan amounting to $17,315,269, which amount is equal to 0.92% of
the Fund's average daily net assets for the fiscal
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year. The payments accrued under the Plan were calculated pursuant to clause
(a) of the compensation formula under the Plan.
At any given time, the Distributor may incur expenses in distributing
shares of the Fund which may be in excess of the total of (i) the payments
made by the Fund pursuant to the Plan and the Fund's original plan of
distribution, and (ii) the proceeds of contingent deferred sales charges paid
by investors upon the redemption of shares (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). For example, if the
Distributor incurred $1 million in expenses in distributing shares of the
Fund and $750,000 had been received by the Distributor as described in (i)
and (ii) above, the excess expense would amount to $250,000. The Distributor
has advised the Fund that such excess amounts, including the carrying charge
described above, totalled $53,020,311 at December 31, 1995, which was equal
to 2.22% of the Fund's net assets on such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all its expenses 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 by the Distributor in excess of payments made to the Distributor
under the Plan and the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares, if for any reason the Plan is terminated
the Trustees will consider at that time the manner in which to treat such
expenses. Any cumulative expenses incurred, but not yet recovered through
distribution fees or contingent deferred sales charges, may or may not be
recovered through future distribution fees or contingent deferred sales
charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), by taking the value of all assets
of the Fund, subtracting all its liabilities, dividing by the number of
shares outstanding and adjusting to the nearest cent. The net asset value per
share will not be determined on Good Friday and on such other federal and
non- federal holidays as are observed by the New York Stock Exchange.
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 or quoted by NASDAQ is valued at its latest sale price on that
exchange or quotation service, prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price
(in cases where a security is traded on more than one exchange, the security
is valued on the exchange designated as the primary market pursuant to
procedures adopted by the Trustees); and (2) all other portfolio securities
for which over-the-counter market quotations are readily available are valued
at the latest bid price. When market quotations are not readily available,
including circumstances under which it is determined by the Investment
Manager that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision
of the Fund's Trustees. For valuation purposes, quotations of foreign
portfolio securities, other assets and liabilities and forward contracts
stated in foreign currency are translated into U.S. dollar equivalents at the
prevailing market rates prior to the close of the New York Stock Exchange.
Dividends receivable are accrued as of the ex-dividend date or as of the time
that the relevant ex-dividend date and amounts become known.
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.
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Certain securities in the Fund's portfolio may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes
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.
SHAREHOLDER SERVICES
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Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the
shareholder requests that they be paid in cash. Shares so acquired are not
subject to the imposition of a contingent deferred sales charge upon their
redemption (see "Redemptions and Repurchases").
Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value
next determined after receipt by the Transfer Agent, by returning the check
or the proceeds to the Transfer Agent within thirty days after the payment
date. Shares so acquired are not subject to the imposition of a contingent
deferred sales charge upon their redemption (see "Redemptions and
Repurchases").
EasyInvest.SM Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund. (see "Purchase of Fund Shares" and
"Redemptions and Repurchases--Involuntary Redemption").
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The Withdrawal Plan provides for monthly or quarterly (March, June,
September and December) checks in any amount, not less than $25, or in any
whole percentage of the account balance, on an annualized basis. Any
applicable contingent deferred sales charge will be imposed on shares
redeemed under the Withdrawal Plan (See "Redemptions and Repurchases--
Contingent Deferred Sales Charge"). Therefore, any shareholder participating
in the Withdrawal Plan will have sufficient shares redeemed from his or her
account so that the proceeds (net of any applicable contingent deferred sales
charge) to the shareholder will be the designated monthly or quarterly
amount.
Tax-Sheltered Retirement Plans. Retirement plans are available for use by
corporations, the self- employed, Individual Retirement Accounts and
Custodial Accounts under Section 403(b)(7) of the Internal Revenue Code.
Adoption of such plans should be on advice of legal counsel or tax adviser.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of other Dean Witter
Funds sold with a contingent deferred sales charge ("CDSC funds"), and for
shares of Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited
Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter Balanced
Growth Fund, Dean Witter Balanced Income Fund, Dean Witter Intermediate Term
U.S. Treasury Trust and five Dean Witter Funds which are money market funds
15
<PAGE>
(the foregoing eleven non-CDSC funds are hereinafter collectively referred to
in this section as the "Exchange Funds.") Exchanges may be made after the
shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share
of each fund after the exchange order is received. When exchanging into a
money market fund from the Fund, shares of the Fund are redeemed out of the
Fund at their next calculated net asset value and the proceeds of the
redemption are used to purchase shares of the money market fund at their net
asset value determined the following business day. Subsequent exchanges
between any of the money market funds and any of the CDSC funds can be
effected on the same basis. No contingent deferred sales charge ("CDSC") is
imposed at the time of any exchange, although any applicable CDSC will be
imposed upon ultimate redemption. Shares of the Fund acquired in exchange for
shares of another CDSC fund having a different CDSC schedule than that of
this Fund will be subject to the CDSC schedule of this Fund, even if such
shares are subsequently re-exchanged for shares of the CDSC fund originally
purchased. During the period of time the shareholder remains invested in
shares of an Exchange Fund (calculated from the last day of the month in
which the shares were acquired) the holding period (for the purpose of
determining the rate of the contingent deferred sales charge) is frozen. If
those shares are subsequently reexchanged for shares of a CDSC fund, the
holding period previously frozen when the first exchange was made resumes on
the last day of the month in which shares of a CDSC fund are reacquired.
Thus, the CDSC is based upon the time (calculated as described above) the
shareholder was invested in shares of a CDSC fund (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). However, in the case of
shares exchanged for shares of an Exchange Fund on or after April 23, 1990,
upon a redemption of shares which results in a CDSC being imposed, a credit
(not to exceed the amount of the CDSC) will be given in an amount equal to
the Exchange Fund 12b-1 distribution fees, if any, incurred on or after that
date which are attributable to those shares. (Exchange Fund 12b-1
distribution fees are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for
shares of other Dean Witter Funds for which shares of a front-end sales
charge fund have been exchanged) are not subject to any CDSC upon their
redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the
best interests of the Fund and its other shareholders, investors should be
aware that the Fund and each of the other Dean Witter Funds may in their
discretion limit or otherwise restrict the number of times this Exchange
Privilege may be exercised by any investor. Any such restriction will be made
by the Fund on a prospective basis only, upon notice to the shareholder not
later than ten days following such shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Dean Witter Funds for which shares of the Fund
16
<PAGE>
have been exchanged, upon such notice as may be required by applicable
regulatory agencies (presently sixty days' prior written notice for
termination or material revision), provided that six months' prior written
notice of termination will be given to shareholders who hold shares of an
Exchange Fund pursuant to the Exchange Privilege, and provided further that
the Exchange Privilege may be terminated or materially revised without notice
under certain unusual circumstances. Shareholders maintaining margin accounts
with DWR or another Selected Dealer are referred to their account executive
regarding restrictions on exchange of shares of the Fund pledged in the
margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated
for federal income tax purposes the same as a repurchase or redemption of
shares, on which the shareholder may realize a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in
situations where there is an exchange of shares within ninety days after the
shares are purchased. The Exchange Privilege is only available in states
where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean
Witter Funds (for which the Exchange Privilege is available) pursuant to this
Exchange Privilege by contacting their DWR or other Selected Broker-Dealer
account executive (no Exchange Privilege Authorization Form is required).
Other shareholders (and those shareholders who are clients of DWR or another
Selected Broker- Dealer but who wish to make exchanges directly by
telephoning the Transfer Agent) must complete and forward to the Transfer
Agent an Exchange Privilege Authorization Form, copies of which may be
obtained from the Transfer Agent, to initiate an exchange. If the
Authorization Form is used, exchanges may be made in writing or by contacting
the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions may also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that 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 Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds
may be reduced by the amount of any applicable contingent deferred sales
charges (see below). If shares are held in a shareholder's
17
<PAGE>
account without a share certificate, a written request for redemption sent to
the Fund's Transfer Agent at P.O. Box 983, Jersey City, NJ 07303 is required.
If certificates are held by the shareholder, the shares may be redeemed by
surrendering the certificates with a written request for redemption, along
with any additional documentation required by the Transfer Agent.
Contingent Deferred Sales Charge. Shares of the Fund which are held for
six years or more after purchase (calculated from the last day of the month
in which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than six years after purchase may,
however, be subject to a charge upon redemption. This charge is called a
"contingent deferred sales charge" ("CDSC"), and it will be a percentage of
the dollar amount of shares redeemed and will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The size of this percentage will depend upon how long the shares
have been held, as set forth in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE 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>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption;
(ii) the current net asset value of shares purchased more than six years
prior to the redemption; and (iii) the current net asset asset value of
shares purchased through reinvestment of dividends or distributions and/or
shares acquired in exchange for shares of Dean Witter Funds sold with a
front-end sales charge or of other Dean Witter Funds acquired in exchange for
such shares. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order)
are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in
a qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination
of disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) 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 );
(B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2 ; or (C) a tax-free return of an excess contribution
to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of
the Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which Dean Witter Trust
Company, an affiliate of the Investment Manager, serves as recordkeeper or
Trustee ("Eligible 401(k) Plan"), provided that either: (A) the plan
continues to be an Eligible 401(k) Plan after the redemption; or (B) the
redemption is in connection with the complete termination of the plan
involving the distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With
18
<PAGE>
reference to (2) above, the term "distribution" does not encompass a direct
transfer of IRA, 403(b) Custodial Account or retirement plan assets to a
successor custodian or trustee. All waivers will be granted only following
receipt by the Distributor of confirmation of the shareholder's entitlement.
Repurchase. DWR and other Selected Broker- Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker- Dealers
upon the telephonic request of the shareholder. The repurchase price is the
net asset value per share next determined (see "Purchase of Fund Shares")
after such purchase order is received by DWR or other Selected Broker-Dealer,
reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed upon repurchase by the
Fund, the Distributor, DWR or other Selected Broker-Dealer. The offer by DWR
and other Selected Broker-Dealers to repurchase shares may be suspended
without notice by them at any time. In that event, shareholders may redeem
their shares through the Fund's Transfer Agent as set forth above under
"Redemption."
Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended under unusual circumstances. If the shares to be redeemed have
recently been purchased by check, payment of the redemption proceeds may be
delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of
receipt of the check by the Transfer Agent.) Shareholders maintaining margin
accounts with DWR or another Selected Dealer are referred to their account
executive regarding restrictions on redemption of shares of the Fund pledged
in the margin account.
Reinstatement Privilege. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption
or repurchase in shares of the Fund at the net asset value next determined
after a reinstatement request, together with the proceeds, is received by the
Transfer Agent and receive a pro rata credit for any CDSC paid in connection
with such redemption or repurchase.
Involuntary Redemption. The Fund reserves the right, on sixty days'
notice, to redeem, at net asset value, the shares of any shareholder (other
than shares held in an Individual Retirement Account or Custodial Account
under Section 403(b)(7) of the Internal Revenue Code) whose shares due to
redemptions by the shareholder have a value of less than $100 as a result of
redemptions or repurchases or such lesser amount as may be fixed by the
Trustees or, in the case of an account opened through EasyInvest, if after
twelve months the shareholder has invested less than $1,000 in the account.
However, before the Fund redeems such shares and sends the proceeds to the
shareholder, it will notify the shareholder that the value of the shares is
less than the applicable amount and allow him or her sixty days to make an
additional investment in an amount which will increase the value of his or
her account to at least the applicable amount before the redemption is
processed. No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund intends to pay semi-annual dividends
and to distribute substantially all of the Fund's net investment income and
net short-term capital gains, if there are any. The Fund intends to
distribute dividends from net long-term capital gains, if any, at least once
each
19
<PAGE>
year. The Fund may, however, determine either to distribute or to retain all
or part of any long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends be paid in cash. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)
Taxes. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise remain
qualified as a regulated investment company under Subchapter M of the
Internal Revenue Code, it is not expected that the Fund will be required to
pay any federal income tax. Shareholders who are required to pay taxes on
their income will normally have to pay federal income taxes, and any state
income taxes, on the dividends and 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 dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash.
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of the Fund's gross income be
derived from gains from the sale or other disposition of securities held for
less than three months. Accordingly, the Fund may be restricted in the
writing of options on securities held for less than three months, in the
writing of options which expire in less than three months, and in effecting
closing transactions with respect to call or put options which have been
written or purchased less than three months prior to such transactions. The
Fund may also be restricted in its ability to engage in transactions
involving futures contracts.
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. Capital gains distributions are not
eligible for the dividends received deduction.
At the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes, including information as to the portion taxable as ordinary income,
the portion taxable as long-term capital gains, and the amount of dividends
eligible for the Federal dividends received deduction available to
corporations. To avoid being subject to a 31% federal backup withholding tax
on taxable dividends, capital gains distributions and the proceeds of
redemptions and repurchases, shareholders' taxpayer identification numbers
must be furnished and certified as to their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average
annual total return" of the Fund refers to a figure reflecting the average
annualized percentage increase (or decrease) in the value of an initial
investment in the Fund of $1,000 over periods of one, five and ten years.
Average annual total return reflects all income earned by the Fund, any
appreciation or depreciation of the Fund's assets, all expenses incurred by
the Fund and all sales charges which would be incurred by redeeming
shareholders, for the stated periods. It also assumes reinvestment of all
dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Fund may
20
<PAGE>
also advertise the growth of hypothetical investments of $10,000, $50,000 and
$100,000 in shares of the Fund. Such calculations may or may not reflect the
deduction of the contingent deferred sales charge which, if reflected, would
reduce the performance quoted. The Fund from time to time may also advertise
its performance relative to certain performance rankings and indexes compiled
by independent organizations (such as mutual fund performance rankings of
Lipper Analytical Services, Inc., the S&P 500 Stock Index and the Dow Jones
Industrial Average).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
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 Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by
the Shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Fund, requires that notice of such Fund obligations include such disclaimer,
and provides for indemnification out of the Fund's property for any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be
unable to meet its obligations. Given the above limitations on shareholder
personal liability, and the nature of the Fund's assets and operations, in
the opinion of Massachusetts counsel to the Fund, the risk to Fund
shareholders of personal liability is remote.
Code of Ethics. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no Dean Witter Fund is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within 60 days of a sale or a sale
within 60 days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within 30 days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute
Advisory Group on Personal Investing.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.
21
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS
Dean Witter Liquid Asset Fund Inc.
Dean Witter U.S. Government Money
Market Trust
Dean Witter Tax-Free Daily Income Trust
Dean Witter California Tax-Free Daily
Income Trust
Dean Witter New York Municipal Money
Market Trust
EQUITY FUNDS
Dean Witter American Value Fund
Dean Witter Natural Resource Development
Securities Inc.
Dean Witter Dividend Growth Securities Inc.
Dean Witter Developing Growth Securities Trust
Dean Witter World Wide Investment Trust
Dean Witter Value-Added Market Series
Dean Witter Utilities Fund
Dean Witter Capital Growth Securities
Dean Witter European Growth Fund Inc.
Dean Witter Precious Metals and Minerals Trust
Dean Witter Pacific Growth Fund Inc.
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth Securities
Dean Witter Global Utilities Fund
Dean Witter International Small Cap Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter Federal Securities Trust
Dean Witter Convertible Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter New York Tax-Free Income Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
Dean Witter National Municipal Trust
Dean Witter High Income Securities
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
Dean Witter Intermediate Term U.S. Treasury Trust
DEAN WITTER RETIREMENT SERIES
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series
ASSET ALLOCATION FUNDS
Dean Witter Strategist Fund
Dean Witter Global Asset Allocation Fund
ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
<PAGE>
Dean Witter
American Value Fund
Two World Trade Center
New York, New York 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Anita H. Kolleeny
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
DEAN WITTER
AMERICAN
VALUE FUND
PROSPECTUS--FEBRUARY 27, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 27, 1996
Dean Witter
American
Value Fund
- -----------------------------------------------------------------------------
Dean Witter American Value Fund (the "Fund") is an open-end, diversified
management investment company whose investment objective is long-term capital
growth consistent with an effort to reduce volatility. The Fund invests
principally in common stock of companies in industries which, at the time of
investment, are believed to be undervalued in the marketplace. (See
"Investment Practices and Policies".)
A Prospectus for the Fund dated February 27, 1996, which provides the
basic information you should know before investing in the Fund, may be
obtained without charge from the Fund at its address or telephone numbers
listed below or from the Fund's Distributor, Dean Witter Distributors Inc.,
or from Dean Witter Reynolds, Inc., at any of its branch offices. This
Statement of Additional Information is not a Prospectus. It contains
information in addition to and more detailed than that set forth in the
Prospectus. It is intended to provide you additional information regarding
the activities and operations of the Fund, and should be read in conjunction
with the Prospectus.
Dean Witter American Value Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management .......... 3
Trustees and Officers ................ 6
Investment Practices and Policies ... 12
Investment Restrictions .............. 25
Portfolio Transactions and Brokerage 26
The Distributor ...................... 28
Shareholder Services ................. 31
Redemptions and Repurchases .......... 36
Dividends, Distributions and Taxes .. 38
Performance Information .............. 39
Shares of the Fund ................... 40
Custodian and Transfer Agent ......... 41
Independent Accountants .............. 41
Reports to Shareholders .............. 41
Legal Counsel ........................ 41
Experts .............................. 41
Registration Statement ............... 41
Financial Statements--December 31,
1995 ................................ 42
Report of Independent Accountants ... 53
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund was incorporated in the State of Maryland on December 13, 1979
under the name InterCapital Industry-Valued Securities Inc. On March 16, 1983
the Fund's shareholders approved a change in the Fund's name, effective March
21, 1983, to Dean Witter Industry-Valued Securities Inc. On April 30, 1987,
the Fund reorganized as a Massachusetts business trust with the name Dean
Witter American Value Fund.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or
"InterCapital"), a Delaware corporation, whose address is Two World Trade
Center, New York, New York 10048, is the Fund's Investment Manager.
InterCapital is a wholly-owned subsidiary of Dean Witter, Discover & Co.
("DWDC"), a Delaware corporation. In an internal reorganization which took
place in January, 1993, InterCapital assumed the investment advisory,
administrative and management activities previously performed by the
InterCapital Division of Dean Witter Reynolds Inc. ("DWR"), a broker-dealer
affiliate of InterCapital. (As hereinafter used in this Statement of
Additional Information, the terms "InterCapital" and "Investment Manager"
refer to DWR's InterCapital Division prior to the internal reorganization and
Dean Witter InterCapital Inc. thereafter.) The daily management of the Fund
and research relating to the Fund's portfolio is conducted by or under the
direction of officers of the Fund and of the Investment Manager, subject to
review of investments by the Fund's Board of Trustees. In addition, the
Trustees of the Fund provide guidance on economic factors and interest rate
trends. Information as to these Trustees and Officers is contained under the
caption "Trustees and Officers."
InterCapital is also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc.,
InterCapital Income Securities Inc., Dean Witter High Yield Securities Inc.,
Dean Witter Tax-Free Daily Income Trust, Dean Witter Developing Growth
Securities Trust, Dean Witter American Value Fund, Dean Witter Dividend
Growth Securities Inc., Dean Witter Natural Resource Development Securities
Inc., Dean Witter U.S. Government Money Market Trust, Dean Witter California
Tax-Free Income Fund, Dean Witter Variable Investment Series, Dean Witter
World Wide Investment Trust, Dean Witter Select Municipal Reinvestment Fund,
Dean Witter U.S. Government Securities Trust, Dean Witter New York Tax-Free
Income Fund, Dean Witter Convertible Securities Trust, Dean Witter Federal
Securities Trust, Dean Witter Value-Added Market Series, High Income
Advantage Trust, High Income Advantage Trust II, High Income Advantage Trust
III, Dean Witter Government Income Trust, Dean Witter California Tax-Free
Daily Income Trust, Dean Witter Utilities Fund, Dean Witter Managed Assets
Trust, Dean Witter Strategist Fund, Dean Witter World Wide Income Trust, Dean
Witter Intermediate Income Securities, Dean Witter Capital Growth Securities,
Dean Witter European Growth Fund Inc., Dean Witter Pacific Growth Fund Inc.,
Dean Witter Precious Metals and Minerals Trust, Dean Witter Global Short-Term
Income Fund Inc., Dean Witter Multi-State Municipal Series Trust, Dean Witter
New York Municipal Money Market Trust, InterCapital Quality Municipal
Investment Trust, Dean Witter Premier Income Trust, Dean Witter Short-Term
U.S. Treasury Trust, InterCapital Insured Municipal Bond Trust, InterCapital
Insured Municipal Trust, InterCapital Quality Municipal Income Trust, Dean
Witter Diversified Income Trust, Dean Witter Health Sciences Trust, Dean
Witter Retirement Series, InterCapital Quality Municipal Securities,
InterCapital California Quality Municipal Securities, InterCapital New York
Quality Municipal Securities, Dean Witter Global Dividend Growth Securities,
Dean Witter Global Utilities Fund, Dean Witter High Income Securities, Dean
Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean
Witter International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean
Witter Select Dimensions Series, Dean Witter Balanced Growth Fund, Dean
Witter Balanced Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter
Capital Appreciation Fund, Dean Witter Intermediate Term U.S. Treasury Trust,
Dean Witter Information Fund, InterCapital Insured Municipal Securities,
InterCapital Insured California Municipal Securities, InterCapital Insured
Municipal Income Trust, InterCapital California Insured Municipal Income
Trust, Active Assets Money Trust, Active Assets California Tax-Free Trust,
Active Assets Tax-Free Trust, Active Asset Government Securities Trust,
Municipal Income Trust, Municipal Income Trust II, Municipal Income
3
<PAGE>
Trust III, Municipal Income Opportunities Trust, Municipal Income
Opportunities Trust II, Municipal Income Opportunities Trust III, Municipal
Premium Income Trust and Prime Income Trust. The foregoing investment
companies, together with the Fund, are collectively referred to as the Dean
Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser:
TCW/DW Core Equity Trust, TCW/DW North American Government Income Trust,
TCW/DW Latin American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW
Small Cap Growth Fund, TCW/DW Balanced Fund, TCW/DW Total Return Trust,
TCW/DW Emerging Markets Opportunities Trust, TCW/DW Mid-Cap Equity Trust,
TCW/DW Term Trust 2000, TCW/DW Term Trust 2002 and TCW/DW Term Trust 2003
(the "TCW/DW Funds"). InterCapital also serves as: (i) sub-adviser to
Templeton Global Opportunities Trust, an open-end investment company; (ii)
administrator of The BlackRock Strategic Term Trust Inc., a closed-end
investment company; and (iii) sub-administrator of MassMutual Participation
Investors and Templeton Global Governments Income Trust, closed-end
investment companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage
the investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such 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 Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such 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.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to
the Fund which were previously performed directly by InterCapital. On April
17, 1995, DWSC was reorganized in the State of Delaware, necessitating the
entry into a new Services Agreement by InterCapital on that date. The
foregoing internal reorganizations did not result in any change in the nature
or scope of the administrative services being provided to the Fund or any of
the fees being paid by the Fund for the overall services being performed
under the terms of the existing Management Agreement.
Expenses not expressly assumed by the Investment Manager under the
Agreement or by the Distributor of the Fund's shares, Dean Witter
Distributors Inc. ("Distributors" or the "Distributor") (see "The
Distributor") will be paid by the Fund. The expenses borne by the Fund
include, but are not limited to: charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage
commissions; taxes; engraving and printing share certificates; registration
costs of the Fund and its shares under federal and state securities laws; the
cost and expense of printing, including typesetting, and distributing
prospectuses of the Fund and supplements thereto to the Fund's shareholders;
all expenses of shareholders' and Trustees' meetings and of preparing,
printing and mailing of proxy statements and reports to shareholders; fees
and travel expenses of Trustees or members of any advisory board or committee
who are not employees of the Investment Manager or any corporate affiliate of
the Investment Manager; all expenses incident to any dividend, withdrawal or
redemption options; charges and expenses of any outside service used for
pricing of the Fund's shares; fees and expenses of legal counsel, including
counsel to the Trustees who are not interested persons of the Fund or of the
Investment Manager (not including compensation or expenses of attorneys who
are
4
<PAGE>
employees of the Investment Manager); fees and expenses of the Fund's
independent accountants; membership dues of industry associations; interest
on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Trustees) of the Fund which inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification relating thereto);
and all other costs of the Fund's operation.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates to the net assets of the Fund determined as of the
close of each business day: 0.625% of the portion of the daily net assets not
exceeding $250 million and 0.50% of the portion of the daily net assets
exceeding $250 million. For the fiscal years ended December 31, 1993, 1994
and 1995, the Fund accrued to the Investment Manager total compensation under
the Agreement in the amounts of $4,299,335, $7,401,318 and $9,736,912,
respectively.
Total operating expenses of the Fund are subject to applicable limitations
under rules and regulations of states where the Fund is authorized to sell
its shares. Therefore, operating expenses are effectively subject to the most
restrictive of such limitations as the same may be amended from time to time.
Presently, the most restrictive limitation is as follows. If, in any fiscal
year, the Fund's total operating expenses, exclusive of taxes, interest,
brokerage fees, distribution fees and extraordinary expenses (to the extent
permitted by applicable state securities laws and regulations), exceed 2 1/2
% of the first $30,000,000 of average daily net assets, 2% of the next
$70,000,000 of average daily net assets and 1 1/2 % of any excess over
$100,000,000, the Investment Manager will reimburse and Fund for the amount
of such excess. Such amount, if any, will be calculated daily and credited on
a monthly basis. The Fund did not exceed such limitation or the then existing
expense limitation during the fiscal years ended December 31, 1993, 1994 and
1995.
The 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 Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
The Agreement was initially approved by the Board of Trustees on October
30, 1992 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on January 12, 1993. The Agreement is substantially
identical to a prior investment management agreement which was initially
approved by the Trustees on April 15, 1987 and by the Shareholders of the
Fund at a Meeting of Shareholders on April 21, 1987. The Agreement took
effect on June 30, 1993 upon the spin-off by Sears, Roebuck & Co. of its
remaining shares of DWDC. Under its terms, the Agreement had an initial term
ending April 30, 1994 and will remain in effect from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Act, of the outstanding
shares of the Fund, or by the Trustees of the Fund; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees of the Fund who are not parties to the Agreement or "interested
persons" (as defined in the Act) of any such party (the "Independent
Trustees"), which vote must be cast in person at a meeting called for the
purpose of voting on such approval. At their meeting held on April 20, 1995,
the Fund's Trustees, including all of the Independent Trustees, approved the
continuation of the Agreement until April 30, 1996.
The Agreement may be terminated at any time, without penalty, on thirty
days' notice by the Trustees of the Fund, by the holders of a majority, as
defined in the Investment Company Act of 1940 (the "Act"), of the outstanding
shares of the Fund, or by the Investment Manager. The Agreement will
automatically terminate in the event of its assignment (as defined in the
Act).
The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use or, at any
time, permit others to use, the name "Dean Witter". The Fund has also agreed
that, in the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent is terminated, the Fund will eliminate the name
"Dean Witter" from its name if DWR or its parent company shall so request.
5
<PAGE>
TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the 79 Dean Witter Funds and the 12 TCW/DW Funds, are
shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------- ---------------------------------------------------------
<S> <C>
Michael Bozic (55) Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief Executive
6111 Broken Sound Parkway, N.W. Officer of Hills Department Stores (May, 1991-July, 1995);
Boca Raton, Florida formerly Chairman and Chief Executive Officer (January,
1987-August, 1990) and President and Chief Operating Officer
(August, 1990-February, 1991) of the Sears Merchandise Group
of Sears, Roebuck and Co.; Director of Eaglemark Financial
Services, Inc., the United Negro College Fund, Weirton Steel
Corporation and Domain Inc. (home decor retailer).
Charles A. Fiumefreddo* (62) Chairman, Chief Executive Officer and Director of InterCapital,
Chairman, President, Chief Executive Dean Witter Distributors Inc. ("Distributors") and Dean Witter
Officer and Trustee Trust Company ("DWSC"); Director and Executive Vice President
Two World Trade Center of DWR; Chairman, Director or Trustee, President and Chief
New York, New York Executive Officer of the Dean Witter Funds; Chairman, Chief
Executive Officer and Trustee of the TCW/DW Funds; Chairman
and Director of Dean Witter Trust Company ("DWTC"); Director
and/or officer of various DWDC subsidiaries; formerly executive
Vice President and Director of DWDC (until February, 1993).
Edwin J. Garn (63) Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah) (1974-1992) and Chairman, Senate Banking
c/o Huntsman Chemical Corporation Committee (1980- 1986); formerly Mayor of Salt Lake City, Utah
500 Huntsman Way (1971-1974); formerly Astronaut, Space Shuttle Discovery (April
Salt Lake City, Utah 12-19, 1985); Vice Chairman, Huntsman Chemical Corporation
(since January, 1993); Director of Franklin Quest (time
management systems) and John Alden Financial Corp.; member
of the board of various civic and charitable organizations.
John R. Haire (71) Chairman of the Audit Committee and Chairman of the Committee
Trustee of Independent Directors or Trustees and Director or Trustee
Two World Trade Center of the Dean Witter Funds; Trustee of the TCW/DW Funds; formerly
New York, New York President, Council for Aid to Education (1978-1989) and Chairman
and Chief Executive Officer of Anchor Corporation, an Investment
Adviser (1964-1978); Director of Washington National
Corporation (insurance).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------- ---------------------------------------------------------
<S> <C>
Dr. Manuel H. Johnson (47) Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Koch Professor of International Economics and Director
c/o Johnson Smick International, Inc. of the Center for Global Market Studies at George Mason University
1133 Connecticut Avenue, N.W. (since September, 1990); Co-Chairman and a founder of the Group
Washington, D.C. of Seven Council (G7C), an international economic commission
(since September, 1990); Director or Trustee of the Dean Witter
Funds; Trustee of the TCW/DW Funds; Director of NASDAQ (since
June, 1995); Director of Greenwich Capital Markets, Inc.
(broker-dealer); formerly Vice Chairman of the Board of Governors
of the Federal Reserve System (February, 1986- August, 1990)
and Assistant Secretary of the U.S. Treasury (1982-1986).
Paul Kolton (72) Director or Trustee of the Dean Witter Funds; Chairman of the
Trustee Audit Committee and Chairman of the Committee of the Independent
c/o Gordon Altman Butowsky Weitzen Shalov Trustees and Trustee of the TCW/DW Funds; formerly Chairman
& Wein of the Financial Accounting Standards Advisory Council and
Counsel to the Independent Trustees Chairman and Chief Executive Officer of the American Stock
114 West 47th Street Exchange; Director of UCC Investors Holding Inc. (Uniroyal
New York, New York Chemical Company, Inc.); director or trustee of various not-for-
profit organizations.
Michael E. Nugent (59) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership (since April, 1988); Director or Trustee of the
c/o Triumph Capital, L.P. Dean Witter Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital Corporation
New York, New York (1984-1988); director of various business organizations.
Philip J. Purcell* (52) Chairman of the Board of Directors and Chief Executive Officer
Trustee of DWDC, DWR and Novus Credit Services Inc.; Director of
Two World Trade Center InterCapital, DWSC and Distributors; Director or Trustee of
New York, New York the Dean Witter Funds; Director and/or officer of various DWDC
subsidiaries.
John L. Schroeder (65) Retired; Director or Trustee of the Dean Witter Funds; Trustee
Trustee of the TCW/DW Funds; Director of Citizens Utilities Company;
c/o Gordon Altman Butowsky formerly Executive Vice President and Chief Investment Officer
Weitzen Shalov & Wein of the Home Insurance Company (August, 1991-September, 1995);
Counsel to the Independent Trustees formerly Chairman and Chief Investment Officer of Axe-Houghton
114 West 47th Street Management and the Axe- Houghton Funds (April, 1983-June, 1991)
New York, New York and President of USF&G Financial Services, Inc. (June, 1990-June,
1991).
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------- ---------------------------------------------------------
<S> <C>
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel of
Vice President, Secretary and General Counsel InterCapital; Senior Vice President and Secretary of DWTC;
Two World Trade Center Senior Vice President, Assistant Secretary and Assistant General
New York, New York Counsel of Distributors; Assistant Secretary of DWR and Vice
President, Secretary and General Counsel of the Dean Witter
Funds and the TCW/DW Funds.
Anita H. Kolleeny (40) Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (49) First Vice President (since May, 1991) and Assistant Treasurer
Treasurer (since January, 1993) of InterCapital; First Vice President
Two World Trade Center and Assistant Treasurer of DWSC and Treasurer of the Dean Witter
New York, New York Funds and TCW/DW Funds; previously Vice President of
InterCapital.
</TABLE>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Robert M. Scanlan, President of InterCapital and Chief
Operating Officer of InterCapital and DWSC, Executive Vice President of
Distributors and DWTC and Director of DWTC, David A. Hughey, Executive Vice
President and Chief Administrative Officer of InterCapital, DWSC,
Distributors and DWTC and Director of DWTC, Edmund C. Puckhaber, Executive
Vice President of InterCapital and Director of DWTC, Robert S. Giambrone,
Senior Vice President of InterCapital, DWSC, Distributors and DWTC, and
Joseph J. McAlinden and Kenton J. Hinchliffe and Ira N. Ross, Senior Vice
Presidents of InterCapital, are Vice Presidents of the Fund. In addition,
Barry Fink and Marilyn K. Cranney, First Vice Presidents and Assistant
General Counsels of InterCapital and DWSC and Lou Anne D. McInnis and Ruth
Rossi, Vice Presidents and Assistant General Counsels of InterCapital and
DWSC, and Carsten Otto, a Staff Attorney with InterCapital, are Assistant
Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of
this Statement of Additional Information, there are a total of 79 Dean Witter
Funds, comprised of 119 portfolios. As of January 31, 1996, the Dean Witter
Funds had total net assets of approximately $73.5 billion and more than five
million shareholders.
Seven Trustees (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, DWDC.
These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Five
of the seven independent Trustees are also Independent Trustees of the TCW/DW
Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The 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. Indeed,
by serving on the Funds' Boards, certain Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law
from doing so.
8
<PAGE>
All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1995, the three Committees held a combined total of fifteen meetings. The
Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Trustees is 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 Dean Witter Funds
have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
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.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He
screens and/or prepares written materials and identifies critical issues for
the Independent Trustees to consider, develops agendas for Committee
meetings, determines the type and amount of information that the Committees
will need to form a judgment on various issues, and arranges to have that
information furnished to Committee members. He also arranges for the services
of independent experts and consults with them in advance of meetings to help
refine reports and to focus on critical issues. Members of the Committees
believe that the person who serves as Chairman of all three Committees and
guides their efforts is pivotal to the effective functioning of the
Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination
of chief executive and support staff of the Independent Trustees.
The Chairman of the Committees is not employed by any other organization
and devotes his time primarily to the services he performs as Committee
Chairman and Independent Trustee of the Dean Witter Funds and as an
Independent Trustee of the TCW/DW Funds. The current Committee Chairman has
had more than 35 years experience as a senior executive in the investment
company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the 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
9
<PAGE>
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, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 ($1,200
prior to September 30, 1995) plus a per meeting fee of $50 for meetings of
the Board of Trustees or committees of the Board of Trustees attended by the
Trustee (the Fund pays the Chairman of the Audit Committee an annual fee of
$750 and pays the Chairman of the Committee of the Independent Trustees an
additional annual fee of $2,400, in each case inclusive of the Committee
meeting fees). 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.
The Fund has 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 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 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 25.0% of his or
her Eligible Compensation plus 0.4166666% 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 50.0% 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 Fund in the five year period prior to the
date of the Eligible Trustee's retirement. Benefits under the retirement
program are not secured or funded by the Fund. As of the date of this
Statement of Additional Information, 57 Dean Witter Funds have adopted the
retirement program.
(1) An Eligible Trustee may elect alternate payments of his or her
retirement benefits based upon the combined life expectancy of such Eligible
Trustee and his or her spouse on the date of such Eligible Trustee's
retirement. The amount estimated to be payable under this method, through the
remainder of the later of the lives of such Eligible Trustee and spouse, will
be the actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of the
Regular Benefit.
10
<PAGE>
The following table illustrates the compensation paid and the retirement
benefits accrued to the Fund's Independent Trustees by the Fund for the
fiscal year ended December 31, 1995 and the estimated retirement benefits for
the Fund's Independent Trustees as of December 31, 1995.
<TABLE>
<CAPTION>
FUND COMPENSATION ESTIMATED RETIREMENT BENEFITS
-------------------------------- ----------------------------------------------------------------
ESTIMATED
RETIREMENT CREDIT YEARS OF ESTIMATED ESTIMATED
AGGREGATE BENEFITS SERVICE AT PERCENTAGE OF ESTIMATED ANNUAL
NAME OF INDEPENDENT COMPENSATION ACCRUED AS FUND RETIREMENT ELIGIBLE ELIGIBLE BENEFITS UPON
TRUSTEE FROM THE FUND EXPENSES (MAXIMUM 10) COMPENSATION COMPENSATION(2) RETIREMENT(3)
- -------------------------- --------------- --------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic ............. $1,850 $ 454 10 57.5% $1,950 $1,121
Edwin J. Garn ............. 2,000 781 10 57.5 1,950 1,121
John R. Haire ............. 4,600(4) 7,518 10 57.5 5,162 2,968
Dr. Manuel H. Johnson .... 2,000 306 10 57.5 1,950 1,121
Paul Kolton ............... 2,000 3,096 10 57.0 2,445 1,394
Michael E. Nugent ......... 1,800 582 10 57.5 1,950 1,121
John L. Schroeder ......... 2,000 893 8 47.9 1,950 934
</TABLE>
- ---------------
(2) Based on current levels of compensation.
(3) Based on current levels of compensation. Amount of annual benefits
also varies depending on the Trustee's elections described in Footnote (1)
above.
(4) Of Mr. Haire's compensation from the Fund, $3,150 is paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($750).
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for
services to the 79 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Kolton and Nugent, the 11 TCW/DW Funds that were in operation at
December 31, 1995. With respect to Messrs. Haire, Johnson, Kolton and Nugent,
the TCW/DW Funds are included solely because of a limited exchange privilege
between those Funds and five Dean Witter Money Market Funds. Mr. Schroeder
was elected as a Trustee of the TCW/DW Funds on April 20, 1995.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
FOR SERVICE AS CHAIRMAN OF TOTAL CASH
DIRECTOR OR FOR SERVICE AS COMMITTEES OF COMPENSATION
TRUSTEE AND TRUSTEE AND INDEPENDENT FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER DIRECTORS/ 79 DEAN WITTER
NAME OF INDEPENDENT OF 79 DEAN WITTER OF 11 TCW/DW TRUSTEES AND FUNDS AND 11
TRUSTEE FUNDS FUNDS AUDIT COMMITTEES TCW/DW FUNDS
- -------------------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Michael Bozic ............. $126,050 -- -- $126,050
Edwin J. Garn ............. 136,450 -- -- 136,450
John R. Haire ............. 98,450 $82,038 $217,350(5) 397,838
Dr. Manuel H. Johnson .... 136,450 82,038 -- 218,488
Paul Kolton ............... 136,450 54,788 36,900(6) 228,138
Michael E. Nugent ......... 124,200 75,038 -- 199,238
John L. Schroeder ......... 136,450 46,964 -- 183,414
</TABLE>
- ---------------
(5) For the 79 Dean Witter Funds in operation at December 31, 1995.
(6) For the 11 TCW/DW Funds in operation at December 31, 1995.
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 percent of the Fund's shares
of beneficial interest outstanding.
11
<PAGE>
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers investors an opportunity
to participate in a diversified portfolio of securities, consisting
principally of common stocks. The portfolio reflects an investment
decision-making process developed by the Fund's Investment Manager.
INDUSTRY VALUATION APPROACH
As stated in the Prospectus, in managing the Fund's portfolio the
Investment Manager generally seeks to identify industries, rather than
individual companies, as prospects for capital appreciation. This approach is
designed to capitalize on four basic assumptions: (1) industry trends are a
primary force governing company earnings; (2) conventional forecasts by
security analysts of company earnings do not fully reflect underlying
industry conditions or changing economic cycles; (3) the market's perception
of industry trends is often transitory or exaggerated; and (4) distortions in
relative valuations beyond their normal ranges provide significant buying or
selling opportunities.
The Investment Manager generally seeks to invest assets of the Fund in
industries it considers to be "undervalued" at the time of purchase and to
sell those it considers "overvalued". In so doing, the Investment Manager
utilizes a record of historical price/earnings ratios for each of more than
60 industry groups (which may be increased or decreased, from time to time)
relative to the Standard & Poor's Index of 500 stocks ("S&P Index"). From
this record a range or band is established in which variations in an
industry's price/earnings multiple, relative to the S&P Index, are considered
normal. Based upon a forecast of industry earnings, an industry is considered
"undervalued", "moderately valued" or "overvalued" depending upon whether the
relative price/earnings multiple is below, within or above the normalized
channel.
The Investment Manager also uses models which utilize economic indicators
or other financial variables to evaluate the relative attractiveness of
industries. Economic indicators considered would be specific to particular
industries. Financial variables may include cash flow, asset value,
historical and projected earnings, absolute and relative price/earnings
ratios, dividend discount values, as well as other factors.
A basic tenet of the industry valuation approach is that there is no
certainty of superior performance in any specific industry selection, but
rather that approximately equal weighting of investments in a group of
industries, each of which has been identified as undervalued, can benefit
from the performance probabilities of the total group. The Investment Manager
believes that subjective judgment enters into every investment process no
matter how sophisticated or systematized, but that any adverse impact on
investment performance resulting from errors of judgment may be mitigated by
approximately equal weighting of both the industries and companies within
those industries acquired for the portfolio.
The foregoing represents the main outlines of the industry valuation
approach. The following describes its key features, all of which are subject
to modification as described below or as result of applying the asset
allocation disciplines described later.
1. Equal Industry Weightings.
After determining the industries that it considers to be undervalued, the
Investment Manager generally attempts to invest approximately equal amounts
of the equity portion of the portfolio in securities of companies in each of
such industries, subject to adjustment for company weightings as set forth in
the next paragraph.
2. Equal Company Weightings.
From the total of all companies included in the industry valuation
process, the Investment Manager selects a limited number from each industry
as representative of that industry. Such selections are made on the basis of
various criteria, including size and quality of a company, the visibility of
its earnings and various valuation parameters. Valuation screens may include
dividend discount model values, price-to- book ratios, price-to-cashflow
values, relative and absolute price-to-earnings ratios and ratios of price-
earnings multiples to earnings growth. Price and earnings momentum ratings
derived from external
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sources are also factored into the stock selection decision. Those companies
which are in undervalued industries and which the Investment Manager believes
to be attractive investments are finally selected for inclusion in the
portfolio. When final selections are made, approximately equal amounts of the
equity portion of the portfolio are invested in each of such companies. This
may vary depending on whether the Investment Manager is in the process of
building or reducing a stock position. Consideration will also be given to
earnings visibility and valuation. Stocks in industries not identified as
undervalued may not be equally weighted. Also, smaller capitalization issues
may not be equally weighted due to liquidity considerations.
3. Relative Industry Values.
Industry valuation only attempts to identify industries whose securities
might be expected to perform relatively better than the market as represented
by the S&P Index. It does not seek to identify securities which will
experience an absolute increase in value notwithstanding market conditions.
However, the process assumes that, despite interim fluctuations in stock
market prices, the long-term trend in equity security values will be up.
4. Industry Coverage.
Industry valuation presently covers securities classified by the
Investment Manager in approximately 60 industries. The classification of
industries in the S&P Index and in the industry valuation group are not
identical and the universe of industry-valued securities includes some which
are not contained in the S&P Index. To provide flexibility for taking
advantage of investment opportunities in "non-classified" industries, that
is, the industries not included in the Investment Manager's industry
valuation, the Investment Manager may invest a portion of the Fund's assets
in a limited number of securities in such non-classified industries which the
Investment Manager identifies as attractive investments. Also, the Investment
Manager may invest, on a selective basis, in stocks of moderately valued
industries.
5. Continuity of Industry Trends.
Industry valuation assumes that the trend of industry price/earnings
ratios relative to the price/ earnings ratios of all the companies in the S&P
Index will be substantially continuous. It is possible, however, that certain
changes in industry trends may result in a discontinuity that will not be
signaled in advance by the industry valuation process. The Investment Manager
believes that such changes are difficult to predict by any investment
decision-making process and that, at times, the company analysis may provide
a useful corrective mechanism.
6. Practical Applications.
In applying the industry valuation approach to management of the portfolio
of the Fund, the Investment Manager will make adjustments in the portfolio
which reflect modifications of the underlying concepts whenever, in its
opinion, such adjustments are necessary or desirable to achieve the Fund's
objectives. Such adjustments may include, for example, weighting some
industries or companies more or less than others, based upon the Investment
Manager's judgment as to the investment merits of specific companies. In
addition, without specific action by the Investment Manager, adjustments may
result from fluctuations in market prices which distort previously
established industry and company weightings. The portfolio may, at times,
include securities of industries which are considered overvalued due to
consideration of stage-of-cycle analysis or may not include representation in
industries considered undervalued due to considerations such as valuation
criteria, stage-of-cycle analysis or lack of earnings visibility, balance
sheet viability or management quality. Also, independent of the application
of the industry valuation process, the Fund continuously sells and redeems
its own shares, and, as a result, securities may have to be sold at times
from the Fund's portfolio to meet redemptions and monies received upon sale
of the Fund's shares must be used to purchase portfolio securities. Such
sales and purchases of portfolio securities will result in a portfolio that
does not completely reflect equal weighting of investment in industries or
companies.
Asset Allocation. Common stocks, particularly those sought for possible
capital appreciation, have historically experienced a great amount of price
fluctuation. The Investment Manager believes it is
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desirable to attempt to reduce the risks of extreme price fluctuations even
if such an attempt results, as it likely will at times, in reducing the
probabilities of obtaining greater capital appreciation. Accordingly, the
Investment Manager's investment process incorporates elements which may
reduce, although certainly not eliminate, the volatility of a portfolio. The
Fund may hold a portion of its portfolio in fixed-income securities in an
effort to moderate extremes of price fluctuation. The determination of the
appropriate asset allocation as between equity and fixed-income investments
will be made by the Investment Manager in its discretion, based upon its
evaluation of economic and market conditions.
SECURITY LOANS
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such 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 such loans is that the Fund continues to receive
the income on the loaned securities while at the same time earning interest
on the cash amounts deposited as collateral, which will be invested in
short-term obligations.
A loan may be terminated by the borrower on one business day's notice, or
by the Fund on four business days' notice. If the borrower fails to deliver
the loaned securities within four days after receipt of notice, the Fund
could use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and, in some
cases, even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities
will only be made to firms deemed by the Fund's management to be creditworthy
and when the income which can be earned from such loans justifies the
attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price
during the loan period would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned
securities, to be delivered within one day after notice, to permit the
exercise of such rights if the matters involved would have a material effect
on the Fund's investment in such loaned securities. The Fund will pay
reasonable finder's, administrative and custodial fees in connection with a
loan of its securities. During the year ended December 31, 1995, the Fund did
not loan any of its portfolio securities.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may write covered call options against securities held in its
portfolio and covered put options on eligible portfolio securities and stock
indexes and purchase options of the same series to effect closing
transactions, and may hedge against potential changes in the market value of
investments (or anticipated investments) by purchasing put and call options
on portfolio (or eligible portfolio) securities and engaging in transactions
involving futures contracts and options on such contracts. Call and put
options on U.S. Treasury notes, bonds and bills and equity securities are
listed on Exchanges and are written in over-the-counter transactions ("OTC
options"). Listed options are issued by the Options Clearing Corporation
("OCC"). Ownership of a listed call option gives the Fund the right to buy
from the OCC the underlying security 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 the
underlying security 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 to the OCC 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 from the OCC at the exercise price.
Options on Treasury Bonds and Notes. Because trading in options written on
Treasury bonds and notes tends to center on the most recently auctioned
issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options
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on particular issues. Instead, the expirations introduced at the commencement
of options trading on a particular issue will be allowed to run their course,
with the possible addition of a limited number of new expirations as the
original ones expire. Options trading on each issue of bonds or notes will
thus be phased out as new options are listed on more recent issues, and
options representing a full range of expirations will not ordinarily be
available for every issue on which options are traded.
Options on Treasury Bills. Because a deliverable Treasury bill changes
from week to week, writers of Treasury bill calls cannot provide in advance
for their potential exercise settlement obligations by acquiring and holding
the underlying security. However, if the Fund holds a long position in
Treasury bills with a principal amount of the securities deliverable upon
exercise of the option, the position may be hedged from a risk standpoint by
the writing of a call option. For so long as the call option is outstanding,
the Fund will hold the Treasury bills in a segregated account with its
Custodian, so that they will be treated as being covered.
OTC Options. Exchange-listed options are issued by the OCC which assures
that all transactions in such options are properly executed. 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. 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, the Fund would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Fund will
engage in OTC option transactions only with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York.
Covered Call Writing. The Fund is permitted to write covered call options
on portfolio securities in order to aid in achieving its investment
objective. Generally, a call option is "covered" if the Fund owns, or has the
right to acquire, without additional cash consideration (or for additional
cash consideration held for the Fund by its Custodian in a segregated
account) the underlying security subject to the option except that in the
case of call options on U.S. Treasury Bills, the Fund might own U.S. Treasury
Bills of a different series from those underlying the call option, but with a
principal amount and value corresponding to the exercise price and a maturity
date not later than that of the securities deliverable under the call option.
A call option is also covered if the Fund holds a call on the same security
as the underlying security of the written option, where the exercise price of
the call used for coverage is equal to or less than the exercise price of the
call written or greater than the exercise price of the call written if the
mark to market difference is maintained by the Fund in cash, U.S. Government
securities or other high grade debt obligations which the Fund holds in a
segregated account maintained with its Custodian.
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 achieve a greater total return than
would be realized from holding the underlying securities alone. Moreover, the
premium received will offset a portion of the potential loss incurred by the
Fund if the securities underlying the option are ultimately sold by the Fund
at a loss. The premium received will fluctuate with varying economic market
conditions. If the market value of the portfolio securities upon which call
options have been written increases, the Fund may receive less total return
from the portion of its portfolio upon which calls have been written than it
would have had such call not been written.
During the option period, the Fund may be required, at any time, to
deliver the underlying security against payment of the exercise price on any
calls it has written (exercise of certain listed options may be limited to
specific expiration dates). 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.
Closing purchase transactions are ordinarily effected to realize a profit
on an outstanding call option to prevent an underlying security from being
called, to permit the sale of an underlying security or to enable the Fund to
write another call option on the underlying security with either a different
exercise
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<PAGE>
price or expiration date or both. Also, effecting a closing purchase
transaction will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other investments by the
Fund. The Fund may realize a net gain or loss from a closing purchase
transaction depending upon whether the amount of the premium received on the
call option is more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of
the underlying security. Conversely, a gain resulting from a closing purchase
transaction could be offset in whole or in part or exceeded by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Fund realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security during the option period. If a call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security equal to the
difference between the purchase price of the underlying security and the
proceeds of the sale of the security plus the premium received on the option
less the commission paid.
Options written by a Fund normally have expiration dates of from up to
nine months (equity securities) to eighteen months (fixed-income securities)
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. See "Risks of Options and Futures Transactions,"
below.
Covered Put Writing. As a writer of a covered put option, the 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 (certain listed put options written by the Fund
will be exercisable by the purchaser only on a specific date). A put is
"covered" if, at all times, the Fund maintains, in a segregated account
maintained on its behalf at the Fund's Custodian, cash, U.S. Government
securities or other high grade debt obligations in an amount equal to at
least the exercise price of the option, at all times, during the option
period. Similary, a short put position could be covered by the Fund by its
purchase of a put option on the same security as the underlying security of
the written option, where the exercise price of the purchased option is equal
to or more than the exercise price of the put written or less than the
exercise price of the put written if the mark to market difference is
maintained by the Fund in cash, U.S. Government securities or other high
grade debt obligations which the Fund holds in a segregated account
maintained at its Custodian. In writing puts, the Fund assumes the risk of
loss should the market value of the underlying security decline below the
exercise price of the option (any loss being decreased by the receipt of the
premium on the option written). 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. The operation of and limitations on covered put
options in other respects are substantially identical to those of call
options.
The Fund will write put options for two purposes: (1) to receive the
income derived from the premiums paid by purchasers; and (2) when the
Investment Manager wishes to purchase the security underlying the option at a
price lower than its current market price, in which case it will write the
covered put at an exercise price reflecting the lower purchase price sought.
The potential gain on a covered put option is limited to the premium received
on the option (less the commissions paid on the transaction) while the
potential loss equals the difference between the exercise price of the option
and the current market price of the underlying securities when the put is
exercised, offset by the premium received (less the commissions paid on the
transaction).
Purchasing Call and Put Options. As stated in the Prospectus, the Fund may
purchase listed and OTC call and put options on securities and stock indexes
in amounts equalling up to 10% of its total assets, with a maximum of 5% of
the Fund's assets invested in stock index options. The Fund may purchase call
options only in order to close out a covered call position (see "Covered Call
Writing" above). The purchase of a call option to effect a closing
transaction on a call written over-the-counter may be a listed or OTC option.
In either case, the call purchased is likely to be on the same securities and
have the same terms as the written option. If purchased over-the-counter, the
option would generally be acquired from the dealer or financial institution
which purchased the call written by the Fund.
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<PAGE>
The Fund may purchase put options on securities which it holds (or has the
right to acquire) in its portfolio only to protect itself against a decline
in the value of the security. If the value of the underlying security were to
fall below the exercise price of the put purchased in an amount greater than
the premium paid for the option, the Fund would incur no additional loss. The
Fund may also purchase put options to close out written put positions in a
manner similar to call options closing purchase transactions. In addition,
the Fund may sell a put option which it has previously purchased prior to the
sale of the securities underlying such option. Such a sale would result in a
net gain or loss depending on whether the amount received on the sale is more
or less than the premium and other transaction costs paid on the put option
which is sold. And such gain or loss could be offset in whole or in part by a
change in the market value of the underlying security. If a put option
purchased by the Fund expired without being sold or exercised, the premium
would be lost.
Risks of Options Transactions. 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 increase, but has retained the risk of loss should
the price of the underlying security decline. The secured 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. 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.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction, it cannot
sell the underlying security until the option expires or the option is
exercised. Accordingly, a covered call option writer may not be able to sell
an underlying security at a time when it might otherwise be advantageous to
do so. A secured put option writer who is unable to effect a closing purchase
transaction would continue to bear the risk of decline in the market price of
the underlying security until the option expires or is exercised. In
addition, a secured put writer would be unable to utilize the amount held in
cash or U.S. government or other high grade debt obligations as security for
the put option for other investment purposes until the exercise or expiration
of the option.
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. However, the Fund may be able to purchase an
offsetting option which does not close out its position as a writer but
constitutes an asset of equal value to the obligation under the option
written. If the Fund is not able to either enter into a closing purchase
transaction or purchase an offsetting position, it will be required to
maintain the securities subject to the call, or the collateral underlying the
put, even though it might not be advantageous to do so, until a closing
transaction can be entered into (or the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes
or series of options or underlying securities; (iv) interruption of the
normal operations on an Exchange; (v) inadequacy of the facilities of an
Exchange or the OCC to handle current trading volume; or (vi) a decision by
one or more Exchanges to discontinue the trading of options (or a particular
class or series of options), in which event the secondary market on that
Exchange (or in that class or series of options) would cease to exist,
although outstanding options on that Exchange that had been issued by the OCC
as a result of trades on that Exchange would generally continue to be
excerisable in accordance with their terms.
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. Similarly, in
the
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event of the bankruptcy of the writer of an OTC option purchased by the Fund,
the Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by the Fund only with brokers or financial
institutions deemed creditworthy by the Investment Manager.
Each of the Exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different Exchanges or are held or written
on one or more accounts or through one or more brokers). An Exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. These position limits may
restrict the number of listed options which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the option markets.
Stock Index Options. 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 "multiplier"). The multiplier for an index
option performs a function similar to the unit of trading for a stock option.
It determines the total dollar value per contract of each point in the
difference between the exercise price of an option and the current level of
the underlying index. A multiplier of 100 means that a one-point difference
will yield $100. Options on different indexes may have different multipliers.
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. Unlike stock options, all settlements are in
cash and a gain or loss depends on price movements in the stock market
generally (or in a particular segment of the market) rather than the price
movements in individual stocks. Currently, options are traded on the S&P 100
Index and the S&P 500 Index on the Chicago Board Options Exchange, the Major
Market Index and the Computer Technology Index, Oil Index and Institutional
Index on the American Stock Exchange and the NYSE Index and NYSE Beta Index
on the New York Stock Exchange, The Financial News Composite Index on the
Pacific Stock Exchange and the Value Line Index, National O-T-C Index and
Utilities Index on the Philadelphia Stock Exchange, each of which and any
similar index on which options are traded in the future which include stocks
that are not limited to any particular industry or segment of the market is
referred to as a "broadly based stock market index." The Fund will invest
only in broadly based indexes. Options on broad-based stock indexes provide
the Fund with a means of protecting the Fund against the risk of market wide
price movements. If the Investment Manager anticipates a market decline, the
Fund could purchase a stock index put option. If the expected market decline
materialized, the resulting decrease in the value of the Fund's portfolio
would be offset to the extent of the increase in the value of the put option.
If the Investment Manager anticipates a market rise, the Fund may purchase a
stock index call option to enable the Fund to participate in such rise until
completion of anticipated common stock purchases by the Fund. Purchases and
sales of stock index options also enable the Investment Manager to more
speedily achieve changes in the Fund's equity positions.
The Fund will write put options on stock indexes only if such positions
are covered by cash, U.S. government securities or other high grade debt
obligations equal to the aggregate exercise price of the puts, or by a put
option on the same stock index with a strike price no lower than the strike
price of the put option sold by the Fund, which cover is held for the Fund in
a segregated account maintained for it by the Fund's Custodian. All call
options on stock indexes written by the Fund will be covered either by a
portfolio of stocks substantially replicating the movement of the index
underlying the call option or by holding a separate call option on the same
stock index with a strike price no higher than the strike price of the call
option sold by the Fund.
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Risks of Options on Indexes. Because exercises of stock index options are
settled in cash, call writers such as the Fund cannot provide in advance for
their 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 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 such 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. As stated in the Prospectus, the Fund may purchase and
sell interest rate and stock index futures contracts ("futures contracts")
that are traded on U.S. commodity exchanges on such underlying securities as
U.S. Treasury bonds, notes, bills and GNMA Certificates ("interest rate"
futures) and such indexes as the S&P 500 Index, the Moody's Investment-Grade
Corporate Bond Index and the New York Stock Exchange Composite Index ("index"
futures).
As a futures contract purchaser, the Fund 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. As a seller of a futures
contract, the Fund incurs an obligation to deliver the specified amount of
the underlying obligation at a specified time in return for an agreed upon
price.
The Fund will purchase or sell interest rate futures contracts and bond
index futures contracts for the purpose of hedging its fixed-income portfolio
(or anticipated portfolio) securities against changes in prevailing interest
rates. If the Investment Manager anticipates that interest rates may rise
and, concomitantly, the price of fixed-income securities falls, the Fund may
sell an interest rate futures contract or a bond index futures contract. If
declining interest rates are anticipated, the Fund may purchase an interest
rate futures contract to protect against a potential increase in the price of
U.S. Government securities the Fund intends to purchase. Subsequently,
appropriate fixed-income securities may be purchased by the Fund in an
orderly fashion; as securities are purchased, corresponding futures positions
would be terminated by offsetting sales of contracts.
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The Fund will purchase or sell stock index futures contracts for the
purpose of hedging its equity portfolio (or anticipated portfolio) securities
against changes in their prices. If the Investment Manager anticipates that
the prices of stock held by the Fund may fall, the Fund may sell a stock
index futures contract. Conversely, if the Investment Manager wishes to hedge
against anticipated price rises in those stocks which the Fund intends to
purchase, the Fund may purchase stock index futures contracts. In addition,
interest rate and stock index futures contracts will be bought or sold in
order to close out a short or long position in a corresponding futures
contract.
Although most interest rate 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. Stock index futures
contracts provide for the delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the open
or close of the last trading day of the contract and the futures contract
price. A futures contract sale is closed out by effecting a futures contract
purchase for the same aggregate amount of the specific type of equity
security and the same delivery date. If the sales price exceeds the
offsetting purchase price, the seller would be paid the difference and would
realize a gain. If the offsetting purchase price exceeds the sale price, the
seller would pay the difference and would realize a loss. Similarly, a
futures contract purchase is closed out by effecting a futures contract sale
for the same aggregate amount of the specific type of security and the same
delivery date. If the offsetting sale price exceeds the purchase price, the
purchaser would realize a 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.
Interest Rate Futures Contracts. When the Fund enters into an interest
rate futures contract, it is initially required to deposit with the Fund's
Custodian, in a segregated account in the name of the broker performing the
transaction, an "initial margin" of cash or U.S. Government securities or
other high grade short-term obligations equal to approximately 2% of the
contract amount. Initial margin requirements are established by the Exchanges
on which futures contracts trade and may, from time to time, change. In
addition, brokers may establish margin deposit requirements in excess of
those required by the Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a broker's client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper
termination of the futures contract. The margin deposits made are marked to
market daily and the Fund may be required to make subsequent deposits of cash
or U.S. Government securities called "variation margin", with the Fund's
futures contract clearing broker, which are reflective of price fluctuations
in the futures contract. Currently, interest rate futures contracts can be
purchased on debt securities such as U.S. Treasury Bills and Bonds, U.S.
Treasury Notes with Maturities between 6 1/2 and 10 years, GNMA Certificates
and Bank Certificates of Deposit.
Index Futures Contracts. As discussed in the Prospectus, the Fund may
invest in index futures contracts. An index futures contract sale creates an
obligation by the Fund, as seller, to deliver cash at a specified future
time. An index futures contract purchase would create an obligation by the
Fund, as purchaser, to take delivery of cash at a specified future time.
Futures contracts on indexes do not require the physical delivery of
securities, but provide for a final cash settlement on the expiration date
which reflects accumulated profits and losses credited or debited to each
party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirements range from 3% to 10% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in
the form of variation margin payments. The Fund may be required to make
additional margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will operate
to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required
to be paid by or released to the Fund and the Fund realizes a loss or a gain.
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Currently, index futures contracts can be purchased or sold with respect
to, among others, the Standard & Poor's 500 Stock Price Index and the
Standard & Poor's 100 Stock Price Index on the Chicago Mercantile Exchange,
the New York Stock Exchange Composite Index on the New York Futures Exchange,
the Major Market Index on the American Stock Exchange, the Value Line Stock
Index on the Kansas City Board of Trade and the Moody's Investment-Grade
Corporate Bond Index on the Chicago Board of Trade.
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 Fund will purchase and write options on futures contracts for
identical purposes to those set forth above for the purchase of a futures
contract (purchase of a call option or sale of a put option) and the sale of
a futures contract (purchase of a put option or sale of a call option), or to
close out a long or short position in futures contracts. If, for example, the
Investment Manager wished to protect against an increase in interest rates
and the resulting negative impact on the value of a portion of its
fixed-income portfolio, it might write a call option on an interest rate
futures contract, the underlying security of which correlates with the
portion of the portfolio the Investment Manager seeks to hedge. Any premiums
received in the writing of options on futures contracts may, of course,
augment the total return of the Fund and thereby provide a further hedge
against losses resulting from price declines in portions of the Fund's
portfolio.
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 assets which may be subject to a hedge position.
In addition, in accordance with the regulations of the Commodity Futures
Trading Commission ("CFTC") under which the Fund is exempted from
registration as a commodity pool operator, the Fund may only enter into
futures contracts and options on futures contracts transactions for purposes
of hedging a part or all of its portfolio. If the CFTC changes its
regulations so that the Fund would be permitted to write options on futures
contracts for purposes other than hedging the Fund's investments without CFTC
registration, the Fund may engage in such transactions for those purposes.
Except as described above, there are no other limitations on the use of
futures and options thereon by the Fund.
Risks of Transactions in Futures Contracts and Related Options. The Fund
may sell a futures contract to protect against the decline in the value of
securities held by the Fund. However, it is possible that the futures market
may advance and the value of securities held in the portfolio of the Fund may
decline. If this occurred, the Fund would lose money on the futures contract
and also experience a decline in value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree,
over time the value of a diversified portfolio will tend to move in the same
direction as the futures contracts.
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If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Investment Manager may determine not to invest in the
securities as planned and will realize a loss on the futures contract that is
not offset by a reduction in the price of the securities.
If the Fund maintains a short position in a futures contract or has sold a
call option in a futures contract, it will cover this position by holding, in
a segregated account maintained at its Custodian, cash, U.S. Government
securities or other high grade debt obligations equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities underlying the futures contract or the exercise price of the
option. Such a position may also be covered by owning the securities
underlying the futures contract (in the case of a stock index futures
contract a portfolio of securities substantially replicating the relevant
index), or by holding a call option permitting the Fund to purchase the same
contract at a price no higher than the price at which the short position was
established.
In addition, if the Fund holds a long position in a futures contract or
has sold a put option on a futures contract, it will hold cash, U.S.
Government securities or other high grade debt obligations equal to the
purchase price of the contract or the exercise price of the put option (less
the amount of initial or variation margin on deposit) in a segregated account
maintained for the Fund by its Custodian. Alternatively, the Fund could cover
its long position by purchasing a put option on the same futures contract
with an exercise price as high or higher than the price of the contract held
by the Fund.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin
on open futures positions. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. 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.
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. Transactions are entered into by the Fund only with brokers or
financial institutions deemed creditworthy by the Investment Manager.
There may exist an imperfect correlation between the price movements of
futures contracts purchased by the Fund and the movements in the prices of
the securities which are the subject of the hedge. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin deposit requirements, distortions in the
normal relationship between the securities and futures markets could result.
Price distortions could also result if investors in futures contracts opt to
make or take delivery of underlying securities rather than engage in closing
transactions due to the resultant reduction in the liquidity of the futures
market. In addition, due to the fact that, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the cash market, increased participation by
speculators in the futures market could cause temporary price distortions.
Due to the possibility of price distortions in the futures market and because
of the imperfect correlation between movements in the prices of securities
and movements in the prices of futures contracts, a correct forecast of stock
price or interest rate trends by the Investment Manager may still not result
in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for
futures contracts and related options in which the Fund may invest. In the
event a liquid market does not exist, it may not be possible to close out a
futures position and, in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin. In
addition, limitations imposed by an exchange or board of trade on which
futures contracts are traded may compel or prevent the Fund from
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<PAGE>
closing out a contract which may result in reduced gain or increased loss to
the Fund. The absence of a liquid market in futures contracts might cause the
Fund to make or take delivery of the underlying securities at a time when it
may be disadvantageous to do so.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a futures contract would result in a loss
to the Fund notwithstanding that the purchase or sale of a futures contract
would not result in a loss, as in the instance where there is no movement in
the prices of the futures contract or underlying securities.
FOREIGN SECURITIES
As stated in the Prospectus, the Fund may invest in securities issued by
foreign issuers. Investors should carefully consider the risks of investing
in securities of foreign issuers and securities denominated in non-U.S.
currencies. Fluctuations in the relative rates of exchange between the
currencies of different nations will affect the value of the Fund's
investments. Changes in foreign currency exchange rates relative to the U.S.
dollar will affect the U.S. dollar value of the Fund's assets denominated in
that currency and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available
information about such companies. Moreover, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.
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
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign
markets may occasion delays in settlements of Fund trades effected in such
markets. Inability to dispose of portfolio securities due to settlement
delays could result in losses to the Fund due to subsequent declines in value
of such securities and the inability of the Fund to make intended security
purchases due to settlement problems could result in a failure of the Fund to
make potentially advantageous investments.
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 ("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 maintained in a
segregated account and 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
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<PAGE>
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 such date is deemed by the Fund to be the maturity date
of a repurchase agreement, the maturities of securities subject to repurchase
agreements are not subject to any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed
to minimize such risks. These procedures include effecting repurchase
transactions only with large, well-capitalized and well-established financial
institutions whose financial condition will be continually monitored by the
Investment Manager subject to procedures established by the Board of Trustees
of the Fund. In addition, as described above, the value of the collateral
underlying the repurchase agreement will be at least equal to the repurchase
price, including any accrued interest earned on the repurchase agreement. In
the event of a default or bankruptcy by a selling financial institution, the
Fund will seek to liquidate such collateral. However, the exercising of the
Fund's right to liquidate such collateral could involve certain costs or
delays and, to the extent that proceeds from any sale upon a default of the
obligation to repurchase were less than the repurchase price, the Fund could
suffer a loss. It is the current policy of the Fund not to invest in
repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts
to more than 15% of its total assets.
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 such 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. The Fund will also establish a
segregated account with its custodian bank in which it will continually
maintain cash or cash equivalents or other high grade debt portfolio
securities equal in value to commitments to purchase securities on a
when-issued, delayed delivery or forward commitment basis. During the fiscal
year ended December 31, 1995, the Fund did not 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 Investment Manager
determines that issuance of the security is probable. At such time, the Fund
will record the transaction and, in determining its net asset value, will
reflect the value of the security daily. At such time, the Fund will also
establish a segregated account with its custodian bank in which it will
maintain cash or cash equivalents or other high grade debt 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 (see "Investment
Restrictions"). 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 Investment Manager and
the Trustees do not believe that the net asset value of the Fund will be
adversely affected by its purchase of securities on such basis. During the
fiscal year ended December 31,
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1995, the Fund did not purchase securities on a "when, as and if issued"
basis. 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 5% of its total assets in securities which are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or which are
otherwise not readily marketable. (Securities eligible for resale pursuant to
Rule 144A of 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 such
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 such securities for resale and the
risk of substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, 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", such
security will not be included within the category "illiquid securities",
which under current policy may not exceed 15% of the Fund's net assets.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined 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 may not:
1. Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or trustee/director of the Fund or of the Investment
Manager owns more than 1/2 of 1% of the outstanding securities of such
issuer, and such officers and trustees/directors who own more than 1/2 of
1% own in the aggregate more than 5% of the outstanding securities of such
issuer.
2. Purchase or sell real estate or interests therein (including
limited partnership interests), although the Fund may purchase securities
of issuers which engage in real estate operations and securities secured
by real estate or interests therein.
3. Purchase or sell commodities except that the Fund may purchase or
sell (write) futures contracts and related options.
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. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
6. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the amount
borrowed).
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<PAGE>
7. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(6). For the purpose of this restriction, collateral arrangements with
respect to the writing of options and collateral arrangements with respect to
initial or variation margin for futures are not deemed to be pledges of
assets.
8. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of: (a)
entering into any repurchase agreement; (b) borrowing money in accordance
with restrictions described above; or (c) lending portfolio securities.
9. Make loans of money or securities, except: (a) by the purchase of
debt obligations in which the Fund may invest consistent with its investment
objective and policies; (b) by investment in repurchase agreements; or (c) by
lending its portfolio securities.
10. Make short sales of securities.
11. 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.
12. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing of
a portfolio security.
13. Invest for the purpose of exercising control or management of any
other issuer.
In addition, the Fund, as a non-fundamental policy, will not invest more
than 5% of the value of its net assets in warrants, including not more than
2% of such assets in warrants not listed on the New York or American Stock
Exchange. However, the acquisition of warrants attached to other securities
is not subject to this restriction.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------
Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities
for the Fund, the selection of brokers and dealers to effect the
transactions, and the negotiation of brokerage commissions, if any. Purchases
and sales of securities on a stock exchange are effected through brokers who
charge a commission for their services. In the over- the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. 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 December 31, 1993, 1994 and
1995 the Fund paid brokerage commissions in the amounts of $4,783,760,
$7,627,704 and $6,911,661, respectively.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act
as investment manager or adviser to others. It is the practice of the
Investment Manager to cause purchase and sale transactions to be allocated
among the Fund and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Fund and other client
accounts, the main factors considered are 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.
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
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<PAGE>
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 from obtaining a high quality of
brokerage and research services. In seeking to determine the reasonableness
of brokerage commissions paid in any transaction, the Investment Manager
relies upon its experience and knowledge regarding commissions generally
charged by various brokers and on its judgment in evaluating the brokerage
and research services received from the broker effecting the transaction.
Such determinations are necessarily subjective and imprecise, as in most
cases an exact dollar value for those services is not ascertainable.
In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment
Manager believes provide the most favorable prices and are capable of
providing efficient executions. If the Investment Manager believes such
prices and executions are obtainable from more than one broker or dealer, it
may give consideration to placing portfolio transactions with those brokers
and dealers who also furnish research and other services to the Fund or the
Investment Manager. Such 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. During the fiscal year ended December
31, 1995, the Fund directed the payment of $5,667,319 in brokerage
commissions in connection with transactions in the aggregate amount of
$4,345,861,214 to brokers because of research services provided.
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of
research or services otherwise performed by the Investment Manager and
thereby reduce its expenses, it is of indeterminable value and the management
fee paid to the Investment Manager is not reduced by any amount that may be
attributable to the value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e., Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper. Such transactions
will be effected with DWR only when the price available from DWR is better
than that available from other dealers. During the fiscal year ended December
31, 1995, the Fund purchased common stock issued by Morgan Stanley Group,
Inc. and by Merrill Lynch & Co. Inc. which issuers were among the ten brokers
or the ten dealers which executed transactions for or with the Fund in the
largest dollar amounts during the year. At December 31, 1995, the Fund held
common stock issued by Morgan Stanley & Co. Inc. and Merrill Lynch & Co. Inc.
with market values of $24,187,500 and $25,500,000, respectively.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration
received by DWR 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 DWR 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 Board of Trustees of the Fund, including a majority of the
Trustees who are not "interested" persons of the Fund, as defined in the Act,
have adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid to DWR are consistent with the
foregoing standard. During the fiscal years ended December 31, 1993, 1994 and
1995, the Fund paid a total of $864,389, $1,210,464 and $989,462,
respectively, in brokerage commissions to DWR. 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 DWR. During the year ended
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<PAGE>
December 31, 1995, the brokerage commissions paid to DWR represented
approximately 14.32% 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 15.91% of the aggregate dollar value of
all portfolio transactions of the Fund during the year for which commissions
were paid.
THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered
into a selected dealer agreement with DWR, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into selected dealer agreements with other selected broker-dealers. The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of DWDC.
The Board of Trustees of the Fund including a majority of the Trustees who
are not, and were not at the time they voted, interested persons of the Fund,
as defined in the Act ( the "Independent Trustees"), approved, at their
meeting held on October 30, 1992, a Distribution Agreement appointing the
Distributor as exclusive distributor of the Fund's shares and providing for
the Distributor to bear distribution expenses not borne by the Fund. The
Distribution Agreement took effect on June 30, 1993 upon the spin-off by
Sears, Roebuck and Co. of its remaining shares of DWDC. By its terms, the
Distribution Agreement had an initial term ending April 30, 1994, and
provides that it will remain in effect from year to year thereafter if
approved by the Board. At their meeting held on April 20, 1995, the Trustees,
including all of the Independent Trustees, approved the continuation of the
Distribution Agreement until April 30, 1996.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. Such expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
account executives. 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.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. 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.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan") pursuant to which the Fund pays the Distributor
compensation accrued daily and payable monthly at the annual rate of 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's
shares since the inception of the plan of distribution adopted by the Fund
(the "Prior Plan") on April 30, 1984 (not including reinvestments of
dividends or capital gains distributions), less the average daily aggregate
net asset value of the Fund's shares redeemed since the Prior Plan'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 the Fund attributable to shares issued, net of shares redeemed, since the
inception of the Prior Plan. The Plan is substantially identical to the Prior
Plan and was adopted by the Fund solely in connection with its reorganization
as a Massachusetts business trust in April, 1987. The Plan was adopted by a
majority vote of the Board of Trustees, including all of the Independent
Trustees, none of whom had or have any direct or indirect financial interest
in the operation of the Plan, (the "Independent 12b-1 Trustees"), cast in
person at a meeting called for the purpose of voting on the Plan, on April
15, 1987, and by the shareholders holding a majority, as defined in the Act,
of the outstanding shares of the Fund, at the Fund's Annual Meeting of
Stockholders held on April 21, 1987, as part of their approval of the
reorganization of the Fund as a Massachusetts business trust. The Distributor
also receives the proceeds of contingent deferred sales charges imposed on
certain redemptions of shares
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<PAGE>
(see "Redemptions and Repurchases--Contingent Deferred Sales Charge"). The
Distributor has informed the Fund that it and/or DWR received approximately
$886,500, $2,508,000 and $3,588,974, in contingent deferred sales charges for
the fiscal years ended December 31, 1993, 1994 and 1995.
Under its terms, the Plan remained in effect until December 31, 1987, and
will continue from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees in the manner described above.
Most recent continuance of the Plan for one year, until April 30, 1996, was
approved by the Board of Trustees of the Fund, including a majority of the
Independent 12b-1 Trustees, at a Board meeting held on April 20, 1995. At
that meeting, the Trustees, including a majority of the Independent 12b-1
Trustees, also approved certain technical amendments to the Plan in
connection with recent amendments adopted by the National Association of
Securities Dealers, Inc. to its Rules of Fair Practice. Prior to approving
the continuation of the Plan, the Board requested and received from the
Distributor and reviewed all the information which it deemed necessary to
arrive at an informed determination of whether or not the Plan should be
continued. 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; and (3) what services had been provided and were continuing
to be provided under the Plan by DWR to the Fund and its shareholders. Based
upon their review, the Trustees of the Fund, 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.
At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved certain amendments
to the Plan which took effect in January, 1993 and were designed to reflect
the fact that upon the reorganization described above the share distribution
activities theretofore performed for the Fund by DWR were assumed by the
Distributor and DWR's sales activities are now being performed pursuant to
the terms of a selected dealer agreement between the Distributor and DWR. The
amendments provide that payments under the Plan will be made to the
Distributor rather than to DWR as before the amendment, and that the
Distributor in turn is authorized to make payments to DWR, its affiliates or
other selected broker-dealers (or direct that the Fund pay such entities
directly). The Distributor is also authorized to retain part of such fee as
compensation for its own distribution- related expenses. At their meeting
held on April 28, 1993, the Trustees, including a majority of the Independent
12b-1 Trustees, approved certain technical amendments to the Plan in
connection with recent amendments adopted by the National Association of
Securities Dealers Inc. to its Rules of Fair Practice. At their meeting held
on October 26, 1995, the Trustees of the Fund, including all of the
Independent 12b-1 Trustees, approved an amendment to the Plan to permit
payments to be made under the Plan with respect to certain distribution
expenses incurred in connection with the distribution of shares, including
personal services to shareholders with respect to holdings of such shares, of
an investment company whose assets are acquired by the Fund in a tax-free
reorganization.
The Distributor has informed the Fund that a portion of the fees payable
by the Fund each year pursuant to the Plan equal to 0.25% of the Fund's
average daily net assets is characterized as a "service fee" under the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. (of
which the Distributor is a member). Such portion of the fee is a payment made
for personal service and/or the maintenance of shareholder accounts. The
remaining portion of the Plan fees payable by the Fund is characterized as an
"asset-based sales charge" as defined in the aforementioned Rules of Fair
Practice.
Pursuant to the Plan and as required by Rule 12b-1, the Distributor shall
provide the Fund, for review by the Trustees, and the Trustees shall review,
quarterly, a written report of the amounts expended under the Plan and the
purpose for which such expenditures were made.
The Fund accrued $17,315,269 to the Distributor, pursuant to the Plan, for
its fiscal year ended December 31, 1995. This is an accrual at an annual rate
of 1% of the average daily aggregate gross sales of the Fund's shares since
the inception of the Prior Plan on April 30, 1984 (not including
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<PAGE>
reinvestments of dividends or capital gains distributions), less the average
daily aggregate net asset value of the Fund's shares redeemed since the Prior
Plan's inception upon which a contingent deferred sales charge has been
imposed or upon which such charge has been waived.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method shares of the Fund are
sold without a sales load being deducted at the time of purchase, so that the
full amount of an investor's purchase payment will be invested in shares
without any deduction for sales charges. Shares of the Fund may be subject to
a contingent deferred sales charge, payable to the Distributor, if redeemed
during the six years after their purchase. DWR compensates its account
executives by paying them, from its own funds, commissions for the sale of
the Fund's shares, currently a gross sales credit of up to 5% of the amount
sold and an annual residual commission of up to 0.25 of 1% of the current
value (not including reinvested dividends or distributions) of the amount
sold. The gross sales credit is a charge which reflects commissions paid by
DWR to its account executives and DWR's Fund associated distribution-related
expenses, including sales compensation, and overhead and other branch office
distribution-related expenses including: (a) the expenses of operating DWR'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 share sales. The
distribution fee that the Distributor receives from the Fund under the Plan,
in effect, offsets distribution expenses the Distributor incurred on behalf
of the Fund and its opportunity costs, such as the gross sales credit and an
assumed interest charge thereon ("carrying charge"). In the Distributor's
reporting of its distribution expenses to the Fund, such assumed interest
(computed at the "broker's call rate") has been calculated on the gross sales
credit as it is reduced by amounts received by DWR 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 paid 100% of the $17,315,269 accrued under the Plan for the
fiscal year ended December 31, 1995 to the Distributor and DWR. The
Distributor and DWR estimate that they have spent, pursuant to the Plan,
$107,669,324 on behalf of the Fund since the inception of the Prior Plan. It
is estimated that this amount was spent in approximately the following ways:
(i) 3.40% ($3,660,147)--advertising and promotional expenses; (ii) 0.45%
($482,417)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 96.15% ($103,526,760)--other expenses, including the
gross sales credit and the carrying charge, of which 6.34% ($6,566,205)
represents carrying charges, 37.77% ($39,104,192) represents commission
credits to DWR branch offices for payments of commissions to account
executives and 55.89% ($57,856,363) represents overhead and other branch
office distribution-related expenses.
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 contingent deferred sales charges paid by
investors upon redemption of shares. DWR has advised the Fund that such
excess amount, including the carrying charge designed to approximate the
opportunity costs incurred by DWR 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 shares, totalled $53,020,311 as of December 31, 1995.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all expenses 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 distribution
expenses in excess of payments made to the Distributor under the Plan and the
proceeds of contingent deferred sales charges paid by investors upon
redemption of shares, if for any reason the Plan is terminated, the Trustees
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees
or contingent deferred sales charges, may or may not be recovered through
future distribution fees.
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<PAGE>
No interested person of the Fund, nor any Trustee of the Fund who is not
an interested person of the Fund, as defined in the Act, had any direct or
indirect financial interest in the operation of the Plan except to the extent
that the Distributor, InterCapital, DWR 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 as a result of receiving a portion of the
amounts expended thereunder by the Fund.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of
the Fund, and all material amendments of the Plan must also be approved by
the Trustees in the manner describe above. The Plan may be terminated at any
time, without payment of any penalty, by vote of a majority of the Trustees
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan, or by a vote of a majority
of the outstanding voting securities of the Fund (as defined in the 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.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m. New York time (or, on days when the New York Stock Exchange closes prior
to 4:00 p.m., at such earlier time) on each day that the New York Stock
Exchange is open by taking the value of all assets of the Fund, subtracting
its liabilities, dividing by the number of shares outstanding and adjusting
to the nearest cent. The New York Stock Exchange currently observes the
following holidays: New Year's Day; Presidents Day; Good Friday; Memorial
Day; Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.
As stated in the Prospectus, short-term 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. Other short-term debt
securities will be valued on a mark-to-market basis until such time as they
reach a remaining maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees. Listed options on debt securities are valued at the latest sale
price on the exchange on which they are listed unless no sales of such
options have taken place that day, in which case they will be valued at the
mean between their 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 by the Trustees.
All other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds,
United States 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 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 materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
SHAREHOLDER SERVICES
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Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by Dean
Witter Trust Company (the "Transfer Agent"). This is an open account in which
shares owned by the investor are credited by the Transfer Agent in lieu
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of issuance of a share certificate. If a share certificate is desired, it
must be requested in writing for each transaction. Certificates are issued
only for full shares and may be redeposited in the account at any time. There
is no charge to the investor for issuance of a certificate. Whenever a
shareholder-instituted transaction takes place in the Shareholder Investment
Account, the shareholder will be mailed a confirmation of the transaction
from the Fund or from DWR or other selected broker-dealer.
Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of
the Fund is made upon the condition that the Transfer Agent is thereby
automatically appointed as agent of the investor to receive all dividends and
capital gains distributions on shares owned by the investor. Such dividends
and distributions will be paid, at the net asset value per share, in shares
of the Fund (or in cash if the shareholder so requests) as of the close of
business on the record date. At any time an investor may request the Transfer
Agent, in writing, to have subsequent dividends and/or capital gains
distributions paid to him or her in cash rather than shares. To assure
sufficient time to process the change, such request should be received by the
Transfer Agent at least five business days prior to the record date of the
dividend or distribution. In the case of recently purchased shares for which
registration instructions have not been received on the record date, cash
payments will be made to DWR or other selected broker-dealer, and will be
forwarded to the shareholder, upon the receipt of proper instructions.
Targeted Dividends. (Service Mark) In states where it is legally
permissible, shareholders may also have all income dividends and capital
gains distributions automatically invested in shares of an open-end Dean
Witter Fund other than Dean Witter American Value Fund. Such investment will
be made as described above for automatic investment in shares of the Fund, at
the net asset value per share of the selected Dean Witter Fund as of the
close of business on the payment date of the dividend or distribution and
will begin to earn dividends, if any, in the selected Dean Witter Fund the
next business day. To participate in the Targeted Dividends program,
shareholders should contact their DWR or other selected broker- dealer
account executive or the Transfer Agent. Shareholders of the Fund must be
shareholders of the Dean Witter Fund targeted to receive investments from
dividends at the time they enter the Targeted Dividends program. Investors
should review the prospectus of the targeted Dean Witter Fund before entering
the program.
EasyInvest. (Service Mark) Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund. Shares purchased through EasyInvest will be
added to the shareholder's existing account at the net asset value calculated
the same business day the transfer of funds is effected. For further
information or to subscribe to EasyInvest, shareholders should contact their
DWR or other selected broker-dealer account executive or the Transfer Agent.
Investment of Dividends or Distributions Received in Cash. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution at net
asset value, without the imposition of a contingent deferred sales charge
upon redemption, by returning the check or the proceeds to the Transfer Agent
within 30 days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset
value per share next determined after receipt of the check or proceeds by the
Transfer Agent.
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own
or purchase shares of the Fund having a minimum value of $10,000 based upon
the then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount,
not less than $25, or in any whole percentage of the account balance, on an
annualized basis.
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<PAGE>
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment designated in the application. The
shares will be redeemed at their net asset value determined, at the
shareholder's option, on the tenth or twenty-fifth day (or next following
business day) of the relevant month or quarter and normally a check for the
proceeds will be mailed by the Transfer Agent, or amounts credited to a
shareholder's DWR brokerage account, within five business days after the date
of redemption. The Withdrawal Plan may be terminated at any time by the Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the share holder's original
investment will be correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six
years (see "Redemptions and Repurchases-- Contingent Deferred Sales Charge").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments through his or her Account Executive or by written
notification to the Transfer Agent. In addition, the party and/or the address
to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate the Withdrawal Plan at any time by
written notice to the Transfer Agent. In the event of such termination, the
account will be continued as a regular shareholder investment account. The
shareholder may also redeem all or part of the shares held in the Withdrawal
Plan account (see "Redemptions and Repurchases" in the Prospectus) at any
time.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Dean Witter
American Value Fund, directly to the Fund's Transfer Agent. Such amounts will
be applied to the purchase of Fund shares at the net asset value per share
next computed after receipt of the check or purchase payment by the Transfer
Agent. The shares so purchased will be credited to the investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of the Fund may
exchange their shares for shares of other Dean Witter Funds sold with a
contingent deferred sales charge ("CDSC funds") and for shares of Dean Witter
Short- Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund, Dean Witter Balanced Growth Fund, Dean
Witter Balanced Income Fund, Dean Witter Intermediate Term U.S. Treasury
Trust and five Dean Witter Funds which are money market funds (the foregoing
eleven non-CDSC Funds are hereinafter referred to as "Exchange Funds").
Exchanges may be made after the shares of the Fund acquired by purchase (not
by exchange or dividend reinvestment) have been held for thirty days. There
is no waiting period for exchanges of shares acquired by exchange or dividend
reinvestment. An exchange will be treated for federal income tax purposes the
same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
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<PAGE>
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)
As described below, and in the Prospectus under the captions "Exchange
Privilege" and "Contingent Deferred Sales Charge", a contingent deferred
sales charge ("CDSC") may be imposed upon a redemption, depending on a number
of factors, including the number of years from the time of purchase until the
time of redemption or exchange ("holding period"). When shares of the Fund or
any other CDSC fund are exchanged for shares of an Exchange Fund, the
Exchange Fund is executed at no charge to the shareholder, without the
imposition of the CDSC at the time of the exchange. During the period of time
the shareholder remains in the Exchange Fund (calculated from the last day of
the month in which the Exchange Fund shares were acquired), the investment
period or "year since purchase payment made" is frozen. When shares are
redeemed out of the Exchange Fund, they will be subject to a CDSC which would
be based upon the period of time the shareholder held shares in a CDSC fund.
However, in the case of shares of the Fund exchanged into the Exchange Fund,
upon a redemption of shares which results in a CDSC being imposed, a credit
(not to exceed the amount of the CDSC) will be given in an amount equal to
the Exchange Fund 12b-1 distribution fees, if any, incurred on or after that
date which are attributable to those shares. Shareholders acquiring shares of
an Exchange Fund pursuant to this exchange privilege may exchange those
shares back into a CDSC fund from the Exchange Fund, with no CDSC being
imposed on such exchange. The investment period previously frozen when shares
were first exchanged for shares of the Exchange Fund resumes on the last day
of the month in which shares of a CDSC fund are reacquired. A CDSC is imposed
only upon an ultimate redemption, based upon the time (calculated as
described above) the shareholder was invested in a CDSC fund.
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for
shares of other Dean Witter Funds for which shares of a front-end sales
charge fund have been exchanged) are not subject to any CDSC upon their
redemption.
When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund, or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments
between funds for purposes of the CSDC, the amount which represents the
current net asset value of shares at the time of the exchange which were (i)
purchased more than three or six years (depending on the CDSC schedule
applicable to the shares) prior to the exchange, (ii) originally acquired
through reinvestment of dividends or distributions and (iii) acquired in
exchange for shares of front-end sales charge funds, or for shares of other
Dean Witter Funds for which shares of front-end sales charge funds have been
exchanged (all such shares called "Free Shares"), will be exchanged first.
Shares of the Fund acquired prior to April 30, 1984, shares of Dean Witter
Dividend Growth Securities Inc. and Dean Witter Natural Resource Development
Securities Inc. acquired prior to July 2, 1984, and shares of Dean Witter
Strategist Fund acquired prior to November 8, 1989, are also considered Free
Shares and will be the first Free Shares to be exchanged. After an exchange,
all dividends earned on shares in an Exchange Fund will be considered Free
Shares. If the exchanged amount exceeds the value of such Free Shares, an
exchange is made, on a block-by-block basis, of non-Free Shares held for the
longest period of time (except that if shares held for identical periods of
time but subject to different CDSC schedules are held in the same Exchange
Privilege account, the shares of that block that are subject to a lower CDSC
rate will be exchanged prior to the shares of that block that are subject to
a higher CDSC rate). Shares equal to any appreciation in the value of
non-Free Shares exchanged will be treated as Free Shares, and the amount of
the purchase payments for the non-Free Shares of the fund exchanged into will
be equal to the lesser of (a) the purchase payments for, or (b) the current
net asset value of, the exchanged non-Free Shares. If an exchange between
funds would result in exchange of only part of a particular block of non-Free
Shares, then shares equal to any appreciation in the value of the block (up
to the amount of the
34
<PAGE>
exchange) will be treated as Free Shares and exchanged first, and the
purchase payment for that block will be allocated on a pro rata basis between
the non-Free Shares of that block to be retained and the non-Free Shares to
be exchanged. The prorated amount of such purchase payment attributable to
the retained non-Free Shares will remain as the purchase payment for such
shares, and the amount of purchase payment for the exchanged non-Free Shares
will be equal to the lesser of (a) the prorated amount of the purchaser
payment for, or (b) the current net asset value of, those exchanged in
non-Free Shares. Based upon the procedures described in the Prospectus under
the caption "Contingent Deferred Sales Charge", any applicable CDSC will be
imposed upon the ultimate redemption of shares of any fund, regardless of the
number of exchanges since those shares were originally purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any
other of the funds and the general administration of the Exchange Privilege,
the Transfer Agent acts as agent for the Distributor and for the
shareholder's selected 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
selected broker-dealer.
The Distributor and any selected broker-dealer have authorized and
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 fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000
for Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter California Tax-Free Daily Income Trust and Dean Witter New
York Municipal Money Market Trust although those funds may, at their
discretion, accept initial investments of as low as $1,000. The minimum
initial investment is $10,000 for Dean Witter Short- Term U.S. Treasury
Trust, although that fund, in its discretion, may accept initial purchases of
as low as $5,000. The minimum initial investment for all other Dean Witter
Funds for which the Exchange Privilege is available is $1,000.) Upon exchange
into an Exchange Fund, the shares of that fund will be held in a special
Exchange Privilege Account separately from accounts of those shareholders who
have acquired their shares directly from that fund. As a result, certain
services normally available to shareholders of money market funds, including
the check writing feature, will not be available for funds held in that
account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter funds for which
shares of the Fund have been exchanged, upon such notice as may be required
by applicable regulatory agencies (presently sixty days for termination or
material revision), provided that six months' prior written notice of
termination will be given to the shareholders who hold shares of Exchange
Funds, pursuant to the Exchange Privilege, and provided further that the
Exchange Privilege may be terminated or materially revised without notice at
times (a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c)
when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, (d)
during any other period when the Securities and Exchange Commission by order
so permits (provided that applicable rules and regulations of the Securities
and Exchange Commission shall govern as to whether the conditions prescribed
in (b) or (c) exist) or (e) if the Fund would be unable to invest amounts
effectively in accordance with its investment objective, policies and
restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
35
<PAGE>
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. As stated in the Prospectus, shares of the Fund can be
redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds may be reduced by the amount of
any applicable contingent deferred sales charges (see below). If shares are
held in a shareholder's account without a share certificate, a written
request for redemption to the Fund's Transfer Agent at P.O. Box 983, Jersey
City, NJ 07303 is required. If certificates are held by the shareholder, the
shares may be redeemed by surrendering the certificates with a written
request for redemption. The share certificate, or an accompanying stock
power, and the request for redemption, must be signed by the shareholder or
shareholders exactly as the shares are registered. Each request for
redemption, whether or not accompanied by a share certificate, must be sent
to the Fund's Transfer Agent, which will redeem the shares at their net asset
value next computed (see "Purchase of Fund Shares") after it receives the
request, and certificate, if any, in good order. Any redemption request
received after such computation will be redeemed at the next determined net
asset value. The term "good order" means that the share certificate, if any,
and request for redemption are properly signed, accompanied by any
documentation required by the Transfer Agent, and bear signature guarantees
when required by the Fund or the Transfer Agent. If redemption is requested
by a corporation, partnership, trust or fiduciary, the Transfer Agent may
require that written evidence of authority acceptable to the Transfer Agent
be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than the Distributor or a selected broker-dealer for the account of
the shareholder), partnership, trust or fiduciary, or sent to the shareholder
at an address other than the registered address, signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A stock
power may be obtained from any dealer or commercial bank. The Fund may change
the signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a new prospectus.
Contingent Deferred Sales Charge. As stated in the Prospectus, a
contingent deferred sales charge ("CDSC") will be imposed on any redemption
by an investor if after such redemption the current value of the investor's
shares of the Fund is less than the dollar amount of all payments by the
shareholder for the purchase of Fund shares during the preceding six years.
However, no CDSC will be imposed to the extent that the net asset value of
the shares redeemed does not exceed: (a) the current net asset value of
shares purchased more than six years prior to the redemption, plus (b) the
current net asset value of shares purchased through reinvestment of dividends
or distributions of the Fund or another Dean Witter Fund (see "Shareholder
Services--Targeted Dividends"), plus (c) the current net asset value of
shares acquired in exchange for (i) shares of Dean Witter front-end sales
charge funds, or (ii) shares of other Dean Witter Funds for which shares of
front-end sales charge funds have been exchanged (see "Shareholder
Services--Exchange Privilege"), plus (d) increases in the net asset value of
the investor's shares above the total amount of payments for the purchase of
Fund shares made during the preceding six years. The CDSC will be paid to the
Distributor. In addition, no CDSC will be imposed on redemptions of shares
which were purchased by the employee benefit plans established by DWR and SPS
Transaction Services, Inc. (an affiliate of DWR) for their employees as
qualified under Section 401(k) of the Internal Revenue Code.
In determining the applicability of a CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will
be the amount which represents the net asset value of the Investor's shares
purchased more than six years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions and/or shares acquired in
exchange for shares of Dean Witter front-end sales charge funds, or for
shares of other Dean Witter funds for which shares of front-end sales charge
funds have been exchanged. A portion of the
36
<PAGE>
amount redeemed which exceeds an amount which represents both such increase
in value and the value of shares purchased more than six years prior to the
redemption and/or shares purchased through reinvestment of dividends or
distributions and/or shares acquired in the above-described exchanges will be
subject to a CDSC.
The amount of CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years
from the time of any payments for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last
day of the month. The following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE 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>
In determining the rate of the CDSC, it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within
the applicable six-year period. This will result in any such CDSC being
imposed at the lowest possible rate. Accordingly, shareholders may redeem,
without incurring any CDSC, amounts equal to any net increase in the value of
their shares above the amount of their purchase payments made within the past
six years and amounts equal to the current value of shares purchased more
than six years prior to the redemption and shares purchased through
reinvestment of dividends or distributions or acquired in exchange for shares
of Dean Witter front-end sales charge funds, or for shares of other Dean
Witter Funds for which shares of front-end sales charge funds have been
exchanged. The CDSC will be imposed, in accordance with the table shown
above, on any redemptions within six years of purchase which are in excess of
these amounts and which redemptions are not (a) requested within one year of
death or initial determination of disability of a shareholder, or (b) made
pursuant to certain taxable distributions from retirement plans or retirement
accounts, as described in the Prospectus.
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. The term good order means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or Transfer Agent. Such
payment may be postponed or the right of redemption suspended at times (a)
when the New York Stock Exchange is closed for other than customary weekends
and holidays, (b) when trading on that Exchange is restricted, (c) when an
emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) during
any other period when the Securities and Exchange Commission by order so
permits; provided that applicable rules and regulations of the Securities and
Exchange Commission shall govern as to whether the conditions prescribed in
(b) or (c) exist. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum
time needed to verify that the check used for investment has been honored
(not more than fifteen days from the time of receipt of the check by the
Transfer Agent). Shareholders maintaining margin accounts with DWR or another
selected broker-dealer are referred to their account executive regarding
restrictions on redemption of shares of the Fund pledged in the margin
account.
37
<PAGE>
Transfers of Shares. In the event a shareholder requests a transfer of any
shares to a new registration, such 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 contingent deferred sales charge 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 contingent deferred sales charge as
if they had not been so transferred.
Reinstatement Privilege. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within thirty days after the date
of redemption or repurchase, reinstate any portion or all of the proceeds of
such redemption or repurchase in shares of the Fund at the net asset value
next determined after a reinstatement request, together with the proceeds, is
received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and
reinstatement is made in shares of the Fund, some or all of the loss,
depending on the amount reinstated, will not be allowed as a deduction for
federal income tax purposes but will be applied to adjust the cost basis of
the shares acquired upon reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
As discussed in the Prospectus under "Dividends, Distributions and Taxes",
the Fund will determine either to distribute or to retain all or part of any
net long-term capital gains in any year for reinvestment. If any such gains
are retained, the Fund will pay federal income tax thereon, and shareholders
at year-end will be able to claim their share of the tax paid by the Fund as
a credit against their individual federal income tax.
Because the Fund intends to distribute all of its net investment income
and capital gains to shareholders and otherwise continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code,
it is not expected that the Fund will be required to pay any federal income
tax. Shareholders will normally have to pay federal income taxes, and any
state income taxes, on the dividends and distributions they receive from the
Fund. Such dividends and distributions, to the extent that they are derived
from the 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. Any dividends
declared in the last quarter of any calendar year which are paid in the
following calendar year prior to February 1 will be deemed received by the
shareholder in the prior calendar year. Dividend payments will be eligible
for the federal dividends received deduction available to the Fund's
corporate shareholders only to the extent the aggregate dividends received by
the Fund would be eligible for the deduction if the Fund were the shareholder
claiming the dividends received deduction. In this regard, a 46-day holding
period generally must be met.
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 regulations applicable to the Fund may have the effect of causing
the Fund to recognize a gain or loss for tax purposes before the gain or loss
is realized, or to defer recognition of a realized loss for tax purposes.
Recognition, for taxes purposes, of an unrealized loss may result in a lesser
amount of the Fund's realized gains being available for annual distribution.
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 twelve months. Gains or losses on the sale of securities with a tax
holding period of twelve months or less will be short-term gains or losses.
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of its gross income be derived from
gains from the sale or other disposition of securities held for less than
three months. Accordingly, the Fund may be restricted in the writing of
options on
38
<PAGE>
securities held for less than three months, in the writing of options which
expire in less than three months, and in effecting closing transactions with
respect to call or put options which have been written or purchased less than
three months prior to such transactions. The Fund may also be restricted in
its ability to engage in transactions involving futures contracts.
As stated under "Investment Practices and Policies," the Fund may invest
up to 35% of its portfolio in securities other than common stocks, including
U.S. Government securities. Under current federal tax law, the Fund will
receive net investment income in the form of interest by virtue of holding
Treasury bills, notes and bonds, and will recognize income attributable to it
from holding zero coupon Treasury securities. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each
year even though the Fund receives no interest payment in cash on the
security during the year. As an investment company, the Fund must pay out
substantially all of its net investment income each year. Accordingly, the
Fund, to the extent it invests in zero coupon Treasury securities, may be
required to pay out as an income distribution each year an amount which is
greater than the total amount of cash receipts of interest the Fund actually
received. 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.
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, capital gains
distributions and some portion of the dividends 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 capital 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.
Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. The Fund's "average
annual total return" represents an annualization of the Fund's total return
over a particular period and is computed by finding the annual percentage
rate which will result in the ending redeemable value of a hypothetical
$1,000 investment made at the beginning of a one, five or ten year period, or
for the period from the date of commencement of operations, if shorter than
any of the foregoing. The ending redeemable value is reduced by any
contingent deferred sales charge at the end of the one, five or 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, 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.
The average annual total returns of the Fund for the one, five and ten
year periods ended December 31, 1995, were 37.20%, 20.44% and 15.40%,
respectively.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types to total return figures. Such calculations may or may not reflect
the deduction of the contingent deferred sales charge 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 contingent deferred sales charge. Based
on this calculation, the average annual total returns of the Fund for the
one, five and ten year periods ended December 31, 1995, were 42.20%, 20.63%
and 15.40%, respectively.
39
<PAGE>
In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value (without
reduction for any contingent deferred sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing
calculation, the Fund's total return for the one, five and ten year period
ended December 31, 1995, were 42.20%, 155.40% and 319.00%.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 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 $10,000,
$50,000 or $100,000, as the case may be. Investments of $10,000, $50,000 and
$100,000 in the Fund at inception would have grown to $85,644 $428,220 and
$856,440, respectively, at December 31, 1995.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent
organizations.
SHARES OF THE FUND
- -----------------------------------------------------------------------------
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 of the Trustees of the
Fund except for Messrs. Bozic, Purcell and Schroeder have been elected by the
Shareholders of the Fund at a Special Meeting of Shareholders held on January
13, 1993. Messrs. Bozic, Purcell and Schroeder were elected by the other
Trustees of the Fund on April 8, 1994. 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. 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.
The 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 (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future
regulations or other unforeseen circumstances). However, the Trustees have
not authorized any such additional series or classes of shares and the Fund
has no present intention to add additional series or classes of shares.
The Declaration of Trust further 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.
The Fund is authorized to issue an unlimited number of shares of
beneficial interest.
The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders or
the Trustees.
40
<PAGE>
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is
the Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions on Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust Company is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager and Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust Company's responsibilities include maintaining shareholder
accounts, including providing subaccounting and recordkeeping services for
certain retirement accounts; disbursing cash dividends and reinvesting
dividends; processing account registration changes; handling purchase and
redemption transactions; mailing prospectuses and reports; mailing and
tabulating proxies; processing share certificate transactions; and
maintaining shareholder records and lists. For these services Dean Witter
Trust Company receives a per shareholder account fee from the Fund.
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report,
containing financial statements audited by independent accountants, will be
sent to shareholders each year.
The Fund's fiscal year is the calendar year. The financial statements of
the Fund must be audited at least once a year by independent accountants
whose selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- -----------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- -----------------------------------------------------------------------------
The financial statements of the Fund for the fiscal year ended December
31, 1995 included in the Statement of Additional Information and incorporated
by reference in the Prospectus have been so included and incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
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 Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
41
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (78.4%)
Aerospace (1.1%)
350,000 Boeing Company ................................................. $ 27,431,250
--------------
Agriculture Related (2.9%)
400,000 Case Corp. ..................................................... 18,300,000
400,000 IMC Global, Inc. ............................................... 16,350,000
410,000 Pioneer Hi-Bred International, Inc. ............................ 22,806,250
160,000 Potash Corp. of Saskatchewan, Inc. (Canada) .................... 11,340,000
--------------
68,796,250
--------------
Banks (3.2%)
200,000 Bank of Boston Corp. ........................................... 9,250,000
350,000 BankAmerica Corp. .............................................. 22,662,500
280,000 Chase Manhattan Corp. .......................................... 16,975,000
140,000 First Interstate Bancorp ....................................... 19,110,000
40,000 Wells Fargo & Co. .............................................. 8,640,000
--------------
76,637,500
--------------
Beverages - Soft Drinks (0.8%)
360,000 PepsiCo Inc. ................................................... 20,115,000
--------------
Biotechnology (3.1%)
420,000 Amgen Inc.* .................................................... 24,885,000
160,000 Biochem Pharma, Inc.* .......................................... 6,400,000
338,000 Biogen Inc.* ................................................... 20,618,000
400,000 Centocor, Inc.* ................................................ 12,350,000
65,000 Cephalon Inc.* ................................................. 2,648,750
70,000 Chiron Corp.* .................................................. 7,735,000
--------------
74,636,750
--------------
Cable/Cellular (0.1%) ..........................................
155,148 Ericsson (L.M.) Telephone Co. AB (ADR) (Sweden) ................ 3,005,993
--------------
Capital Goods (2.7%)
111,700 AlliedSignal, Inc. ............................................. 5,305,750
303,000 Lockheed Martin Corp. .......................................... 23,937,000
737,500 Loral Corp. .................................................... 26,089,062
100,000 United Technologies Corp. ...................................... 9,487,500
--------------
64,819,312
--------------
Chemicals (1.1%)
210,000 Monsanto Co. ................................................... 25,725,000
--------------
Commercial Services (0.5%)
300,000 America Online, Inc.* .......................................... 11,175,000
--------------
Communications -
Equipment & Software (2.2%)
333,800 Ascend Communications, Inc.* ................................... 27,079,525
350,000 Cisco Systems, Inc.* ........................................... 26,118,750
--------------
53,198,275
--------------
Communications - Software & Services (1.6%)
90,000 Adobe Systems, Inc. ............................................ $ 5,580,000
28,800 CKS Group, Inc.* ............................................... 1,116,000
120,000 Elcom International, Inc.* ..................................... 1,800,000
150,000 Intuit, Inc.* .................................................. 11,700,000
150,000 Quarterdeck Corp.* ............................................. 4,106,250
280,000 Sun Microsystems, Inc.* ........................................ 12,775,000
--------------
37,077,250
--------------
Computer Services (1.9%)
275,600 Computer Sciences Corp.* ....................................... 19,360,900
376,321 First Data Corp. ............................................... 25,166,467
--------------
44,527,367
--------------
Computer Software (0.8%)
150,000 Macromedia, Inc.* .............................................. 7,781,250
260,000 PeopleSoft, Inc.* .............................................. 11,050,000
--------------
18,831,250
--------------
Consumer Business Services (3.3%)
200,000 Automatic Data Processing, Inc. ................................ 14,850,000
200,000 DST Systems, Inc.* ............................................. 5,700,000
470,000 General Motors Corp. (Class E) ................................. 24,440,000
275,000 Reuters Holdings PLC (ADR) (United Kingdom) .................... 15,193,750
400,000 Service Corp. International .................................... 17,600,000
--------------
77,783,750
--------------
Consumer Products (5.1%)
220,000 Coca Cola Co. .................................................. 16,335,000
300,000 Dial Corp. ..................................................... 8,887,500
138,000 Estee Lauder Companies (Class A)* .............................. 4,812,750
32,400 Helene Curtis Industries Inc. .................................. 1,024,650
400,000 Kimberly-Clark Corp. ........................................... 33,100,000
80,000 Mondavi (Robert) Corp. (The) (Class A)* ........................ 2,200,000
47,600 Oakley, Inc.* .................................................. 1,618,400
241,000 Procter & Gamble Co. ........................................... 20,003,000
300,000 Ralston-Ralston Purina Group ................................... 18,712,500
450,000 Sara Lee Corp. ................................................. 14,343,750
--------------
121,037,550
--------------
Drugs (4.8%)
300,000 American Home Products Corp.* .................................. 29,100,000
320,000 Bristol-Myers Squibb Co. ....................................... 27,480,000
340,000 Pfizer, Inc. ................................................... 21,420,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
<TABLE>
<CAPTION>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1995, continued
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
200,000 Pharmacia & Upjohn, Inc. ....................................... $ 7,750,000
530,000 SmithKline Beecham PLC (ADR) (United Kingdom) .................. 29,415,000
--------------
115,165,000
--------------
Energy (0.3%)
200,000 Sonat, Inc. .................................................... 7,125,000
--------------
Entertainment (1.6%)
525,000 C U C International, Inc.* ..................................... 17,915,625
350,000 Walt Disney Co. ................................................ 20,650,000
--------------
38,565,625
--------------
Financial - Miscellaneous (7.2%)
400,000 Ahmanson (H.F.) & Co. .......................................... 10,600,000
665,000 Bear Stearns Companies, Inc. ................................... 13,216,875
600,000 Countrywide Credit Industries, Inc. ............................ 13,050,000
211,000 Donaldson, Lufkin & Jenrette, Inc. ............................. 6,593,750
300,000 Federal Home Loan Mortgage Corp. ............................... 25,050,000
180,000 Federal National Mortgage Association .......................... 22,342,500
258,100 Golden West Financial Corp. .................................... 14,260,025
500,000 Great Western Financial Corp. .................................. 12,750,000
200,000 Green Tree Financial Corp. ..................................... 5,275,000
500,000 Merrill Lynch & Co., Inc. ...................................... 25,500,000
300,000 Morgan Stanley Group, Inc. ..................................... 24,187,500
--------------
172,825,650
--------------
Financial Services (1.2%)
450,000 Travelers Group, Inc. .......................................... 28,293,750
--------------
Health Maintenance Organizations (4.5%)
300,000 Healthcare Compare Corp.* ...................................... 13,050,000
400,000 Healthsource, Inc.* ............................................ 14,400,000
200,000 Humana, Inc.* .................................................. 5,475,000
35,000 Pacificare Health Systems, Inc. (Class A)* ..................... 3,010,000
280,000 Pacificare Health Systems, Inc. (Class B)* ..................... 24,360,000
180,000 Physio-Control International Corp.* ............................ 3,217,500
285,000 U.S. Healthcare, Inc. .......................................... 13,216,875
450,000 United Healthcare Corp. ........................................ 29,475,000
--------------
106,204,375
--------------
Healthcare -- Drugs (1.2%)
500,000 Lilly (Eli) & Co. .............................................. $ 28,125,000
--------------
Healthcare Products & Services (1.7%)
220,000 HBO & Co. ...................................................... 16,775,000
176,000 Quintiles Transnational Corp.* ................................. 7,128,000
300,000 Shared Medical Systems Corp. ................................... 16,200,000
--------------
40,103,000
--------------
Home Building (0.3%)
375,000 Clayton Homes, Inc. ............................................ 8,015,625
--------------
Hotels/Motels (0.3%)
100,000 HFS, Inc.* ..................................................... 8,175,000
--------------
Housing Related (0.5%)
289,000 American Standard, Inc.* ....................................... 8,092,000
110,800 Oakwood Homes Corp. ............................................ 4,251,950
--------------
12,343,950
--------------
Insurance (5.3%)
260,000 Aetna Life & Casualty Co. ...................................... 18,005,000
250,000 Allstate Corp. (The)* .......................................... 10,281,250
210,000 Chubb Corp. .................................................... 20,317,500
200,000 CIGNA Corp. .................................................... 20,650,000
51,800 CNA Financial Corp.* ........................................... 5,879,300
170,000 General Re Corp. ............................................... 26,350,000
601,000 Prudential Reinsurance Holdings, Inc. .......................... 14,048,375
240,000 SunAmerica Inc. ................................................ 11,400,000
--------------
126,931,425
--------------
Media Group (1.6%)
200,000 Clear Channel Communications, Inc.* ............................ 8,825,000
100,000 Evergreen Media Corp. (Class A)* ............................... 3,175,000
710,000 Infinity Broadcasting Corp.* ................................... 26,447,500
--------------
38,447,500
--------------
Medical Products & Supplies (3.6%)
150,000 Boston Scientific Corp.* ....................................... 7,350,000
760,000 Guidant Corp. .................................................. 32,110,000
200,000 IDEXX Laboratories, Inc.* ...................................... 9,300,000
269,300 Medtronic Inc. ................................................. 15,047,137
300,000 St. Jude Medical, Inc.* ........................................ 12,825,000
200,000 Target Therapeutics, Inc.* ..................................... 8,550,000
--------------
85,182,137
--------------
Medical Services (0.1%)
120,000 Healthsouth Corp.* ............................................. 3,495,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1995, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Medical Supplies (0.1%)
20,500 Becton, Dickinson & Co. ........................................ $ 1,537,500
--------------
Miscellaneous (1.0%)
450,000 Thermo Electron Corp.* ......................................... 23,400,000
--------------
Multi-Line Insurance (1.6%)
400,000 American International Group, Inc. ............................. 37,000,000
--------------
Pharmaceuticals (2.5%)
395,000 Johnson & Johnson .............................................. 33,821,875
400,000 Merck & Co., Inc. .............................................. 26,300,000
--------------
60,121,875
--------------
Restaurants (0.5%)
28,000 Boston Chicken, Inc.* .......................................... 896,000
75,000 Lone Star Steakhouse & Saloon, Inc.* ........................... 2,868,750
400,000 Starbucks Corp.* ............................................... 8,350,000
--------------
12,114,750
--------------
Retail (2.1%)
470,000 Federated Department Stores, Inc.* ............................. 12,925,000
22,000 General Nutrition Companies, Inc.* ............................. 506,000
600,000 Gucci Group NV (Italy)* ........................................ 23,325,000
100,000 Home Depot, Inc. ............................................... 4,787,500
300,000 Walgreen Co. ................................................... 8,962,500
--------------
50,506,000
--------------
Telecommunications (3.5%)
100,000 ADC Telecommunications, Inc.* .................................. 3,625,000
200,000 AT&T Corp. ..................................................... 12,950,000
200,000 Cascade Communications Corp.* .................................. 17,000,000
400,000 GTE Corp. ...................................................... 17,600,000
145,000 Shiva Corp.* ................................................... 10,549,287
160,000 Stratacom, Inc.* ............................................... 11,680,000
300,000 WorldCom Inc.* ................................................. 10,575,000
--------------
83,979,287
--------------
Telecommunications Equipment (0.6%)
345,200 Picturetel Corp.* .............................................. $ 14,800,450
--------------
Tobacco (1.0%)
270,000 Philip Morris Companies, Inc. .................................. 24,435,000
--------------
Transportation (0.9%)
Burlington Northern
280,000 Santa Fe, Inc. ................................................. 21,840,000
--------------
TOTAL COMMON STOCKS (Identified Cost $1,626,106,751) ........... 1,873,530,396
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATION (17.3%)
U.S. Treasury Bond 6.875% due 08/15/25 (Identified Cost
$366,500 $404,346,875) .................................................. 413,400,547
---------------
SHORT-TERM INVESTMENTS (4.4%)
U.S. GOVERNMENT AGENCIES (a) (4.3%)
45,000 Federal Home Loan Banks 5.50% due 01/05/96 ..................... 44,972,500
58,500 Federal Home Loan Mortgage Corp. 5.75% due 01/02/96 ............ 58,490,656
---------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $103,463,156) .................................. 103,463,156
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS December 31, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (0.1%)
The Bank of New York 3.00% due 01/02/96 (dated 12/29/95;
proceeds $1,871,969; collateralized by $1,866,621 U.S. Treasury
Note 5.75% due 09/30/97 valued at $1,908,772) (Identified Cost
$1,871 $1,871,345) .................................................... $ 1,871,345
---------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $105,334,501) ................................. 105,334,501
---------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $2,135,788,128) (b) 100.1% 2,392,265,444
LIABILITIES IN EXCESS OF
OTHER ASSETS ........................ (0.1) (3,378,065)
-------- ---------------
NET ASSETS .......................... 100.0% $2,388,887,379
======== ===============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost.
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $2,135,788,128) .......... $2,392,265,444
Receivable for:
Investments sold ......................... 19,132,343
Shares of beneficial interest sold ...... 10,430,067
Interest ................................. 9,517,766
Dividends ................................ 1,501,779
Prepaid expenses and other assets .......... 65,674
--------------
TOTAL ASSETS ............................. 2,432,913,073
--------------
LIABILITIES:
Payable for:
Investments purchased .................... 37,554,057
Distributions ............................ 1,800,633
Plan of distribution fee ................. 1,696,783
Shares of beneficial interest
repurchased ............................. 1,285,982
Investment management fee ................ 1,021,540
Accrued expenses and other payables ....... 666,699
--------------
TOTAL LIABILITIES ........................ 44,025,694
--------------
NET ASSETS:
Paid-in-capital ............................ 1,981,034,438
Net unrealized appreciation ................ 256,477,316
Accumulated undistributed net investment
income .................................... 1,103,834
Accumulated undistributed net realized gain 150,271,791
--------------
NET ASSETS ............................... $2,388,887,379
==============
NET ASSET VALUE PER SHARE,
87,963,108 shares outstanding (unlimited
shares authorized of $.01 par value) ..... $ 27.16
==============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $132,992 foreign
withholding tax) ..................... $ 17,672,185
Interest .............................. 13,839,031
-------------
TOTAL INCOME ........................ 31,511,216
-------------
EXPENSES
Plan of distribution fee .............. 17,315,269
Investment management fee ............. 9,736,912
Transfer agent fees and expenses ..... 2,362,052
Custodian fees ........................ 467,070
Registration fees ..................... 244,618
Shareholder reports and notices ...... 156,816
Professional fees ..................... 57,026
Trustees' fees and expenses ........... 32,667
Other ................................. 23,526
-------------
TOTAL EXPENSES ...................... 30,395,956
-------------
NET INVESTMENT INCOME ............... 1,115,260
-------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ..................... 449,119,481
Net change in unrealized appreciation 204,343,705
-------------
NET GAIN ............................ 653,463,186
-------------
NET INCREASE .......................... $654,578,446
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED DECEMBER ENDED DECEMBER
31, 1995 31, 1994
- ------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 1,115,260 $ 182,792
Net realized gain (loss) .............................. 449,119,481 (58,679,520)
Net change in unrealized appreciation ................. 204,343,705 (43,049,173)
----------------- -----------------
NET INCREASE (DECREASE) ............................. 654,578,446 (101,545,901)
----------------- -----------------
Dividends and distributions from:
Net investment income ................................. (193,886) --
Net realized gain ..................................... (231,910,868) (21,279,873)
----------------- -----------------
TOTAL ............................................... (232,104,754) (21,279,873)
----------------- -----------------
Net increase from transactions in shares of beneficial
interest ............................................. 476,459,623 394,801,479
----------------- -----------------
TOTAL INCREASE ...................................... 898,933,315 271,975,705
NET ASSETS:
Beginning of period ................................... 1,489,954,064 1,217,978,359
----------------- -----------------
END OF PERIOD
(Including undistributed net investment income of
$1,103,834 and $182,460, respectively) .............. $2,388,887,379 $1,489,954,064
================= =================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1995
1. Organization and Accounting Policies
Dean Witter American Value Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is
capital growth consistent with an effort to reduce volatility. The Fund seeks
to achieve its objective by investing in a diversified portfolio of
securities consisting principally of common stocks. The Fund was incorporated
in Maryland in 1979, commenced operations on March 27, 1980 and reorganized
as a Massachusetts business trust on April 30, 1987.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American Stock Exchange is valued at its latest sale price on
that exchange prior to the time when assets are valued; if there were no
sales that day, the security is valued at the latest bid price; (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest available bid price prior to the time of
valuation; (3) when market quotations are not readily available, including
circumstances under which it is determined by the Investment Manager that
sale or bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Trustees
(valuation of debt securities for which market quotations are not readily
available may be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); and (4) short-term debt securities having a maturity date
of more than sixty days at time of purchase are valued on a mark-to-market
basis until sixty days prior to maturity and thereafter at amortized cost
based on their value on the 61st day. Short-term debt securities having a
maturity date of sixty days or less at the time of purchase are valued at
amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Dividend income and other distributions are recorded on the
ex-dividend date. Discounts are accreted over the life of the respective
securities. Interest income is accrued daily.
48
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1995, continued
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays a management fee, accrued
daily and payable monthly, by applying the following annual rates to the net
assets of the Fund determined at the close of each business day: 0.625% to
the portion of average daily net assets not exceeding $250 million and 0.50%
to the portion of average daily net assets exceeding $250 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted
a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act
pursuant to which the Fund pays the Distributor compensation, accrued daily
and payable monthly, at an annual rate of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the
49
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1995, continued
Fund's shares since the implementation of the Plan on April 30, 1984 (not
including reinvestment of dividend or capital gain distributions) less the
average daily aggregate net asset value of the Fund's shares redeemed since
the Fund's implementation of the Plan upon which a contingent deferred sales
charge has been imposed or upon which such charge has been waived; or (b) the
Fund's average daily net assets attributable to shares issued, net of related
shares redeemed since implementation of the Plan. Amounts paid under the Plan
are paid to the Distributor to compensate it for the services provided and
the expenses borne by it and others in the distribution of the Fund's shares,
including the payment of commissions for sales of the Fund's shares and
incentive compensation to, and expenses of, the account executives of Dean
Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other employees or selected broker-dealers who engage in or
support distribution of the Fund's shares or who service shareholder
accounts, including overhead and telephone expenses, printing and
distribution of prospectuses and reports used in connection with the offering
of the Fund's shares to other than current shareholders and preparation,
printing and distribution of sales literature and advertising materials. In
addition, the Distributor may be compensated under the Plan for its
opportunity costs in advancing such amounts which compensation would be in
the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred
but not yet recovered, may be recovered through future distribution fees from
the Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the year ended December 31,
1995, it received approximately $3,588,974 in contingent deferred sales
charges from certain redemptions of the Fund's shares. The Fund's
shareholders pay such charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended December 31, 1995
aggregated $4,980,680,540 and $4,619,658,733, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$1,042,009,404 and $639,688,973, respectively.
For the year ended December 31, 1995, the Fund incurred $989,462 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the
Fund. At December 31, 1995, the Fund's payable for investments purchased
included unsettled trades with DWR of $6,647,628.
50
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1995, continued
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $255,000.
The Fund has an unfunded noncontributory defined benefit pension plan
covering all independent Trustees of the Fund who will have served as
independent Trustees for at least five years at the time of retirement.
Benefits under this plan are based on years of service and compensation
during the last five years of service. Aggregate pension costs for the year
ended December 31, 1995 included in Trustees' fees and expenses in the
Statement of Operations amounted to $12,001. At December 31, 1995, the Fund
had an accrued pension liability of $22,479 which is included in accrued
expenses in the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold 27,784,767 $ 726,405,402 31,171,952 $ 693,824,171
Reinvestment of dividends and distributions 8,258,700 219,428,179 988,724 20,179,867
-------------- --------------- -------------- ---------------
36,043,467 945,833,581 32,160,676 714,004,038
Repurchased (18,333,417) (469,373,958) (14,645,353) (319,202,559)
-------------- --------------- -------------- ---------------
Net increase 17,710,050 $ 476,459,623 17,515,323 $ 394,801,479
============== =============== ============== ===============
</TABLE>
6. FEDERAL INCOME TAX STATUS
During the year ended December 31, 1995, the Fund utilized its net capital
loss carryover of approximately $34,379,000. As of December 31, 1995, the
Fund had temporary book/tax differences primarily attributable to capital
loss deferrals on wash sales.
51
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1994 1993 1992 1991
- -------------------------- -------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period ...... $21.21 $23.10 $20.93 $20.66 $14.39
-------- --------- --------- -------- --------
Net investment income
(loss) ................... 0.01 -- (0.09) 0.03 0.05
Net realized and
unrealized gain (loss) .. 8.87 (1.57) 3.94 0.71 7.90
-------- --------- --------- -------- --------
Total from investment
operations ............... 8.88 (1.57) 3.85 0.74 7.95
-------- --------- --------- -------- --------
Less dividends and
distributions from:
Net investment income .. -- -- (0.01) (0.03) (0.03)
Net realized gain ....... (2.93) (0.32) (1.67) (0.44) (1.65)
Paid-in-capital ......... -- -- -- -- --
-------- --------- --------- -------- --------
Total dividends and
distributions ............ (2.93) (0.32) (1.68) (0.47) (1.68)
-------- --------- --------- -------- --------
Net asset value,
end of period ............ $27.16 $21.21 $23.10 $20.93 $20.66
======== ========= ========= ======== ========
TOTAL INVESTMENT RETURN+ 42.20% (6.75)% 18.70% 3.84% 56.26%
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................. 1.61% 1.71% 1.61% 1.72% 1.58%
Net investment income
(loss) ................... 0.06% 0.01% (0.59)% 0.18% 0.29%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions .............. $2,389 $1,490 $1,218 $459 $227
Portfolio turnover rate .. 256% 295% 276% 305% 264%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1990 1989 1988 1987 1986
- -------------------------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period ...... $14.81 $13.19 $12.21 $12.64 $12.67
--------- -------- -------- -------- --------
Net investment income
(loss) ................... 0.24 0.34 0.29 0.19 0.28
Net realized and
unrealized gain (loss) .. (0.38) 2.99 1.03 0.20 1.76
--------- -------- -------- -------- --------
Total from investment
operations ............... (0.14) 3.33 1.32 0.39 2.04
--------- -------- -------- -------- --------
Less dividends and
distributions from:
Net investment income .. (0.28) (0.32) (0.33) (0.23) (0.32)
Net realized gain ....... -- (1.39) -- (0.59) (1.75)
Paid-in-capital ......... -- -- (0.01) -- --
--------- -------- -------- -------- --------
Total dividends and
distributions ............ (0.28) (1.71) (0.34) (0.82) (2.07)
--------- -------- -------- -------- --------
Net asset value,
end of period ............ $14.39 $14.81 $13.19 $12.21 $12.64
========= ======== ======== ======== ========
TOTAL INVESTMENT RETURN+ (0.90)% 25.39% 10.84% 2.84% 15.82%
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................. 1.70% 1.66% 1.78% 1.62% 1.39%
Net investment income
(loss) ................... 1.67% 2.23% 2.15% 1.42% 2.10%
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions .............. $ 89 $ 100 $ 90 $ 109 $ 79
Portfolio turnover rate .. 234% 196% 133% 203% 120%
<FN>
- ------------
+ Does not reflect the deduction of sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER AMERICAN VALUE FUND
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
American Value Fund (the "Fund") at December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each
of the ten years in the period then ended, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 7, 1996
1995 FEDERAL TAX NOTICE (unaudited)
During the year ended December 31, 1995, the Fund paid to shareholders
$0.46 per share from long-term capital gains. For such period, 4.91% of
the income paid qualified for the dividends received deduction
available to corporations.
53
DEAN WITTER AMERICAN VALUE FUND
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
----------
Financial highlights for for the fiscal years ended
December 31, 1986, 1987, 1988, 1989, 1990, 1991, 1992,
1993, 1994 and 1995...................................4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
---
Statement of assets and liabilities at
December 31, 1995.....................................42
Statement of operations for the year ended
December 31, 1995.....................................46
Statement of changes in net assets for the
years ended December 31, 1994 and 1995................46
Notes to Financial Statements.........................47
Portfolio of Investments at December 31, 1995.........48
Financial highlights for for the fiscal years ended
December 31, 1986, 1987, 1988, 1989, 1990, 1991, 1992,
1993, 1994 and 1995...................................52
(3) Financial statements included in Part C:
None
(b) Exhibits:
--------
1. -- Declaration of Trust*
6. -- Form of Selected Dealers Agreement*
8. -- Form of Custody Agreement between Registrant and
The Bank of New York.*
9. -- Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services Company Inc.
11. -- Consent of Independent Accountants
15. -- Amended and Restated Plan of Distribution pursuant
to Rule 12b-1
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
*Previously filed; re-filed via EDGAR with this Amendment
to the Registration Statement. All other exhibits
previously filed and incorporated by reference.
Item 25. Persons Controlled by or Under Common Control With Registrant.
None
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at January 31, 1996
-------------- ------------------------
Shares of Beneficial Interest 217,891
Item 27. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the
indemnification of the Registrant's trustees, officers, employees and
agents is permitted if it is determined that they acted under the belief
that their actions were in or not opposed to the best interest of the
Registrant, and, with respect to any criminal proceeding, they had
reasonable cause to believe their conduct was not unlawful. In addition,
indemnification is permitted only if it is determined that the actions in
question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason
of reckless disregard of their obligations and duties to the Registrant.
Trustees, officers, employees and agents will be indemnified for the
expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they
give their undertakings to repay the Registrant unless their conduct is
later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust
and paragraph 8 of the Registrant's Investment Management Agreement,
neither the Investment Manager nor any trustee, officer, employee or agent
of the Registrant shall be liable for any action or failure to act, except
in the case of bad faith, willful misfeasance, gross negligence or reckless
disregard of duties to the Registrant.
2
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer, or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding)
is asserted against the Registrant by such trustee, officer or controlling
person in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act, and will be governed by the final adjudication of
such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with
Release 11330 of the Securities and Exchange Commission under the
Investment Company Act of 1940, so long as the interpretation of Sections
17(h) and 17(i) of such Act remains in effect.
Registrant, in conjunction with the Investment Manager,
Registrant's Trustees, and other registered investment management companies
managed by the Investment Manager, maintains insurance on behalf of any
person who is or was a Trustee, officer, employee, or agent of Registrant,
or who is or was serving at the request of Registrant as a trustee,
director, officer, employee or agent of another trust or corporation,
against any liability asserted against him and incurred by him or arising
out of his position. However, in no event will Registrant maintain
insurance to indemnify any such person for any act for which Registrant
itself is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment adviser. The following information is given
regarding officers of Dean Witter InterCapital Inc. InterCapital is a
wholly-owned subsidiary of Dean Witter, Discover & Co. The principal
address of the Dean Witter Funds is Two World Trade Center, New York, New
York 10048.
The term "Dean Witter Funds" used below refers to the following
registered investment companies:
Closed-End Investment Companies
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
3
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
Open-end Investment Companies:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
4
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Premier Income Trust
(32) Dean Witter Short-Term U.S. Treasury Trust
(33) Dean Witter Diversified Income Trust
(34) Dean Witter U.S. Government Money Market Trust
(35) Dean Witter Global Dividend Growth Securities
(36) Active Assets California Tax-Free Trust
(37) Dean Witter Natural Resource Development Securities Inc.
(38) Active Assets Government Securities Trust
(39) Active Assets Money Trust
(40) Active Assets Tax-Free Trust
(41) Dean Witter Limited Term Municipal Trust
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
The term "TCW/DW Funds" refers to the following registered investment
companies:
Open-End Investment Companies
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
Closed-End Investment Companies
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
5
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee, President
and Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co. ("DWDC"); Director and/or officer
of various DWDC subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds; Member (since
January, 1993) and Chairman (since January,
1995) of the Board of Directors of NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
6
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
David A. Hughey Executive Vice President and Chief Administrative
Executive Vice Officer of DWSC, Distributors and DWTC; Director
President and Chief of DWTC; Vice President of the Dean Witter Funds
Administrative Officer and the TCW/DW Funds.
Edmund C. Puckhaber Director of DWTC; Vice President of the Dean
Executive Vice Witter Funds.
President
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone
Senior Vice President Senior Vice President of DWSC, Distributors
and DWTC; Vice President of the Dean Witter Funds
and the TCW/DW Funds.
7
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Joseph J. McAlinden
Senior Vice President Vice President of the Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira Ross
Senior Vice President Vice President of various Dean Witter Funds.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
8
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Douglas Brown
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
9
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Peter W. Gurman
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of Dean Witter Mid-Cap Growth Fund.
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
Stanley Kapica
Vice President
Michael Knox Vice President of Dean Witter Convertible
Vice President Securities Trust.
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
10
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Hugh Rose
Vice President
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Marianne Zalys
Vice President
Item 29. Principal Underwriters
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
11
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
12
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(b) The following information is given regarding directors and officers
of Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None
of the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
- ---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained
by the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
Item 32. 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.
13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and
State of New York on the 23rd day of February, 1996.
DEAN WITTER AMERICAN VALUE FUND
By /s/ Sheldon Curtis
------------------------------
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 19 has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
(1) Principal Executive Officer Chairman, President
Chief Executive
Officer and Trustee
By /s/ Charles A. Fiumefreddo 02/23/96
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 02/23/96
----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo
Philip J. Purcell
By /s/ Sheldon Curtis 02/23/96
-----------------------------
Sheldon Curtis
Attorney-in-Fact
Michael Bozic
Edwin J. Garn
John R. Haire
Manuel H. Johnson
Paul Kolton
Michael E. Nugent
John L. Schroeder
By /s/ David M. Butowsky 02/23/96
----------------------------
David M. Butowsky
Attorney-in-Fact
DEAN WITTER AMERICAN VALUE FUND
EXHIBIT INDEX
1. -- Declaration of Trust*
6. -- Form of Selected Dealers Agreement.
8. -- Form of Custody Agreement between Registrant and
The Bank of New York*
9. -- Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services Company
Inc.
11. -- Consent of Independent Accountants
15. -- Form of Amended and Restated Plan of Distribution
pursuant to Rule 12b-1.
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
- ---------------
* Previously filed; re-filed via EDGAR with this Amendment to the
Registration Statement. All other exhibits previously filed and incorporated
by reference.
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
DECLARATION OF TRUST
DATED: APRIL 6, 1987
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE I -- Name and Definitions ................................................ 2
Section 1.1 Name ........................................................... 2
Section 1.2 Definitions .................................................... 2
ARTICLE II -- Trustees ........................................................... 4
Section 2.1 Number of Trustees ............................................. 4
Section 2.2 Election and Term .............................................. 4
Section 2.3 Resignation and Removal ........................................ 4
Section 2.4 Vacancies ...................................................... 5
Section 2.5 Delegation of Power to Other Trustees .......................... 5
ARTICLE III -- Powers of Trustees ................................................ 6
Section 3.1 General ........................................................ 6
Section 3.2 Investments .................................................... 6
Section 3.3 Legal Title .................................................... 7
Section 3.4 Issuance and Repurchase of Securities .......................... 7
Section 3.5 Borrowing Money; Lending Trust Assets .......................... 8
Section 3.6 Delegation; Committees ......................................... 8
Section 3.7 Collection and Payment ......................................... 8
Section 3.8 Expenses ....................................................... 8
Section 3.9 Manner of Acting; By-Laws ...................................... 8
Section 3.10 Miscellaneous Powers ........................................... 9
Section 3.11 Principal Transactions ......................................... 9
Section 3.12 Litigation ..................................................... 9
ARTICLE IV -- Investment Adviser, Distributor, Custodian and Transfer Agent....... 11
Section 4.1 Investment Adviser ............................................. 11
Section 4.2 Administrative Services ........................................ 11
Section 4.3 Distributor .................................................... 11
Section 4.4 Transfer Agent ................................................. 12
Section 4.5 Custodian ...................................................... 12
Section 4.6 Parties to Contract ............................................ 12
</TABLE>
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ARTICLE V -- Limitations of Liability of Shareholders, Trustees and Others ........ 13
Section 5.1 No Personal Liability of Shareholders, Trustees, etc. ......... 13
Section 5.2 Non-Liability of Trustees, etc. ................................ 13
Section 5.3 Indemnification ................................................ 14
Section 5.4 No Bond Required of Trustees ................................... 14
Section 5.5 No Duty of Investigation; Notice in Trust Instruments, etc. ... 14
Section 5.6 Reliance on Experts, etc. ...................................... 15
ARTICLE VI -- Shares of Beneficial Interest.......................................... 16
Section 6.1 Beneficial Interest ............................................ 16
Section 6.2 Rights of Shareholders ......................................... 16
Section 6.3 Trust Only ..................................................... 16
Section 6.4 Issuance of Shares ............................................. 17
Section 6.5 Register of Shares ............................................. 17
Section 6.6 Transfer of Shares ............................................. 17
Section 6.7 Notices ........................................................ 18
Section 6.8 Voting Powers .................................................. 18
Section 6.9 Series or Classes of Shares .................................... 19
ARTICLE VII -- Redemptions........................................................ 23
Section 7.1 Redemptions .................................................... 23
Section 7.2 Redemption at the Option of the Trust .......................... 23
Section 7.3 Effect of Suspension of Determination of Net Asset Value ...... 23
Section 7.4 Suspension of Right of Redemption .............................. 24
</TABLE>
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ARTICLE VIII -- Determination of Net Asset Value, Net Income and Distributions....
Section 8.1 Net Asset Value ................................................ 25
Section 8.2 Distributions to Shareholders .................................. 25
Section 8.3 Determination of Net Income .................................... 26
Section 8.4 Power to Modify Foregoing Procedures ........................... 26
ARTICLE IX -- Duration; Termination of Trust; Amendment; Mergers, etc. .......... 27
Section 9.1 Duration ....................................................... 27
Section 9.2 Termination of Trust or a Series ............................... 27
Section 9.3 Amendment Procedure ............................................ 28
Section 9.4 Merger, Consolidation and Sale of Assets ....................... 29
Section 9.5 Incorporation .................................................. 29
ARTICLE X -- Reports to Shareholders ............................................. 31
ARTICLE XI -- Miscellaneous ...................................................... 32
Section 11.1 Filing ......................................................... 32
Section 11.2 Governing Law .................................................. 32
Section 11.3 Resident Agent ................................................. 32
Section 11.4 Counterparts ................................................... 32
Section 11.5 Reliance by Third Parties ...................................... 32
Section 11.6 Provisions in Conflict with Law or Regulations ................. 33
Section 11.7 Use of the Name "Dean Witter" .................................. 33
SIGNATURE PAGE ................................................................... 34
</TABLE>
iii
<PAGE>
DECLARATION OF TRUST
OF
DEAN WITTER AMERICAN VALUE FUND
Dated: April 6, 1987
THE DECLARATION OF TRUST of Dean Witter American Value Fund is
made the 6th day of April, 1987 by the parties signatory hereto, as trustees
(such persons, so long as they shall continue in office in accordance with
the terms of this Declaration of Trust, and all other persons who at the time
in question have been duly elected or appointed as trustees in accordance
with the provisions of this Declaration of Trust and are then in office,
being hereinafter called the "Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed
thereto; and
WHEREAS, it is provided that the beneficial interest in the trust assets
be divided into transferable shares of beneficial interest as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
1
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is the "Dean
Witter American Value Fund," and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue
or be sued under that name, which name (and the word "Trust" wherever herein
used) shall refer to the Trustees as Trustees, and not as individuals, or
personally, and shall not refer to the officers, agents, employees or
Shareholders of the Trust. Should the Trustees determine that the use of such
name is not advisable, they may use such other name for the Trust as they
deem proper and the Trust may hold its property and conduct its activities
under such other name.
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-Laws" means the By-Laws referred to in Section 3.9 hereof, as
from time to time amended.
(b) the terms "Commission," "Affiliated Person" and "Interested
Person," have the meanings given them in the 1940 Act.
(c) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration,"
"hereof," "herein" and "hereunder" shall be deemed to refer to this
Declaration rather than the article or section in which such words appear.
(d) "Distributor" means the party, other than the Trust, to a contract
described in Section 4.3 hereof.
(e) "Fundamental Policies" shall mean the investment policies and
restrictions set forth in the Prospectus and Statement of Additional
Information and designated as fundamental policies therein.
(f) "Investment Adviser" means any party, other than the Trust, to a
contract described in Section 4.1 hereof.
(g) "Majority Shareholder Vote" means the vote of the holders of a
majority of Shares, which shall consist of: (i) a majority of Shares
represented in person or by proxy and entitled to vote at a meeting of
Shareholders at which a quorum, as determined in accordance with the
By-Laws, is present; (ii) a majority of Shares issued and outstanding and
entitled to vote when action is taken by written consent of Shareholders;
and (iii) a "majority of the outstanding voting securities," as the phrase
is defined in the 1940 Act, when any
2
action is required by the 1940 Act by such majority as so defined.
(h) "1940 Act" means the Investment Company Act of 1940 and the rules
and regulations thereunder as amended from time to time.
(i) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
(j) "Prospectus" means the Prospectus and Statement of Additional
Information constituting parts of the Registration Statement of the Trust
under the Securities Act of 1933 as such Prospectus and Statement of
Additional Information may be amended or supplemented and filed with the
Commission from time to time.
(k) "Series" means one of the separately managed components of the
Trust (or, if the Trust shall have only one such component, then that one)
as set forth in Section 6.1 hereof or as may be established and designated
from time to time by the Trustees pursuant to that section.
(l) "Shareholder" means a record owner of outstanding Shares.
(m) "Shares" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the
shares of any and all series or classes which may be established by the
Trustees, and includes fractions of Shares as well as whole Shares.
(n) "Transfer Agent" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.
(o) "Trust" means the Dean Witter Tax-Exempt Securities Trust.
(p) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of
the Trust or the Trustees.
(q) "Trustees" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms hereof,
and all other persons who may from time to time be duly elected or
appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and reference herein to a Trustee or the Trustees shall
refer to such person or persons in their capacity as trustees hereunder.
3
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by
a majority of the Trustees, provided, however, that the number of Trustees
shall in no event be less than three (3) nor more than fifteen (15).
Section 2.2. Election and Term. The Trustees shall be elected by a
Majority Shareholder Vote at the first meeting of Shareholders immediately
prior to the public offering of Shares of the Trust. The Trustees shall have
the power to set and alter the terms of office of the Trustees, and they may
at any time lengthen or lessen their own terms or make their terms of
unlimited duration, subject to the resignation and removal provisions of
Section 2.3 hereof. Subject to Section 16(a) of the 1940 Act, the Trustees
may elect their own successors and may, pursuant to Section 2.4 hereof,
appoint Trustees to fill vacancies. The Trustees shall adopt By-Laws not
inconsistent with this Declaration or any provision of law to provide for
election of Trustees by Shareholders at such time or times as the Trustees
shall determine to be necessary or advisable.
Section 2.3. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall
be effective upon such delivery, or at a later date according to the terms of
the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than the number
required by Section 2.1 hereof) by the action of two-thirds of the remaining
Trustees or by the action of the Shareholders of record of not less than
two-thirds of the Shares outstanding (for purposes of determining the
circumstances and procedures under which such removal by the Shareholders may
take place, the provisions of Section 16(c) of the 1940 Act shall be
applicable to the same extent as if the Trust were subject to the provisions
of that Section). Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the incapacity or death of
any Trustee, his legal representative shall execute and deliver on his behalf
such documents as the remaining Trustees shall require as provided in the
preceding sentence.
4
Section 2.4. Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy existing by reason of an
increase in the number of Trustees, subject to the provisions of Section
16(a) of the 1940 Act, the remaining Trustees or, prior to the public
offering of Shares of the Trust, if only one Trustee shall then remain in
office, the remaining Trustee, shall fill such vacancy by the appointment of
such other person as they or he, in their or his discretion, shall see fit,
made by a written instrument signed by a majority of the remaining Trustees
or by the remaining Trustee, as the case may be. Any such appointment shall
not become effective, however, until the person named in the written
instrument of appointment shall have accepted in writing such
appointment and agreed in writing to be bound by the terms of
the Declaration. An appointment of a Trustee may be made in
anticipation of a vacancy to occur at a later date by reason of
retirement, resignation or increase in the number of Trustees, provided that
such appointment shall not become effective prior to such retirement,
resignation or increase in the number of Trustees. Whenever a vacancy in the
number of Trustees shall occur, until such vacancy is filled as provided in
this Section 2.4, the Trustees in office, regardless of their number, shall
have all the powers granted to the Trustees and shall discharge all the
duties imposed upon the Trustees by the Declaration. A written instrument
certifying the existence of such vacancy signed by a majority of the Trustees
shall be conclusive evidence of the existence of such vacancy.
Section 2.5. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall less than two (2) Trustees personally exercise the powers granted
to the Trustees under the Declaration except as herein otherwise expressly
provided.
5
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the
same extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the Commonwealth of
Massachusetts, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities
wheresoever in the world they may be located as they deem necessary, proper
or desirable in order to promote the interests of the Trust although such
things are not herein specifically mentioned. Any determination as to what is
in the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. Investments. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of negotiable or nonnegotiable
instruments, obligations, evidences of indebtedness, certificates of
deposit or indebtedness, commercial paper, repurchase agreements, reverse
repurchase agreements, options, commodities, commodity futures contracts
and related options, currencies, currency futures and forward contracts,
and other securities, investment contracts and other instruments of any
kind, including, without limitation, those issued, guaranteed or sponsored
by any
6
and all Persons including, without limitation, states, territories
and possessions of the United States, the District of Columbia and any of
the political subdivisions, agencies or instrumentalities thereof, and by
the United States Government or its agencies or instrumentalities, foreign
or international instrumentalities, or by any bank or savings institution,
or by any corporation or organization organized under the laws of the
United States or of any state, territory or possession thereof, and of
corporations or organizations organized under foreign laws, or in "when
issued" contracts for any such securities, or retain Trust assets in cash
and from time to time change the investments of the assets of the Trust;
and to exercise any and all rights, powers and privileges of ownership or
interest in respect of any and all such investments of every kind and
description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more
persons, firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional securities in which the Trust may invest should the
Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by
any law limiting the investments which may be made by fiduciaries.
Section 3.3. Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust, or in the name
of any other Person as nominee, on such terms as the Trustees may determine,
provided that the interest of the Trust therein is appropriately protected.
The right, title and interest of the Trustees in the Trust Property shall
vest automatically in each Person who may hereafter become a Trustee. Upon
the resignation, removal or death of a Trustee he shall automatically cease
to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed
and delivered.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares
and, subject to the provisions set forth in Articles VII, VIII and IX and
Section
7
6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 3.5. Borrowing Money; Lending Trust Assets. Subject to the
Fundamental Policies, the Trustee shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person and to lend Trust assets.
Section 3.6. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of
the Trust and the Trust Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Trustees or otherwise as the Trustees may deem
expedient.
Section 3.7. Collection and Payment. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay
all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which
any property is owed to the Trust; and to enter into releases, agreements and
other instruments.
Section 3.8. Expenses. Subject to Section 6.9 hereof, the Trustees shall
have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust
to themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
Section 3.9. Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken
by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment
by means of which all persons participating in the meeting can hear each
other, or by written consents of all the Trustees. The Trustees may adopt
By-Laws not inconsistent with this Declaration to provide for the conduct of
the business of the Trust and may amend or repeal such By-Laws to the extent
such power is not reserved to the Shareholders.
8
Section 3.10. Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust or any Series thereof; (b)
enter into joint ventures, partnerships and any other combinations or
associations; (c) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine; (d)
purchase, and pay for out of Trust Property or the property of the appropriate
Series of the Trust, insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, distributors, selected
dealers or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
to be taken by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (e) establish pension, profit-sharing, Share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (f) to the extent permitted by
law, indemnify any person with whom the Trust or any Series thereof has
dealings, including any Investment Adviser, Distributor, Transfer Agent and
selected dealers, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine
and change the fiscal year of the Trust or any Series thereof and the method
by which its accounts shall be kept; and (i) adopt a seal for the Trust but
the absence of such seal shall not impair the validity of any instrument
executed on behalf of the Trust.
Section 3.11. Principal Transactions. Except in transactions permitted by
the 1940 Act or any rule or regulation thereunder, or any order of exemption
issued by the Commission, or effected to implement the provisions of any
agreement to which the Trust is a party, the Trustees shall not, on behalf of
the Trust, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Trust or any Series thereof
to, any Trustee or officer of the Trust or any firm of which any such Trustee
or officer is a member acting as principal, or have any such dealings with
any Investment Adviser, Distributor or Transfer Agent or with any Affiliated
Person of such Person; but the Trust or any Series thereof may employ any
such Person, or firm or company in which such Person is an Interested Person,
as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
9
Section 3.12. Litigation. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series
thereof to pay or to satisfy any debts, claims or expenses incurred in
connection therewith, including those of litigation, and such power shall
include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business
judgment, to dismiss any action, suit, proceeding, dispute, claim, or demand,
derivative or otherwise, brought by any person, including a Shareholder in
its own name or the name of the Trust, whether or not the Trust or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
10
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
Section 4.1. Investment Adviser. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time
enter into one or more investment advisory or management contracts or, if the
Trustees establish multiple Series, separate investment advisory or
management contracts with respect to one or more Series whereby the other
party or parties to any such contracts shall undertake to furnish the Trust
or such Series such management, investment advisory, administration,
accounting, legal, statistical and research facilities and services,
promotional or marketing activities, and such other facilities and services,
if any, as the Trustees shall from time to time consider desirable and all
upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of the Declaration, the Trustees
may authorize the Investment Advisers, or any of them, under any such
contracts (subject to such general or specific instructions as the Trustees
may from time to time adopt) to effect purchases, sales, loans or exchanges
of portfolio securities and other investments of the Trust on behalf of the
Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations
of such Investment Advisers, or any of them (and all without further action
by the Trustees). Any such purchases, sales, loans and exchanges shall be
deemed to have been authorized by all of the Trustees. The Trustees may, in
their sole discretion, call a meeting of Shareholders in order to submit to a
vote of Shareholders at such meeting the approval or continuance of any such
investment advisory or management contract. If the Shareholders of any one or
more of the Series of the Trust should fail to approve any such investment
advisory or management contract, the Investment Adviser may nonetheless serve
as Investment Adviser with respect to any Series whose Shareholders approve
such contract.
Section 4.2. Administrative Services. The Trustees may in their discretion
from time to time contract for administrative personnel and services whereby
the other party shall agree to provide the Trustees or the Trust
administrative personnel and services to operate the Trust on a daily or
other basis, on such terms and conditions as the Trustees may in their
discretion determine. Such services may be provided by one or more persons or
entities.
Section 4.3. Distributor. The Trustees may in their discretion from time
to time enter into one or more contracts,
11
providing for the sale of Shares to net the Trust or the applicable Series of
the Trust not less than the net asset value per Share (as described in Article
VIII hereof) and pursuant to which the Trust may either agree to sell the
Shares to the other parties to the contracts, or any of them, or appoint any
such other party its sales agent for such Shares. In either case, any such
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article IV,
including, without limitation, the provision for the repurchase or sale of
shares of the Trust by such other party as principal or as agent of the Trust.
Section 4.4. Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or
more Persons.
Section 4.5. Custodian. The Trustees may appoint or otherwise engage one
or more banks or trust companies, each having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least
five million dollars ($5,000,000) to serve as Custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in the By-Laws of the Trust.
Section 4.6. Parties to Contract. Any contract of the character described
in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other
contract may be entered into with any Person, although one or more of the
Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence
of any such relationship; nor shall any Person holding such relationship be
liable merely by reason of such relationship for any loss or expense to the
Trust under or by reason of said contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract when
entered into was not inconsistent with the provisions of this Article IV. The
same Person may be the other party to any contracts entered into pursuant to
Sections 4.1, 4.2, 4.3, 4.4 or 4.5 above or otherwise, and any individual may
be financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts mentioned in this Section 4.6.
12
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs
of the Trust. No Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever to any Person, other than the
Trust or its Shareholders, in connection with the Trust Property or the
affairs of the Trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard for his duty to such
Person; and all such Persons shall look solely to the Trust Property, or to the
Property of one or more specific Series of the Trust if the claim arises from
the conduct of such Trustee, officer, employee or agent with respect to only
such Series, for satisfaction of claims of any nature arising in connection
with the affairs of the Trust. If any Shareholder, Trustee, officer, employee
or agent, as such, of the Trust is made a party to any suit or proceeding to
enforce any such liability, he shall not, on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each Shareholder
harmless from and against all claims and liabilities, to which such Shareholder
may become subject by reason of his being or having been a Shareholder, and
shall reimburse such Shareholder for all legal and other expenses reasonably
incurred by him in connection with any such claim or liability; provided that,
in the event the Trust shall consist of more than one Series, Shareholders of a
particular Series who are faced with claims or liabilities solely by reason of
their status as Shareholders of that Series shall be limited to the assets of
that Series for recovery of such loss and related expenses. The rights accruing
to a Shareholder under this Section 5.1 shall not exclude any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically
provided herein.
Section 5.2. Non-Liability of Trustees, etc. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to
any Shareholder, Trustee, officer, employee, or agent thereof for any action
or failure to act (including without limitation the failure to compel in any
way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties.
13
Section 5.3. Indemnification. (a) The Trustees shall provide for
indemnification by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, of any
person who is, or has been, a Trustee, officer, employee or agent of the
Trust against all liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been a Trustee, officer, employee or agent and against amounts paid or
incurred by him in the settlement thereof, in such manner as the Trustees may
provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
Section 5.4. No Bond Required of Trustees. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust or a Series thereof
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent
or be liable for the application of money or property paid, loaned or
delivered to or on the order of the Trustees or of said officer, employee or
agent. Every obligation, contract, instrument, certificate, Share, other
security of the Trust or a Series thereof or undertaking, and every other act
or thing whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as officers, employees or agents of the Trust or a
Series thereof. Every written obligation, contract, instrument, certificate,
Share, other security of the Trust or undertaking made or issued by the
Trustees shall recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the obligations
of the Trust or a Series thereof under any such instrument are not binding
upon any of the Trustees or Shareholders, individually, but bind only the
Trust Estate (or, in the event the Trust shall consist of more than one
Series, in the case of any such obligation
14
which relates to a specific Series, only the Series which is a party thereto),
and may contain any further recital which they or he may deem appropriate, but
the omission of such recital shall not affect the validity of such obligation,
contract instrument, certificate, Share, security or undertaking and shall not
operate to bind the Trustees or Shareholders individually. The Trustees shall
at all times maintain insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
Section 5.6. Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by any Investment Adviser,
Distributor, Transfer Agent, selected dealers, accountants, appraisers or
other experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or
expert may also be a Trustee.
15
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.01 par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the authority to establish
and designate one or more Series or classes of shares. Each share of any
Series shall represent an equal proportionate share in the assets of that
Series with each other Share in that Series. The Trustees may divide or
combine the shares of any Series into a greater or lesser number of shares in
that Series without thereby changing the proportionate interests in the
assets of that Series. Subject to the provisions of Section 6.9 hereof, the
Trustees may also authorize the creation of additional series of shares (the
proceeds of which may be invested in separate, independently managed
portfolios) and additional classes of shares within any series. All Shares
issued hereunder including, without limitation, Shares issued in connection
with a dividend in Shares or a split in Shares, shall be fully paid and
nonassessable.
Section 6.2. Rights of Shareholders. The ownership of the Trust Property
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by
their Shares, and they shall have no right to call for any partition or
division of any property, profits, rights or interests of the Trust nor can
they be called upon to assume any losses of the Trust or suffer an assessment
of any kind by virtue of their ownership of Shares. The Shares shall be
personal property giving only the rights in the Declaration specifically set
forth. The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may
determine with respect to any series of Shares.
Section 6.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the Trustees
to create a general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal relationship other
than a trust. Nothing in the Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members
of a joint stock association.
16
Section 6.4 Issuance of Shares. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares of any
Series, in addition to the then issued and outstanding Shares and Shares held
in the treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection
with the assumption of liabilities) and businesses. In connection with any
issuance of Shares, the Trustees may issue fractional Shares. The Trustees
may from time to time divide or combine the Shares of any Series into a
greater or lesser number without thereby changing the proportionate
beneficial interests in that Series. Contributions to the Trust may be
accepted for, and Shares shall be redeemed as, whole Shares and/or fractions
of a Share as described in the Prospectus.
Section 6.5. Register of Shares. A register shall be kept in respect of
each Series at the principal office of the Trust or at an office of the
Transfer Agent which shall contain the names and addresses of the
Shareholders and the number of Shares of each Series held by them
respectively and a record of all transfers thereof. Such register may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled
to receive dividends or distributions or otherwise to exercise or enjoy the
rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or
in the By-Laws provided, until he has given his address to the Transfer Agent
or such other officer or agent of the Trustees as shall keep the said
register for entry thereon. It is not contemplated that certificates will be
issued for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate appropriate rules
and regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent
thereunto duly authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer, together with such
evidence of the genuineness of each such execution and authorization and of
other matters as may reasonably be required. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such record is made,
the Shareholder of record shall be deemed to be the holder of such
17
Shares for all purposes hereunder and neither the Trustees nor any Transfer
Agent or registrar nor any officer, employee or agent of the Trust shall be
affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the
Transfer Agent, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder
and neither the Trustees nor any Transfer Agent or registrar nor any officer
or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law, except as may
otherwise be provided by the laws of the Commonwealth of Massachusetts.
Section 6.7. Notices. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the register of the Trust. Annual reports
and proxy statements need not be sent to a shareholder if: (i) an annual
report and proxy statement for two consecutive annual meetings, or (ii) all,
and at least two, checks (if sent by first class mail) in payment of
dividends or interest and shares during a twelve month period have been
mailed to such shareholder's address and have been returned undelivered.
However, delivery of such annual reports and proxy statements shall resume
once a Shareholder's current address is determined.
Section 6.8. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.2 hereof, (ii) for
the removal of Trustees as provided in Section 2.3 hereof, (iii) with respect
to any investment advisory or management contract as provided in Section 4.1,
(iv) with respect to termination of the Trust as provided in Section 9.2, (v)
with respect to any amendment of the Declaration to the extent and as
provided in Section 9.3, (vi) with respect to any merger, consolidation or
sale of assets as provided in Section 9.4, (vii) with respect to
incorporation of the Trust to the extent and as provided in Section 9.5,
(viii) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should
or should not be brought or maintained derivatively or as a class action on
behalf of the Trust or the Shareholders (provided that Shareholders of a
18
Series are not entitled to vote in connection with the bringing of a
derivative or class action with respect to any matter which only affects
another Series or its Shareholders), (ix) with respect to any plan adopted
pursuant to Rule 12b-1 (or any successor rule) under the 1940 Act and (x)
with respect to such additional matters relating to the Trust as may be
required by law, the Declaration, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as and
when the Trustees may consider necessary or desirable. Each whole Share shall
be entitled to one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote,
except that Shares held in the treasury of the Trust as of the record date, as
determined in accordance with the By-Laws, shall not be voted. On any matter
submitted to a vote of Shareholders, all Shares shall be voted by individual
Series except (1) when required by the 1940 Act, Shares shall be voted in the
aggregate and not by individual Series; and (2) when the Trustees have
determined that the matter affects only the interests of one or more Series,
then only the Shareholders of such Series shall be entitled to vote thereon.
The Trustees may, in conjunction with the establishment of any further Series
or any classes of Shares, establish conditions under which the several series
or classes of Shares shall have separate voting rights or no voting rights.
There shall be no cumulative voting in the election of Trustees. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required by law, the Declaration or the By-Laws to be taken by
Shareholders. The By-Laws may include further provisions for Shareholders'
votes and meetings and related matters.
Section 6.9. Series or Classes of Shares. The following provisions are
applicable regarding the Series of Shares of the Trust established in Section
6.1 hereof and shall be applicable if the Trustees shall establish additional
Series or shall divide the shares of any Series into two or more classes,
also as provided in Section 6.1 hereof, and all provisions relating to the
Trust shall apply equally to each Series thereof except as the context
requires:
(a) The number of authorized shares and the number of shares of each
Series or of each class that may be issued shall be unlimited. The
Trustees may classify or reclassify any unissued shares or any shares
previously issued and reacquired of any Series or class into one or more
Series or one or more classes that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or
some other Series or class), reissue for such consideration and on such
terms as they may determine, or cancel any shares of any Series or any
class reacquired by the Trust at their discretion from time to time.
19
(b) The power of the Trustees to invest and reinvest the Trust
Property shall be governed by Section 3.2 of this Declaration with respect
to any one or more Series which represents the interests in the assets of
the Trust immediately prior to the establishment of any additional Series
and the power of the Trustees to invest and reinvest assets applicable to
any other Series shall be as set forth in the instrument of the Trustees
establishing such series which is hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
shares of a particular Series or class together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that Series or class for all purposes,
subject only to the rights of creditors, and shall be so recorded upon the
books of account of the Trust. In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular Series or
class, the Trustees shall allocate them among any one or more of the
Series or classes established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and
binding upon the shareholders of all Series or classes for all purposes.
No holder of Shares of any Series shall have any claim on or right to any
assets allocated or belonging to any other Series.
(d) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series and all
expenses, costs, charges and reserves attributable to that Series. All
expenses and liabilities incurred or arising in connection with a
particular Series, or in connection with the management thereof, shall be
payable solely out of the assets of that Series and creditors of a
particular Series shall be entitled to look solely to the property of such
Series for satisfaction of their claims. Any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem
fair and equitable. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and
20
binding upon the holders of all Series for all purposes. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the shareholders.
(e) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 8.2 of this Declaration with respect to any
one or more Series or classes which represents the interests in the assets
of the Trust immediately prior to the establishment of any additional
Series or classes. With respect to any other Series or class, dividends
and distributions on shares of a particular Series or class may be paid
with such frequency as the Trustees may determine, which may be daily or
otherwise, pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine, to the holders
of shares of that Series or class, from such of the income and capital
gains, accrued or realized, from the assets belonging to that Series or
class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Series or class. All dividends and
distributions on shares of a particular Series or class shall be
distributed pro rata to the holders of that Series or class in proportion
to the number of shares of that Series or class held by such holders at
the date and time of record established for the payment of such dividends
or distributions.
(f) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and
dividend rights, of each class and Series of Shares.
(g) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of Shares of
any Series or class shall have the right to convert or exchange said
Shares into Shares of one or more Series of Shares in accordance with such
requirements and procedures as may be established by the Trustees.
(h) The establishment and designation of any Series or class of shares
in addition to those established in Section 6.1 hereof shall be effective
upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights,
preferences, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of such Series or
class, or as otherwise provided in such instrument. At any time that there
are no shares outstanding of any particular Series or class previously
21
established and designated, the Trustees may by an instrument executed by
a majority of their number abolish that Series or class and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
(i) Shareholders of a Series shall not be entitled to participate in a
derivative or class action with respect to any matter which only affects
another Series or its Shareholders.
(j) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a
Series shall be entitled to receive his pro rata share of distributions of
income and capital gains made with respect to such Series. In the event of
the liquidation of a particular Series, the Shareholders of that Series
which has been established and designated and which is being liquidated
shall be entitled to receive, when and as declared by the Trustees, the
excess of the assets belonging to that Series over the liabilities
belonging to that Series. The holders of Shares of any Series shall not be
entitled hereby to any distribution upon liquidation of any other Series.
The assets so distributable to the Shareholders of any Series shall be
distributed among such Shareholders in proportion to the number of Shares
of that Series held by them and recorded on the books of the Trust. The
liquidation of any particular Series in which there are Shares then
outstanding may be authorized by an instrument in writing, without a
meeting, signed by a majority of the Trustees then in office, subject to
the approval of a majority of the outstanding voting securities of that
Series, as that phrase is defined in the 1940 Act.
22
<PAGE>
ARTICLE VII
REDEMPTIONS
Section 7.1. Redemptions. Each Shareholder of a particular Series shall
have the right at such times as may be permitted by the Trust to require the
Trust to redeem all or any part of his Shares of that Series, upon and
subject to the terms and conditions provided in this Article VII. The Trust
shall, upon application of any Shareholder or pursuant to authorization from
any Shareholder, redeem or repurchase from such Shareholder outstanding
shares for an amount per share determined by the Trustees in accordance with
any applicable laws and regulations; provided that (a) such amount per share
shall not exceed the cash equivalent of the proportionate interest of each
share or of any class or Series of shares in the assets of the Trust at the
time of the redemption or repurchase and (b) if so authorized by the
Trustees, the Trust may, at any time and from time to time charge fees for
effecting such redemption or repurchase, at such rates as the Trustees may
establish, as and to the extent permitted under the 1940 Act and the rules
and regulations promulgated thereunder, and may, at any time and from time to
time, pursuant to such Act and such rules and regulations, suspend such right
of redemption. The procedures for effecting and suspending redemption shall
be as set forth in the Prospectus from time to time. Payment will be made in
such manner as described in the Prospectus.
Section 7.2. Redemption at the Option of the Trust. Each Share of the
Trust or any Series of the Trust shall be subject to redemption at the option
of the Trust at the redemption price which would be applicable if such Share
were then being redeemed by the Shareholder pursuant to Section 7.1: (i) at
any time, if the Trustees determine in their sole discretion that failure to
so redeem may have materially adverse consequences to the holders of the
Shares of the Trust or of any Series, or (ii) upon such other conditions with
respect to maintenance of Shareholder accounts of a minimum amount as may
from time to time be determined by the Trustees and set forth in the then
current Prospectus of the Trust. Upon such redemption the holders of the
Shares so redeemed shall have no further right with respect thereto other
than to receive payment of such redemption price.
Section 7.3. Effect of Suspension of Determination of Net Asset Value. If,
pursuant to Section 7.4 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or
of any Series thereof,
23
the rights of Shareholders (including those who shall
have applied for redemption pursuant to Section 7.1 hereof but who shall not
yet have received payment) to have Shares redeemed and paid for by the Trust
or a Series thereof shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right
so suspended may, during the period of such suspension, by appropriate
written notice of revocation at the office or agency where application was
made, revoke any application for redemption not honored and withdraw any
certificates on deposit. The redemption price of Shares for which redemption
applications have not been revoked shall be the net asset value of such
Shares next determined as set forth in Section 8.1 after the termination of
such suspension, and payment shall be made within seven (7) days after the
date upon which the application was made plus the period after such
application during which the determination of net asset value was suspended.
Section 7.4. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which
disposal by the Trust or a Series thereof of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust or a
Series thereof fairly to determine the value of its net assets, or (iv)
during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the rights of
redemption or postponement of the date of payment or redemption; provided
that applicable rules and regulations of the Commission shall govern as to
whether the conditions prescribed in (ii), (iii) or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of
redemption or payment on redemption until the Trust shall declare the
suspension at an end, except that the suspension shall terminate in any event
on the first day on which said stock exchange shall have reopened or the period
specified in (ii) or (iii) shall have expired (as to which in the absence of an
official ruling by the Commission, the determination of the Trust shall be
conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the net asset value existing after the termination of the suspension.
24
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 8.1. Net Asset Value. The net asset value of each outstanding
Share of each Series of the Trust shall be determined on such days and at
such time or times as the Trustees may determine. The method of determination
of net asset value shall be determined by the Trustees and shall be as set
forth in the Prospectus and Statement of Additional Information. The power
and duty to make the daily calculations may be delegated by the Trustees to
any Investment Adviser, the Custodian, the Transfer Agent or such other
person as the Trustees by resolution may determine. The Trustees may suspend
the daily determination of net asset value to the extent permitted by the
1940 Act.
Section 8.2. Distributions to Shareholders. The Trustees shall from time
to time distribute ratably among the Shareholders of the Trust or of any
Series such proportion of the net income, earnings, profits, gains, surplus
(including paid-in surplus), capital, or assets of the Trust or of such
Series held by the Trustees as they may deem proper. Such distribution may be
made in cash or property (including without limitation any type of
obligations of the Trust or of such Series or any assets thereof), and the
Trustees may distribute ratably among the Shareholders of the Trust or of
that Series additional Shares issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem proper. Such distributions
may be among the Shareholders of record (determined in accordance with the
Prospectus and Statement of Additional Information) of the Trust or of such
Series at the time of declaring a distribution or among the Shareholders of
record of the Trust or of such Series at such later date as the Trustees
shall determine. The Trustees may always retain from the net income,
earnings, profits or gains of the Trust or of such Series such amount as they
may deem necessary to pay the debts or expenses of the Trust or of such
Series or to meet obligations of the Trust or of such Series, or as they may
deem desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business. The Trustees may adopt and offer
to Shareholders of the Trust or of any Series such dividend reinvestment
plans, cash dividend payout plans or related plans as the Trustees deem
appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted
25
to give the Trustees the power in their discretion to distribute for any fiscal
year as ordinary dividends and as capital gains distributions, respectively,
additional amounts sufficient to enable the Trust to avoid or reduce liability
for taxes.
Section 8.3. Determination of Net Income. The Trustees shall have the
power to determine the net income of any Series of the Trust and from time to
time to distribute such net income ratably among the Shareholders as
dividends in cash or additional Shares of such Series issuable hereunder. The
determination of net income and the resultant declaration of dividends shall
be as set forth in the Prospectus and Statement of Additional Information.
The Trustees shall have full discretion to determine whether any cash or
property received by any Series of the Trust shall be treated as income or as
principal and whether any item of expense shall be charged to the income or
the principal account, and their determination made in good faith shall be
conclusive upon the Shareholders. In the case of stock dividends received,
the Trustees shall have full discretion to determine, in the light of the
particular circumstances, how much, if any, of the value thereof shall be
treated as income, the balance, if any, to be treated as principal.
Section 8.4. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration
and payment of dividends and distributions, as they may deem necessary or
desirable to enable the Trust to comply with any provision of the 1940 Act,
or any rule or regulation thereunder, including any rule or regulation
adopted pursuant to Section 22 of the 1940 Act by the Commission or any
securities association registered under the Securities Exchange Act of 1934,
or any order of exemption issued by said Commission, all as in effect now or
hereafter amended or modified. Without limiting the generality of the
foregoing, the Trustees may establish classes or additional Series of Shares
in accordance with Section 6.9.
26
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article IX.
Section 9.2. Termination of Trust or a Series. (a) The Trust or any Series
may be terminated (i) by the affirmative vote of the holders of not less than
two-thirds of the Shares outstanding and entitled to vote at any meeting of
Shareholders of the Trust or the appropriate Series thereof, or (ii) by an
instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than two-thirds of such
Shares of the Trust or the appropriate Series thereof, or by such other vote
as may be established by the Trustees with respect to any class or Series of
Shares, or (iii) by the Trustees by written notice to the Shareholders, or
(iv) with respect to a Series as provided in Section 6.9(h). Upon the
termination of the Trust or the Series:
(i) The Trust or the Series shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust or
the Series and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust or
the Series, collect its assets, sell, convey, assign, exchange, transfer
or otherwise dispose of all or any part of the remaining Trust Property or
Trust Property allocated or belonging to such Series to one or more
persons at public or private sale for consideration which may consist in
whole or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and to do all other acts appropriate to
liquidate its business; provided that any sale, conveyance, assignment,
exchange, transfer or other disposition of all or substantially all the
Trust Property or Trust Property allocated or belonging to such Series
shall require Shareholder approval in accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they
27
deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or Trust Property allocated or
belonging to such Series, in cash or in kind or partly each, among the
Shareholders of the Trust or of each Series according to their respective
rights.
(b) After termination of the Trust or the Series and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth
the fact of such termination, and the Trustees shall thereupon be discharged
from all further liabilities and duties with respect to the Trust or the
terminated Series, and the rights and interest of all Shareholders of the
Trust or the terminated Series shall thereupon cease.
Section 9.3. Amendment Procedure. (a) This Declaration may be amended by a
Majority Shareholder Vote, at a meeting of Shareholders, or by written
consent without a meeting. The Trustees may also amend this Declaration
without the vote or consent of Shareholders (i) to change the name of the
Trust or any Series or classes of Shares, (ii) to supply any omission, or
cure, correct or supplement any ambiguous, defective or inconsistent
provision hereof, (iii) if they deem it necessary to conform this Declaration
to the requirements of applicable federal or state laws or regulations or the
requirements of the Internal Revenue Code, or to eliminate or reduce any
federal, state or local taxes which are or may be payable by the Trust or the
Shareholders, but the Trustees shall not be liable for failing to do so, or
(iv) for any other purpose which does not adversely affect the rights of any
Shareholder with respect to which the amendment is or purports to be
applicable.
(b) No amendment may be made under this Section 9.3 which would change any
rights with respect to any Shares of the Trust or of any Series of the Trust
by reducing the amount payable thereon upon liquidation of the Trust or of
such Series of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote or consent of the holders of
two-thirds of the Shares of the Trust or of such Series outstanding and
entitled to vote, or by such other vote as may be established by the Trustees
with respect to any Series or class of Shares. Nothing contained in this
Declaration shall permit the amendment of this Declaration to impair the
exemption from personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the Secretary
or any Assistant Secretary of the Trust, setting forth an amendment and
reciting that it was duly
28
adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and executed by a
majority of the Trustees or certified by the Secretary or any Assistant
Secretary of the Trust, shall be conclusive evidence of such amendment when
lodged among the records of the Trust. Unless such amendment or such
certificate sets forth some later time for the effectiveness of such
amendment, such amendment shall be effective when lodged among the records of
the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by
the affirmative vote of a majority of the Trustees or by an instrument signed
by a majority of the Trustees.
Section 9.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all
or substantially all of the Trust Property or Trust Property allocated or
belonging to such Series, including its good will, upon such terms and
conditions and for such consideration when and as authorized, at any meeting
of Shareholders called for the purpose, by the affirmative vote of the
holders of not less than two-thirds of the Shares of the Trust or such Series
outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of not less than
two-thirds of such Shares, or by such other vote as may be established by the
Trustees with respect to any series or class of Shares; provided, however,
that, if such merger, consolidation, sale, lease or exchange is recommended
by the Trustees, a Majority Shareholder Vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange
shall be deemed for all purposes to have been accomplished under and pursuant
to the laws of the Commonwealth of Massachusetts.
Section 9.5. Incorporation. With approval of a Majority Shareholder Vote,
or by such other vote as may be established by the Trustees with respect to
any Series or class of Shares, the Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other
organization to take over all of the Trust Property or the Trust Property
allocated or belonging to such Series or to carry on any business in which
the Trust shall directly or indirectly have any interest, and to sell, convey
and transfer the Trust Property or the Trust Property allocated or belonging
to such Series to any such corporation, trust, partnership, association or
organization in exchange for the shares or
29
securities thereof or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such corporation,
trust, partnership, association or organization in which the Trust or such
Series holds or is about to acquire shares or any other interest. The Trustees
may also cause a merger or consolidation between the Trust or any successor
thereto and any such corporation, trust, partnership, association or other
organization if and to the extent permitted by law, as provided under the law
then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to such organization or entities.
30
<PAGE>
ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit or cause the officers of
the Trust to submit to the Shareholders a written financial report of each
Series of the Trust, including financial statements which shall at least
annually be certified by independent public accountants.
31
ARTICLE XI
MISCELLANEOUS
Section 11.1. Filing. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other places as may be required under the laws of Massachusetts and
may also be filed or recorded in such other places as the Trustees deem
appropriate. Each amendment so filed shall be accompanied by a certificate
signed and acknowledged by a Trustee or by the Secretary or any Assistant
Secretary of the Trust stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and
operative, may be executed from time to time by a majority of the Trustees
and shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
Section 11.2. Resident Agent. The Prentice-Hall Corporation System, Inc.,
84 State Street, Boston, Massachusetts 02109 is the resident agent of the
Trust in the Commonwealth of Massachusetts.
Section 11.3. Governing Law. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
laws thereof and the rights of all parties and the validity and construction
of every provision hereof shall be subject to and construed according to the
laws of said State.
Section 11.4. Counterparts. The Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument,
which shall be sufficiently evidenced by any such original counterpart.
Section 11.5. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a
Trustee hereunder, or Secretary or Assistant Secretary of the Trust,
certifying to: (a) the number or identity of Trustees or Shareholders, (b)
the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Shareholders, (d) the
fact that the number of Trustees or Shareholders present at any meeting or
executing any written instrument satisfies the requirements of this
32
Declaration, (e) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with
the Trustees and their successors.
Section 11.6. Provisions in Conflict with Law or Regulations. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of
the Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation
to the extent necessary to eliminate such conflict; provided, however, that
such determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior
to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any
manner affect such provision in any other jurisdiction or any other provision
of the Declaration in any jurisdiction.
Section 11.7. Use of the name "Dean Witter." Dean Witter Reynolds Inc.
("DWR") has consented to the use by the Trust of the identifying name "Dean
Witter," which is a property right of DWR. The Trust will only use the name
"Dean Witter" as a component of its name and for no other purpose, and will
not purport to grant to any third party the right to use the name "Dean
Witter" for any purpose. DWR, or any corporate affiliate of the parent of
DWR, may use or grant to others the right to use the name "Dean Witter", or
any combination or abbreviation thereof, as all or a portion of a corporate
or business name or for any commercial purpose, including a grant of such
right to any other investment company. At the request of DWR or its parent,
the Trust will take such action as may be required to provide its consent to
the use by DWR or its parent, or any corporate affiliate of DWR's parent, or
by any person to whom DWR or its parent or an affiliate of DWR's parent shall
have granted the right to the use, of the name "Dean Witter", or any
combination or abbreviation thereof. Upon the termination of any investment
advisory agreement into which DWR and the Trust may enter, the Trust shall,
upon request by DWR or its parent, cease to use the name "Dean Witter" as a
component of its name, and shall not use the name, or any combination or
abbreviation thereof, as a part of its name or for any other commercial
purpose, and shall cause its officers, trustees and shareholders to take any
and all actions which DWR or its parent may request to effect the foregoing
and to reconvey to DWR or its parent any and all rights to such name.
33
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Declaration of
Trust this 6th day of April, 1987.
/s/ Charles A. Fiumefreddo
- ------------------------------------------------
Charles A. Fiumefreddo, as
Trustee and not individually
One World Trade Center
New York, New York 10048
/s/ Sheldon Curtis
- ------------------------------------------------
Sheldon Curtis, as Trustee
not individually
One World Trade Center
New York, New York 10048
/s/ Andrew J. Melton, Jr.
- ------------------------------------------------
Andrew J. Melton, Jr., as
Trustee and not individually
Five World Trade Center
New York, New York 10048
- ------------------------------------------------
, as Trustee and not individually
34
IN WITNESS WHEREOF, the undersigned has executed this instrument this 6th
day of April, 1987.
/s/ David M. Elwood
---------------------------------
, as Trustee and not
individually
One Federal Street
Boston, MA 02110
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. Boston, MA
April 6, 1987
Then personally appeared the above-named David M. Elwood who acknowledged
the foregoing instrument to be his free act and deed.
before me.
/s/ Pauline F. Martin
---------------------------------
Notary Public
My commission expires: November 12, 1993
<PAGE>
STATE OF NEW YORK
}
COUNTY OF NEW YORK : ss.:
On this 6th day of April, 1987, ANDREW J. MELTON, JR., CHARLES A.
FIUMEFREDDO and SHELDON CURTIS, known to me and known to be the individuals
described in and who executed the foregoing instrument, personally appeared
before me and they severally acknowledged the foregoing instrument to be
their free act and deed.
/s/ Barry Fink
---------------------------------
Notary Public
My commission expires: December 31, 1996
<PAGE>
DEAN WITTER AMERICAN VALUE FUND
SELECTED DEALERS AGREEMENT
Gentlemen:
DW Distributors Inc. (the "Distributor") has a distribution
agreement (the "Distribution Agreement") with Dean Witter American
Value Fund, a Massachusetts business trust (the "Fund"), pursuant
to which it acts as the Distributor for the sale of the Fund's shares
of beneficial interest, par value $0.01 per share (the "Shares"). Under
the Distribution Agreement, the Distributor has the right to distribute
Shares for resale.
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to
the public are registered under the Securities Act of 1933, as amended. You
have received a copy of the Distribution Agreement between us and the Fund
and reference is made herein to certain provisions of such Distribution
Agreement. The terms used herein, including "Prospectus" and "Registration
Statement" of the Fund and "Selected Dealer" shall have the same meaning in
this Agreement as in the Distribution Agreement. As principal, we offer to
sell shares to you, as a Selected Dealer, upon the following terms and
conditions:
1. In all sales of Shares to the public you shall act as dealer for your
own account, and in no transaction shall you have any authority to act as
agent for the Fund, for us or for any other Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order, as set forth in the
current Prospectus. The procedure relating to the handling of orders shall be
subject to instructions which we or the Fund shall forward from time to time to
you. All orders are subject to acceptance or rejection by the Distributor or
the Fund in the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable net asset values and
subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares except
under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and
offers to sell Shares you will furnish to each person to whom any such sale
or offer is made a copy of the Prospectus (as then amended or supplemented)
and will not furnish to any person any information relating to the Shares,
which is inconsistent in any respect with the information contained in the
Prospectus (as then amended or supplemented) or cause any advertisement to be
published by radio or television or in any newspaper or posted in any public
place or use any sales promotional material without our consent and the
consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund and
personal services to Fund shareholders by paying you a sales charge and/or
other commissions, which may be in the form of a gross sales credit and/or an
annual residual commission or service fee, under the terms and in the
percentage amounts as may be in effect from time to time by the Distributor.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding; e.g., by a change in
the "net asset value" from that used in determining the offering price to
your customers.
6. If any Shares sold to you under the terms of this Agreement are
repurchased by us for the account of the Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and
refund to us, any sales charge or other commission received by you on such
Shares.
7. No person is authorized to make any representations concerning the
Shares or the Fund except those contained in the current Prospectus and in
such printed information subsequently issued by us or
1
<PAGE>
the Fund as information supplemental to such Prospectus. In purchasing
Shares through us you shall rely solely on the representations contained in
the Prospectus and supplemental information above mentioned. Any printed
information which we furnish you other than the Prospectus and the Fund's
periodic reports and proxy solicitation material are our sole responsibility
and not the responsibility of the Fund, and you agree that the Fund shall
have no liability or responsibility to you in these respects unless expressly
assumed in connection therewith.
8. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus at or prior to the time of offering
or sale and you agree thereafter to deliver to such purchasers copies of the
annual and interim reports and proxy solicitation materials of the Fund. You
further agree to endeavor to obtain proxies from such purchasers. Additional
copies of the Prospectus, annual or interim reports and proxy solicitation
materials of the Fund will be supplied to you in reasonable quantities upon
request.
9. You are hereby authorized (i) to place orders directly with the Fund or
its agent for shares of the Fund to be sold by us to you subject to the
applicable terms and conditions governing the placement of orders for the
purchase of Fund shares, as set forth in the Distribution Agreement, and (ii)
to tender shares directly to the Fund or its agent for redemption subject to
the applicable terms and conditions set forth in the Distribution Agreement.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Shares entirely. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Fund shares. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us herein.
Nothing contained in this paragraph is intended to operate as, and the
provisions of this paragraph shall not in any way whatsoever constitute, a
waiver by you of compliance with any provision of the Securities Act of 1933,
as amended, or of the rules and regulations of the Securities and Exchange
Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States,
we both hereby agree to abide by the Rules of Fair Practice of such
Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Shares have been qualified for sale under, or are exempt from
the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. All communications to us should be sent to the address shown below.
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
15. This Agreement shall become effective as of the date of your
acceptance hereof, provided that you return to us promptly a signed and dated
copy.
DW DISTRIBUTORS INC.
By ...............................
(Authorized Signature)
Please return one signed copy
of this agreement to:
DW Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: Dean Witter Reynolds Inc.
...................................................................
By: C. Fiumefreddo
...................................................................
Address: 2 WTC
...................................................................
New York, New York 10048
...................................................................
Date: January 4, 1993
...................................................................
2
Exhibit 8
CUSTODY AGREEMENT
Agreement made as of this 20th day of September, 1991,
between DEAN WITTER AMERICAN VALUE FUND, a
Massachusetts business trust organized and existing under the
laws of the Commonwealth of Massachusetts, having its
principal office and place of business at 2 World Trade
Center, New York, New York 10048 (hereinafter called the
"Fund"), and THE BANK OF NEW YORK, a New York corporation
authorized to do a banking business, having its principal of-
fice and place of business at 48 Wall Street, New York, New
York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises
hereinafter set forth, the Fund and the Custodian agree as
follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, shall have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all
Appendices and Certifications described in the Exhibits
delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether
or not such person is an Officer or employee of the Fund, duly
authorized by the Board of Trustees of the Fund to give Oral
Instructions and Written Instructions on behalf of the Fund
and listed in the Certificate annexed hereto as Appendix A or
such other Certificate as may be received by the Custodian
from time to time, provided that each person who is designated
in any such Certificate as an "Officer of DWTC" shall be an
Authorized Person only for purposes of Articles XII and XIII
hereof.
3. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and
federal agency securities, its successor or successors and its
nominee or nominees.
4. "Call Option" shall mean an exchange traded option
with respect to Securities other than Index, Futures
Contracts, and Futures Contract Options entitling the holder,
upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the
specified underlying instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually
received (irrespective of constructive receipt) by the
Custodian and signed on behalf of the Fund by any two Offic-
ers. The term Certificate shall also include instructions by
the Fund to the Custodian communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company, or
any broker-dealer reasonably believed by the Custodian to be
such a clearing member.
7. "Collateral Account" shall mean a segregated account
so denominated which is specifically allocated to a Series and
pledged to the Custodian as security for, and in consideration
of, the Custodian's issuance of any Put Option guarantee let-
ter or similar document described in paragraph 8 of Article V
herein.
8. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment
of the exercise price, as specified therein, to purchase from
the writer thereof the specified underlying instruments, cur-
rency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its
nominee or nominees. The term "Depository" shall further mean
and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identi-
fied in a certified copy of a resolution of the Fund's Board
of Trustees specifically approving deposits therein by the
Custodian.
10. "Financial Futures Contract" shall mean the firm
commitment to buy or sell financial instruments on a U.S. com-
modities exchange or board of trade at a specified future time
at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures
Contract and/or Index Futures Contracts.
- 2 -
12. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
13. "Investment Company Act of 1940" shall mean the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
14. "Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to a specified dollar
amount times the difference between the value of a particular
index at the close of the last business day of the contract
and the price at which the futures contract is originally
struck.
15. "Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an
amount of cash determined by reference to the difference
between the exercise price and the value of the index on the
date of exercise.
16. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant, or
a Clearing Member, or in the name of the Fund for the benefit
of a broker, dealer, futures commission merchant, or Clearing
Member, or otherwise, in accordance with an agreement between
the Fund, the Custodian and a broker, dealer, futures commis-
sion merchant or a Clearing Member (a "Margin Account Agree-
ment"), separate and distinct from the custody account, in
which certain Securities and/or money of the Fund shall be
deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System or a
Depository shall be deemed to have been deposited in, or
withdrawn from, a Margin Account upon the Custodian's effect-
ing an appropriate entry in its books and records.
17. "Money Market Security" shall mean all instruments
and obligations commonly known as a money market instruments,
where the purchase and sale of such securities normally
requires settlement in federal funds on the same day as such
purchase or sale, including, without limitation, certain
Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and/or principal by the government
of the United States or agencies or instrumentalities thereof,
any tax, bond or revenue anticipation note issued by any state
or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase
agreements with respect to Securities and bank time deposits.
18. "O.C.C." shall mean the Options Clearing Corpora-
tion, a clearing agency registered under Section 17A of the
- 3 -
Securities Exchange Act of 1934, its successor or successors,
and its nominee or nominees.
19. "Officers" shall mean the President, any Vice
President, the Secretary, the Clerk, the Treasurer, the
Controller, any Assistant Secretary, any Assistant Clerk, any
Assistant Treasurer, and any other person or persons, whether
or not any such other person is an officer or employee of the
Fund, but in each case only if duly authorized by the Board of
Trustees of the Fund to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund and listed in
the Certificate annexed hereto as Appendix B or such other
Certificate as may be received by the Custodian from time to
time; provided that each person who is designated in any such
Certificate as holding the position of "Officer of DWTC" shall
be an Officer only for purposes of Articles XII and XIII
hereof.
20. "Option" shall mean a Call Option, Covered Call Op-
tion, Index Option and/or a Put Option.
21. "Oral Instructions" shall mean verbal instructions
actually received (irrespective of constructive receipt) by
the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized
Person.
22. "Put Option" shall mean an exchange traded option
with respect to instruments, currency, or Securities other
than Index Options, Futures Contracts, and Futures Contract
Options entitling the holder, upon timely exercise and tender
of the specified underlying instruments, currency, or Securi-
ties, to sell such instruments, currency, or Securities to the
writer thereof for the exercise price.
23. "Reverse Repurchase Agreement" shall mean an agree-
ment pursuant to which the Fund sells Securities and agrees to
repurchase such Securities at a described or specified date
and price.
24. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Op-
tions, Index Options, Index Futures Contracts, Index Futures
Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, over
the counter options on Securities, common stocks and other
securities having characteristics similar to common stocks,
preferred stocks, debt obligations issued by state or
municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds,
industrial bonds and industrial development bonds), bonds,
debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe
- 4 -
for the same, or evidencing or representing any other rights
or interest therein, or rights to any property or assets.
25. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the
terms of this Agreement as a segregated account, by recorda-
tion or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically al-
located to such Series shall be deposited and withdrawn from
time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Fund may
from time to time determine.
26. "Series" shall mean the various portfolios, if any,
of the Fund as described from time to time in the current and
effective prospectus for the Fund, except that if the Fund
does not have more than one portfolio, "Series" shall mean the
Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only
one portfolio.
27. "Shares" shall mean the shares of beneficial inter-
est of the Fund and its Series.
28. "Terminal Link" shall mean an electronic data
transmission link between the Fund and the Custodian requiring
in connection with each use of the Terminal Link the use of an
authorization code provided by the Custodian and at least two
access codes established by the Fund, provided, that the Fund
shall have delivered to the Custodian a Certificate
substantially in the form of Appendix C.
29. "Transfer Agent" shall mean Dean Witter Trust
Company, a New Jersey limited purpose trust company, its suc-
cessors and assigns.
30. "Transfer Agent Account" shall mean any account in
the name of the Transfer Agent maintained with The Bank of New
York pursuant to a Cash Management and Related Services Agree-
ment between The Bank of New York and the Transfer Agent.
31. "Written Instructions" shall mean written communica-
tions actually received (irrespective of constructive receipt)
by the Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an Authorized
Person by telex or any other such system whereby the receiver
of such communications is able to verify by codes or otherwise
with a reasonable degree of certainty the identity of the
sender of such communication.
- 5 -
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the
Custodian as custodian of the Securities and moneys at any
time owned by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to
be delivered to the Custodian all Securities and all moneys
owned by it, at any time during the period of this Agreement,
and shall specify with respect to such Securities and money
the Series to which the same are specifically allocated, and
the Custodian shall not be responsible for any Securities or
money not so delivered. The Custodian shall physically
segregate, keep and maintain the Securities of the Series
separate and apart from each other Series and from other as-
sets held by the Custodian. Except as otherwise expressly
provided in this Agreement, the Custodian will not be
responsible for any Securities and moneys not actually
received by it, unless the Custodian has been negligent or has
engaged in willful misconduct with respect thereto. The
Custodian will be entitled to reverse any credits of money
made on the Fund's behalf where such credits have been previ-
ously made and moneys are not finally collected, unless the
Custodian has been negligent or has engaged in willful
misconduct with respect thereto. The Fund shall deliver to the
Custodian a certified resolution of the Board of Trustees of
the Fund, substantially in the form of Exhibit A hereto, ap-
proving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry
System all Securities eligible for deposit therein, regardless
of the Series to which the same are specifically allocated and
to utilize the Book-Entry System to the extent possible in
connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities and deliveries and
returns of Securities collateral. Prior to a deposit of
Securities specifically allocated to a Series in any
Depository, the Fund shall deliver to the Custodian a certi-
fied resolution of the Board of Trustees of the Fund,
- 6 -
substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and
ongoing basis until instructed to the contrary by a
Certificate to deposit in such Depository all Securities
specifically allocated to such Series eligible for deposit
therein, and to utilize such Depository to the extent possible
with respect to such Securities in connection with its
performance hereunder, including, without limitation, in con-
nection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral. Securities and moneys deposited in either the
Book-Entry System or a Depository will be represented in ac-
counts which include only assets held by the Custodian for
customers, including, but not limited to, accounts in which
the Custodian acts in a fiduciary or representative capacity
and will be specifically allocated on the Custodian's books to
the separate account for the applicable Series. Prior to the
Custodian's accepting, utilizing and acting with respect to
Clearing Member confirmations for Options and transactions in
Options for a Series as provided in this Agreement, the
Custodian shall have received a certified resolution of the
Fund's Board of Trustees, substantially in the form of Exhibit
C hereto, approving, authorizing and instructing the Custodian
on a continuous and on-going basis, until instructed to the
contrary by a Certificate, to accept, utilize and act in ac-
cordance with such confirmations as provided in this Agreement
with respect to such Series. All securities are to be held or
disposed of by the Custodian for, and subject at all times to
the instructions of, the Fund pursuant to the terms of this
Agreement. The Custodian shall have no power or authority to
assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement,
and shall have the sole power to release and deliver Securi-
ties held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all moneys received by it for
the account of the Fund with respect to such Series. Such
moneys will be held in such manner and account as the Fund and
the Custodian shall agree upon in writing from time to time.
Money credited to a separate account for a Series shall be
subject only to drafts, orders, or charges of the Custodian
pursuant to this Agreement and shall be disbursed by the
Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Resolutions of the Fund's Board of
Trustees certified by an Officer and by the Secretary or As-
sistant Secretary of the Fund setting forth the name and ad-
dress of the person to whom the payment is to be made, the
Series account from which payment is to be made, the purpose
for which payment is to be made, and declaring such purpose to
- 7 -
be a proper corporate purpose; provided, however, that amounts
representing dividends, distributions, or redemptions proceeds
with respect to Shares shall be paid only to the Transfer
Agent Account;
(c) In payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian attributable to
such Series and authorized by this Agreement; or
(d) Pursuant to Certificates to pay interest,
taxes, management fees or operating expenses (including,
without limitation thereto, Board of Trustees' fees and
expenses, and fees for legal accounting and auditing
services), which Certificates set forth the name and address
of the person to whom payment is to be made, state the purpose
of such payment and designate the Series for whose account the
payment is to be made.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Fund with confirmations and a
summary, on a per Series basis, of all transfers to or from
the account of the Fund for a Series, either hereunder or with
any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are
transferred to the account of the Fund for a Series but held
in a Depository, the Custodian shall upon such transfer also
by book-entry or otherwise identify such Securities as
belonging to such Series in a fungible bulk of Securities
registered in the name of the Custodian (or its nominee) or
shown on the Custodian's account on the books of the
Book-Entry System or the Depository. At least monthly and
from time to time, the Custodian shall furnish the Fund with a
detailed statement, on a per Series basis, of the Securities
and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the
Custodian hereunder, which are issued or issuable only in
bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that
form; all other Securities held hereunder may be registered in
the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry
System or a Depository or their successor or successors, or
their nominee or nominees. The Fund agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in
the name of its registered nominee or in the name of the
Book-Entry System or a Depository any Securities which it may
hold hereunder and which may from time to time be registered
in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not
held in the Book-Entry System or in a Depository in a separate
- 8 -
account in the name of such Series physically segregated at
all times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate,
the Custodian by itself, or through the use of the Book-Entry
System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance with
preceding paragraph 4:
(a) Promptly collect all income and dividends due
or payable;
(b) Promptly give notice to the Fund and promptly
present for payment and collect the amount of money or other
consideration payable upon such Securities which are called,
but only if either (i) the Custodian receives a written notice
of such call, or (ii) notice of such call appears in one or
more of the publications listed in Appendix D annexed hereto,
which may be amended at any time by the Custodian without the
prior consent of the Fund, provided the Custodian gives prior
notice of such amendment to the Fund;
(c) Promptly present for payment and collect for
the Fund's account the amount payable upon all Securities
which mature;
(d) Promptly surrender Securities in temporary form
in exchange for definitive Securities;
(e) Promptly execute, as custodian, any necessary
declarations or certificates of ownership under the Federal
Income Tax Laws or the laws or regulations of any other taxing
authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System
or the Depository with respect to Securities therein
deposited, for the account of a Series, all rights and similar
securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, prox-
ies, proxy soliciting materials, consents and other written
information (including, without limitation, notices of tender
offers and exchange offers, pendency of calls, maturities of
Securities and expiration of rights) relating to Securities
held pursuant to this Agreement which are actually received by
the Custodian, such proxies and other similar materials to be
executed by the registered holder (if Securities are
registered otherwise than in the name of the Fund), but
without indicating the manner in which proxies or consents are
to be voted.
- 9 -
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry
System or the Depository, shall:
(a) Promptly execute and deliver to such persons as
may be designated in such Certificate proxies, consents,
authorizations, and any other instruments whereby the author-
ity of the Fund as owner of any Securities held hereunder for
the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder
for the Series specified in such Certificate in exchange for
other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the
exercise of any right, warrant or conversion privilege and
receive and hold hereunder specifically allocated to such
Series any cash or other Securities received in exchange;
(c) Promptly deliver any Securities held hereunder
for the Series specified in such Certificate to any protective
committee, reorganization committee or other person in connec-
tion with the reorganization, refinancing, merger, consolida-
tion, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such
Series in exchange therefor such certificates of deposit,
interim receipts or other instruments or documents as may be
issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the
amount payable upon Securities which may be called as
specified in the Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain posses-
sion of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until
after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments
or certificates are available. The Fund shall deliver to the
Custodian such a Certificate no later than the business day
preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall
comply with Section 17(f) of the Investment Company Act of
1940 in connection with the purchase, sale, settlement, clos-
ing out or writing of Futures Contracts, Options, or Futures
Contract Options by making payments or deliveries specified in
Certificates in connection with any such purchase, sale,
writing, settlement or closing out upon its receipt from a
broker, dealer, or futures commission merchant of a statement
or confirmation reasonably believed by the Custodian to be in
the form customarily used by brokers, dealers, or future
- 10 -
commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be,
confirming that such Security is held by such broker, dealer
or futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any nominee of the
Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from
the Margin Account and payments with respect to Securities to
which a Margin Account relates, shall be made in accordance
with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are
available, the Custodian shall, notwithstanding any provision
in this Agreement to the contrary, make payment for any
Futures Contract, Option, or Futures Contract Option for which
such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or
such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such
certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or
certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each execution of a purchase of
Securities by the Fund, other than a purchase of an Option, a
Futures Contract, or a Futures Contract Option, the Fund shall
deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money
Market Securities, a Certificate, Oral Instructions or Writ-
ten Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the
title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d)
the date of purchase and settlement; (e) the purchase price
per unit; (f) the total amount payable upon such purchase; (g)
the name of the person from whom or the broker through whom
the purchase was made, and the name of the clearing broker, if
any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of such Securities
purchased by or for the Fund, pay to the broker specified in
- 11 -
the Certificate out of the moneys held for the account of such
Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set
forth in such Certificate, Oral Instructions or Written
Instructions.
2. Promptly after each execution of a sale of Securi-
ties by the Fund, other than a sale of any Option, Futures
Contract, Futures Contract Option, or any Reverse Repurchase
Agreement, the Fund shall deliver such to the Custodian (i)
with respect to each sale of Securities which are not Money
Market Securities, a Certificate, and (ii) with respect to
each sale of Money Market Securities, a Certificate, Oral
Instructions or Written Instructions, specifying with respect
to each such sale: (a) the Series to which such Securities
were specifically allocated; (b) the name of the issuer and
the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest, if any; (d) the
date of sale and settlement; (e) the sale price per unit; (f)
the total amount payable to the Fund upon such sale; (g) the
name of the broker through whom or the person to whom the sale
was made, and the name of the clearing broker, if any; and (h)
the name of the broker to whom the Securities are to be
delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series
to the broker in accordance with generally accepted street
practices and as specified in the Certificate upon receipt of
the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set
forth in such Certificate, Oral Instructions or Written
Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any
Option by the Fund other than a closing purchase transaction
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to each Option purchased: (a) the Series to
which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or
Security underlying such Option and the number of Options, or
the name of the in the case of an Index Option, the index to
which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price;
(f) the dates of purchase and settlement; (g) the total amount
payable by the Fund in connection with such purchase; and (h)
the name of the Clearing Member through whom such Option was
purchased. The Custodian shall pay, upon receipt of a Clear-
ing Member's statement confirming the purchase of such Option
held by such Clearing Member for the account of the Custodian
(or any duly appointed and registered nominee of the
- 12 -
Custodian) as custodian for the Fund, out of moneys held for
the account of the Series to which such Option is to be
specifically allocated, the total amount payable upon such
purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount pay-
able as set forth in such Certificate.
2. Promptly after the execution of a sale of any Option
purchased by the Fund, other than a closing sale transaction,
pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to each such
sale: (a) the Series to which such Option was specifically
allocated; (b) the type of Option (put or call); (c) the
instrument, currency, or Security underlying such Option and
the number of Options, or the name of the issuer and the title
and number of shares subject to such Option or, in the case of
a Index Option, the index to which such Option relates and the
number of Index Options sold; (d) the date of sale; (e) the
sale price; (f) the date of settlement; (g) the total amount
payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian
shall consent to the delivery of the Option sold by the Clear-
ing Member which previously supplied the confirmation
described in preceding paragraph 1 of this Article with
respect to such Option against payment to the Custodian of the
total amount payable to the Fund, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Call Option: (a) the Series to which
such Call Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the
Call Option; (c) the expiration date; (d) the date of exercise
and settlement; (e) the exercise price per share; (f) the
total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call
Option was exercised. The Custodian shall, upon receipt of
the Securities underlying the Call Option which was exercised,
pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total
amount payable to the Clearing Member through whom the Call
Option was exercised, provided that the same conforms to the
total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Put Option: (a) the Series to which
such Put Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the
Put Option; (c) the expiration date; (d) the date of exercise
- 13 -
and settlement; (e) the exercise price per share; (f) the
total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Op-
tion was exercised. The Custodian shall, upon receipt of the
amount payable upon the exercise of the Put Option, deliver or
direct a Depository to deliver the Securities specifically
allocated to such Series, provided the same conforms to the
amount payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Index
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Index Option: (a) the Series to which
such Index Option was specifically allocated; (b) the type of
Index Option (put or call); (c) the number of Options being
exercised; (d) the index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the total amount
to be received by the Fund in connection with such exercise;
and (h) the Clearing Member from whom such payment is to be
received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the
Series for which such Covered Call Option was written; (b) the
name of the issuer and the title and number of shares for
which the Covered Call Option was written and which underlie
the same; (c) the expiration date; (d) the exercise price; (e)
the premium to be received by the Fund; (f) the date such
Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received.
The Custodian shall deliver or cause to be delivered, in
exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs
prevailing among Clearing Members dealing in Covered Call Op-
tions and shall impose, or direct a Depository to impose, upon
the underlying Securities specified in the Certificate
specifically allocated to such Series such restrictions as may
be required by such receipts. Notwithstanding the foregoing,
the Custodian has the right, upon prior written notification
to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not
deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct
the Depository to deliver, the Securities subject to such
Covered Call Option and specifying: (a) the Series for which
such Covered Call Option was written; (b) the name of the is-
suer and the title and number of shares subject to the Covered
Call Option; (c) the Clearing Member to whom the underlying
- 14 -
Securities are to be delivered; and (d) the total amount pay-
able to the Fund upon such delivery. Upon the return and/or
cancellation of any receipts delivered pursuant to paragraph 6
of this Article, the Custodian shall deliver, or direct a
Depository to deliver, the underlying Securities as specified
in the Certificate against payment of the amount to be
received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing with respect to such Put Option: (a) the Series for which
such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Put Option is written; (g) the name of
the Clearing Member through whom the premium is to be received
and to whom a Put Option guarantee letter is to be delivered;
(h) the amount of cash, and/or the amount and kind of Securi-
ties, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; and
(i) the amount of cash and/or the amount and kind of Securi-
ties specifically allocated to such Series to be deposited
into the Collateral Account for such Series. The Custodian
shall, after making the deposits into the Collateral Account
specified in the Certificate, issue a Put Option guarantee
letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member
specified in the Certificate against receipt of the premium
specified in said Certificate. Notwithstanding the foregoing,
the Custodian shall be under no obligation to issue any Put
Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject
to the Put Option; (c) the Clearing Member from whom the
underlying Securities are to be received; (d) the total amount
payable by the Fund upon such delivery; (e) the amount of cash
and/or the amount and kind of Securities specifically al-
located to such Series to be withdrawn from the Collateral
Account for such Series and (f) the amount of cash and/or the
amount and kind of Securities, specifically allocated to such
Series, if any, to be withdrawn from the Senior Security Ac-
count. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian
in connection with such Put Option, the Custodian shall pay
out of the moneys held for the account of the Series to which
such Put Option was specifically allocated the total amount
payable to the Clearing Member specified in the Certificate as
set forth in such Certificate, against delivery of such
- 15 -
Securities, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes an Index Option, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing with respect to such Index Option: (a) the Series for
which such Index Option was written; (b) whether such Index
Option is a put or a call; (c) the number of options written;
(d) the index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through
whom such Option was written; (h) the premium to be received
by the Fund; (i) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such Series
to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and
(k) the amount of cash and/or the amount and kind of Securi-
ties, if any, specifically allocated to such Series to be
deposited in a Margin Account, and the name in which such ac-
count is to be or has been established. The Custodian shall,
upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such
receipts, if any, which the Custodian has specifically agreed
to issue, which are in accordance with the customs prevailing
among Clearing Members in Index Options and make the deposits
into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the
Certificate.
11. Whenever an Index Option written by the Fund and
described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Index Option: (a)
the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option
being exercised; (c) the Clearing Member through whom such
Index Option is being exercised; (d) the total amount payable
upon such exercise, and whether such amount is to be paid by
or to the Fund; (e) the amount of cash and/or amount and kind
of Securities, if any, to be withdrawn from the Margin
Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from
the Collateral Account for such Series. Upon the return
and/or cancellation of the receipt, if any, delivered pursuant
to the preceding paragraph of this Article, the Custodian
shall pay out of the moneys held for the account of the Series
to which such Stock Index Option was specifically allocated to
the Clearing Member specified in the Certificate the total
amount payable, if any, as specified therein.
- 16 -
12. Promptly after the execution of a purchase or sale
by the Fund of any Option identical to a previously written
Option described in paragraphs, 6, 8 or 10 of this Article in
a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall
promptly deliver to the Custodian a Certificate specifying
with respect to the Option being purchased: (a) that the
transaction is a Closing Purchase Transaction or a Closing
Sale Transaction; (b) the Series for which the Option was
written; (c) the instrument, currency, or Security subject to
the Option, or, in the case of an Index Option, the index to
which such Option relates and the number of Options held; (d)
the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g)
the type of Option (put or call); (h) the date of such
purchase or sale; (i) the name of the Clearing Member to whom
the premium is to be paid or from whom the amount is to be
received; and (j) the amount of cash and/or the amount and
kind of Securities, if any, to be withdrawn from the
Collateral Account, a specified Margin Account, or the Senior
Security Account for such Series. Upon the Custodian's
payment of the premium or receipt of the amount, as the case
may be, specified in the Certificate and the return and/or
cancellation of any receipt issued pursuant to paragraphs 6, 8
or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction or the
Closing Sale Transaction, the Custodian shall remove, or
direct a Depository to remove, the previously imposed
restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option
purchased or written by the Fund and described in this
Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3
Article III herein, and upon the return and/or cancellation of
any receipts issued by the Custodian, shall make such
withdrawals from the Collateral Account, and the Margin Ac-
count and/or the Senior Security Account as may be specified
in a Certificate received in connection with such expiration,
exercise, or consummation.
14. Securities acquired by the Fund through the exercise
of an Option described in this Article shall be subject to
Article IV hereof.
- 17 -
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Futures Contract,
(or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is
being entered; (b) the category of Futures Contract (the name
of the underlying index or financial instrument); (c) the
number of identical Futures Contracts entered into; (d) the
delivery or settlement date of the Futures Contract(s); (e)
the date the Futures Contract(s) was (were) entered into and
the maturity date; (f) whether the Fund is buying (going long)
or selling (going short) such Futures Contract(s); (g) the
amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such
Series; (h) the name of the broker, dealer, or futures commis-
sion merchant through whom the Futures Contract was entered
into; and (i) the amount of fee or commission, if any, to be
paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian
shall make the deposits, if any, to the Margin Account in ac-
cordance with the terms and conditions of the Margin Account
Agreement. The Custodian shall make payment out of the moneys
specifically allocated to such Series of the fee or commis-
sion, if any, specified in the Certificate and deposit in the
Senior Security Account for such Series the amount of cash
and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or
futures commission merchant with respect to an outstanding
Futures Contract shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agree-
ment.
(b) Any variation margin payment or similar payment
from a broker, dealer, or futures commission merchant to the
Fund with respect to an outstanding Futures Contract shall be
received and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement
is made on such Futures Contract, the Fund shall deliver to
the Custodian prior to the delivery or settlement date a
Certificate specifying: (a) the Futures Contract and the
Series to which the same relates; (b) with respect to an Index
Futures Contract, the total cash settlement amount to be paid
- 18 -
or received, and with respect to a Financial Futures Contract,
the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission
merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be
withdrawn from the Senior Security Account for such Series.
The Custodian shall make the payment or delivery specified in
the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the Custodian
hereunder, the Fund shall deliver to the Custodian a
Certificate specifying: (a) the items of information required
in a Certificate described in paragraph 1 of this Article, and
(b) the Futures Contract being offset. The Custodian shall
make payment out of the money specifically allocated to such
Series of the fee or commission, if any, specified in the
Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3
of Article III herein, and make such withdrawals from the
Senior Security Account for such Series as may be specified in
such Certificate. The withdrawals, if any, to be made from
the Margin Account shall be made by the Custodian in ac-
cordance with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any
Futures Contract Option by the Fund, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series to which such Option
is specifically allocated; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price;
(f) the dates of purchase and settlement; (g) the amount of
premium to be paid by the Fund upon such purchase; (h) the
name of the broker or futures commission merchant through whom
such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made.
The Custodian shall pay out of the moneys specifically al-
located to such Series the total amount to be paid upon such
purchase to the broker or futures commissions merchant through
whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
- 19 -
2. Promptly after the execution of a sale of any
Futures Contract Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the Custodian a
Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically
allocated; (b) the type of Future Contract Option (put or
call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures
Contract underlying the Futures Contract Option; (d) the date
of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h)
the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the
cancellation of the Futures Contract Option being closed
against payment to the Custodian of the total amount payable
to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the
Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Op-
tion was specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d)
the date of exercise; (e) the name of the broker or futures
commission merchant through whom the Futures Contract Option
is exercised; (f) the net total amount, if any, payable by the
Fund; (g) the amount, if any, to be received by the Fund; and
(h) the amount of cash and/or the amount and kind of Securi-
ties to be deposited in the Senior Security Account for such
Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments
of money, if any, and the deposits of Securities, if any, into
the Senior Security Account as specified in the Certificate.
The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a)
the Series for which such Futures Contract Option was written;
(b) the type of Futures Contract Option (put or call); (c) the
type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the expiration date; (e) the
exercise price; (f) the premium to be received by the Fund;
(g) the name of the broker or futures commission merchant
through whom the premium is to be received; and (h) the amount
of cash and/or the amount and kind of Securities, if any, to
be deposited in the Senior Security Account for such Series.
The Custodian shall, upon receipt of the premium specified in
- 20 -
the Certificate, make out of the moneys and Securities
specifically allocated to such Series the deposits into the
Senior Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically
allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the name of the broker or futures
commission merchant through whom such Futures Contract Option
was exercised; (e) the net total amount, if any, payable to
the Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited
in the Senior Security Account for such Series. The Custodian
shall, upon its receipt of the net total amount payable to the
Fund, if any, specified in such Certificate make the payments,
if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits, if any,
to be made to the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a put is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying:
(a) the Series to which such Option was specifically al-
located; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying such Futures
Contract Option; (d) the name of the broker or futures commis-
sion merchant through whom such Futures Contract Option is
exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount and
kind of Securities and/or cash to be withdrawn from or
deposited in, the Senior Security Account for such Series, if
any. The Custodian shall, upon its receipt of the net total
amount payable to the Fund, if any, specified in the
Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any,
and the deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
- 21 -
7. Promptly after the execution by the Fund of a
purchase of any Futures Contract Option identical to a previ-
ously written Futures Contract Option described in this
Article in order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall deliver to the
Custodian a Certificate specifying with respect to the Futures
Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is
a closing transaction; (c) the type of Future Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Option Contract; (d)
the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h)
the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for
such Series. The Custodian shall effect the withdrawals from
the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Op-
tion written or purchased by the Fund and described in this
Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdraw-
als from and/or in the case of an exercise such deposits into
the Senior Security Account as may be specified in a
Certificate. The deposits to and/or withdrawals from the
Margin Account, if any, shall be made by the Custodian in ac-
cordance with the terms and conditions of the Margin Account
Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this
Article shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of
Securities by any Series of the Fund, the Fund shall deliver
to the Custodian a Certificate specifying: (a) the Series for
which such short sale was made; (b) the name of the issuer and
the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest or dividends, if
any; (d) the dates of the sale and settlement; (e) the sale
- 22 -
price per unit; (f) the total amount credited to the Fund upon
such sale, if any, (g) the amount of cash and/or the amount
and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has
been or is to be established; (h) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in
a Senior Security Account, and (i) the name of the broker
through whom such short sale was made. The Custodian shall
upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon
such sale, if any, as specified in the Certificate is held by
such broker for the account of the Custodian (or any nominee
of the Custodian) as custodian of the Fund, issue a receipt or
make the deposits into the Margin Account and the Senior
Security Account specified in the Certificate.
2. Promptly after the execution of a purchase to
close-out any short sale of Securities, the Fund shall
promptly deliver to the Custodian a Certificate specifying
with respect to each such closing out: (a) the Series for
which such transaction is being made; (b) the name of the is-
suer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if
any, required to effect such closing-out to be delivered to
the broker; (d) the dates of closing-out and settlement; (e)
the purchase price per unit; (f) the net total amount payable
to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of
cash and the amount and kind of Securities to be withdrawn, if
any, from the Margin Account; (i) the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account; and (j) the name of the
broker through whom the Fund is effecting such closing-out.
The Custodian shall, upon receipt of the net total amount pay-
able to the Fund upon such closing-out, and the return and/ or
cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of
the moneys held for the account of the Fund to the broker the
net total amount payable to the broker, and make the withdraw-
als from the Margin Account and the Senior Security Account,
as the same are specified in the Certificate.
- 23 -
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder, the Fund shall deliver to the Custodian a
Certificate, or in the event such Reverse Repurchase Agreement
is a Money Market Security, a Certificate, Oral Instructions,
or Written Instructions specifying: (a) the Series for which
the Reverse Repurchase Agreement is entered; (b) the total
amount payable to the Fund in connection with such Reverse
Repurchase Agreement and specifically allocated to such
Series; (c) the broker, dealer, or financial institution with
whom the Reverse Repurchase Agreement is entered; (d) the
amount and kind of Securities to be delivered by the Fund to
such broker, dealer, or financial institution; (e) the date of
such Reverse Repurchase Agreement; and (f) the amount of cash
and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon receipt of
the total amount payable to the Fund specified in the
Certificate, Oral Instructions, or Written Instructions make
the delivery to the broker, dealer, or financial institution
and the deposits, if any, to the Senior Security Account,
specified in such Certificate, Oral Instructions, or Written
Instructions.
2. Upon the termination of a Reverse Repurchase Agree-
ment described in preceding paragraph 1 of this Article, the
Fund shall promptly deliver a Certificate or, in the event
such Reverse Repurchase Agreement is a Money Market Security,
a Certificate, Oral Instructions, or Written Instructions to
the Custodian specifying: (a) the Reverse Repurchase Agreement
being terminated and the Series for which same was entered;
(b) the total amount payable by the Fund in connection with
such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series
in connection with such termination; (d) the date of termina-
tion; (e) the name of the broker, dealer, or financial
institution with whom the Reverse Repurchase Agreement is to
be terminated; and (f) the amount of cash and/or the amount
and kind of Securities to be withdrawn from the Senior Securi-
ties Account for such Series. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by
the Fund specified in the Certificate, Oral Instructions, or
Written Instructions, make the payment to the broker, dealer,
or financial institution and the withdrawals, if any, from the
Senior Security Account, specified in such Certificate, Oral
Instructions, or Written Instructions.
- 24 -
3. The Certificates, Oral Instructions, or Written
Instructions described in paragraphs 1 and 2 of this Article
may with respect to any particular Reverse Repurchase Agree-
ment be combined and delivered to the Custodian at the time of
entering into such Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian
hereunder, the Fund shall deliver or cause to be delivered to
the Custodian a Certificate specifying with respect to each
such loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
title of the Securities, (c) the number of shares or the
principal amount loaned, (d) the date of loan and delivery,
(e) the total amount to be delivered to the Custodian against
the loan of the Securities, including the amount of cash col-
lateral and the premium, if any, separately identified, and
(f) the name of the broker, dealer, or financial institution
to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial
institution to which the loan was made upon receipt of the
total amount designated in the Certificate as to be delivered
against the loan of Securities. The Custodian may accept pay-
ment in connection with a delivery otherwise than through the
Book-Entry System or a Depository only in the form of a certi-
fied or bank cashier's check payable to the order of the Fund
or the Custodian drawn on New York Clearing House funds.
2. In connection with each termination of a loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with
respect to each such loan termination and return of Securi-
ties: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
title of the Securities to be returned, (c) the number of
shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the
Custodian (including the cash collateral for such Securities
minus any offsetting credits as described in said
Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be
returned. The Custodian shall receive all Securities returned
from the broker, dealer, or financial institution to which
such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the
total amount payable upon such return of Securities as set
forth in the Certificate.
- 25 -
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Ac-
count and from time to time make such deposits thereto, or
withdrawals therefrom, as specified in a Certificate. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior
Security Account for such Series. In the event that the Fund
fails to specify in a Certificate the Series, the name of the
issuer, the title and the number of shares or the principal
amount of any particular Securities to be deposited by the
Custodian into, or withdrawn from, a Senior Securities Ac-
count, the Custodian shall be under no obligation to make any
such deposit or withdrawal and shall promptly notify the Fund
that no such deposit has been made.
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose
benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any
Margin Account shall be dealt with in accordance with the
terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and
security interest in and to any property at any time held by
the Custodian in any Collateral Account described herein. In
accordance with applicable law the Custodian may enforce its
lien and realize on any such property whenever the Custodian
has made payment or delivery pursuant to any Put Option
guarantee letter or similar document or any receipt issued
hereunder by the Custodian. In the event the Custodian should
realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee
letter or similar document or any receipt, such deficiency
shall be a debt owed the Custodian by the Fund within the
scope of Article XIV herein.
5. On each business day the Custodian shall furnish the
Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close
- 26 -
of business on the previous business day: (a) the name of the
Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker,
dealer, or futures commission merchant specified in the name
of a Margin Account a copy of the statement furnished the Fund
with respect to such Margin Account.
6. The Custodian shall establish a Collateral Account
and from time to time shall make such deposits thereto as may
be specified in a Certificate. Promptly after the close of
business on each business day in which cash and/or Securities
are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect
to such Collateral Account specifying the amount of cash
and/or the amount and kind of Securities held therein. No
later than the close of business next succeeding the delivery
to the Fund of such statement, the Fund shall furnish to the
Custodian a Certificate or Written Instructions specifying the
then market value of the Securities described in such state-
ment. In the event such then market value is indicated to be
less than the Custodian's obligation with respect to any
outstanding Put Option guarantee letter or similar document,
the Fund shall promptly specify in a Certificate the ad-
ditional cash and/or Securities to be deposited in such Col-
lateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of
the resolution of the Board of Trustees of the Fund, certified
by the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, either (i) setting forth with respect to the
Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall
be determined, the amount payable per Share of such Series to
the shareholders of record as of that date and the total
amount payable to the Dividend Agent and any sub-dividend
agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein
and the declaration of dividends and distributions thereon
the Custodian to rely on Oral Instructions, Written Instruc-
tions, or a Certificate setting forth the date of the declara-
tion of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of
such Series to the shareholders of record as of that date and
the total amount payable to the Dividend Agent on the payment
date.
- 27 -
2. Upon the payment date specified in such resolution,
Oral Instructions, Written Instructions, or Certificate, as
the case may be, the Custodian shall pay to the Transfer Agent
Account out of the moneys held for the account of the Series
specified therein the total amount payable to the Dividend
Agent and any sub-dividend agent or co-dividend agent of the
Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver or cause to be delivered, to the Custodian a
Certificate duly specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
(b) The amount of money to be received by the
Custodian for the sale of such Shares and specifically al-
located to the separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the separate account
in the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series the
Custodian shall pay, out of the money held for the account of
such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
desires the Custodian to make payment out of the money held by
the Custodian hereunder in connection with a redemption of any
Shares, it shall furnish, or cause to be furnished, to the
Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in
good form for redemption, the Custodian shall make payment to
the Transfer Agent Account out of the moneys held in the
separate account in the name of the Series the total amount
- 28 -
specified in the Certificate issued pursuant to the foregoing
paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion
advance funds on behalf of any Series which results in an
overdraft because the moneys held by the Custodian in the
separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a
Certificate, Oral Instructions, or Written Instructions or
which results in an overdraft in the separate account of such
Series for some other reason, or if the Fund is for any other
reason indebted to the Custodian with respect to a Series,
(except a borrowing for investment or for temporary or
emergency purposes using Securities as collateral pursuant to
a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness
shall be deemed to be a loan made by the Custodian to the Fund
for such Series payable on demand and shall bear interest from
the date incurred at a rate per annum (based on a 360-day year
for the actual number of days involved) equal to the Federal
Funds Rate plus 1/2%, such rate to be adjusted on the effec-
tive date of any change in such Federal Funds Rate but in no
event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien
and security interest in the aggregate amount of such
overdrafts and indebtedness as may from time to time exist in
and to any property specifically allocated to such Series at
any time held by it for the benefit of such Series or in which
the Fund may have an interest which is then in the Custodian's
possession or control or in possession or control of any third
party acting in the Custodian's behalf. The Fund authorizes
the Custodian, in its sole discretion, at any time to charge
any such overdraft or indebtedness together with interest due
thereon against any money balance of account standing to such
Series' credit on the Custodian's books. In addition, the
Fund hereby covenants that on each Business Day on which
either it intends to enter a Reverse Repurchase Agreement and/
or otherwise borrow from a third party, or which next succeeds
a Business Day on which at the close of business the Fund had
outstanding a Reverse Repurchase Agreement or such a borrow-
ing, it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify
the Series to which the same relates, and shall not incur any
indebtedness, including pursuant to any Reverse Repurchase
Agreement, not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a
- 29 -
separate agreement, the Custodian) from which it borrows money
for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for
such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such
borrowing: (a) the Series to which such borrowing relates; (b)
the name of the bank, (c) the amount and terms of the borrow-
ing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other
loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan
becomes due and payable, (f) the total amount payable to the
Fund on the borrowing date, (g) the market value of Securities
to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a
statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such
loan is in conformance with the Investment Company Act of 1940
and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified col-
lateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may,
at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory
note or loan agreement. The Custodian shall deliver such
Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described
in this paragraph. The Fund shall cause all Securities
released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the
event that the Fund fails to specify in a Certificate the
Series, the name of the issuer, the title and number of shares
or the principal amount of any particular Securities to be
delivered as collateral by the Custodian, to any such bank,
the Custodian shall not be under any obligation to deliver any
Securities.
- 30 -
ARTICLE XV
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the
performance of its duties hereunder, and, except as
hereinafter provided, neither the Custodian nor its nominee
shall be liable for any loss or damage, including counsel
fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agree-
ment, except for any such loss or damage arising out of its
own negligence, bad faith, or willful misconduct or that of
its officers, employees, or agents. The Custodian may, with
respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and
opinion of counsel to the Fund, at the expense of the Fund,
or of its own counsel, at its own expense, and shall be fully
protected with respect to anything done or omitted by it in
good faith in conformity with such advice or opinion. The
Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence or willful
misconduct on the part of the Custodian or any of its
employees or agents.
2. Notwithstanding the foregoing, the Custodian shall
be under no obligation to inquire into, and shall not be li-
able for:
(a) The validity (but not the authenticity) of the
issue of any Securities purchased, sold, or written by or for
the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received
therefor, as specified in a Certificate, Oral Instructions, or
Written Instructions;
(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor, as specified in a Certificate;
(c) The legality of the declaration or payment of
any dividend by the Fund, as specified in a resolution,
Certificate, Oral Instructions, or Written Instructions;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securi-
ties, nor shall the Custodian be under any duty or obligation
to see to it that the cash collateral delivered to it by a
broker, dealer, or financial institution or held by it at any
time as a result of such loan of portfolio Securities of the
- 31 -
Fund is adequate collateral for the Fund against any loss it
might sustain as a result of such loan, except that this sub-
paragraph shall not excuse any liability the Custodian may
have for failing to act in accordance with Article X hereof or
any Certificate, Oral Instructions, or Written Instructions
given in accordance with this Agreement. The Custodian
specifically, but not by way of limitation, shall not be under
any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for
the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obliga-
tion to see that any broker, dealer or financial institution
to which portfolio Securities of the Fund are lent pursuant to
Article X of this Agreement makes payment to it of any
dividends or interest which are payable to or for the account
of the Fund during the period of such loan or at the termina-
tion of such loan, provided, however, that the Custodian shall
promptly notify the Fund in the event that such dividends or
interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of
money and/or Securities held in any Margin Account, Senior
Security Account or Collateral Account in connection with
transactions by the Fund, except that this sub-paragraph shall
not excuse any liability the Custodian may have for failing to
establish, maintain, make deposits to or withdrawals from such
accounts in accordance with this Agreement. In addition, the
Custodian shall be under no duty or obligation to see that any
broker, dealer, futures commission merchant or Clearing Member
makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from
such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from
any broker, dealer, futures commission merchant or Clearing
Member is the amount the Fund is entitled to receive, or to
notify the Fund of the Custodian's receipt or non-receipt of
any such payment.
3. The Custodian shall not be liable for, or considered
to be the Custodian of, any money, whether or not represented
by any check, draft, or other instrument for the payment of
money, received by it on behalf of the Fund until the
Custodian actually receives such money directly or by the
final crediting of the account representing the Fund's inter-
est at the Book-Entry System or the Depository.
4. With respect to Securities held in a Depository,
except as otherwise provided in paragraph 5(b) of Article III
hereof, the Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls,
conversions, exchange offers, tenders, interest rate changes
or similar matters relating to such Securities, unless the
Custodian shall have actually received timely notice from the
- 32 -
Depository in which such Securities are held. In no event
shall the Custodian have any responsibility or liability for
the failure of a Depository to collect, or for the late col-
lection or late crediting by a Depository of any amount pay-
able upon Securities deposited in a Depository which may
mature or be redeemed, retired, called or otherwise become
payable. However, upon receipt of a Certificate from the Fund
of an overdue amount on Securities held in a Depository the
Custodian shall make a claim against the Depository on behalf
of the Fund, except that the Custodian shall not be under any
obligation to appear in, prosecute or defend any action suit
or proceeding in respect to any Securities held by a
Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all
expense and liability be furnished as often as may be
required, or alternatively, the Fund shall be subrogated to
the rights of the Custodian with respect to such claim against
the Depository should it so request in a Certificate. This
paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral
Instructions, or Written Instructions given in accordance with
this Agreement.
5. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount due to
the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent
of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount if the
Securities upon which such amount is payable are in default,
or if payment is refused after the Custodian has timely and
properly, in accordance with this Agreement, made due demand
or presentation, unless and until (i) it shall be directed to
take such action by a Certificate and (ii) it shall be assured
to its satisfaction of reimbursement of its costs and expenses
in connection with any such action, but the Custodian shall
have such a duty if the Securities were not in default on the
payable date and the Custodian failed to timely and properly
make such demand for payment and such failure is the reason
for the non-receipt of payment.
7. The Custodian may appoint one or more banking
institutions as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to,
banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Fund, upon such
terms and conditions as may be approved in a Certificate or
contained in an agreement executed by the Custodian, the Fund
and the appointed institution.
- 33 -
8. The Custodian agrees to indemnify the Fund against
and save the Fund harmless from all liability, claims, losses
and demands whatsoever, including attorney's fees, howsoever
arising or incurred because of the negligence, bad faith or
willful misconduct of any Sub-Custodian of the Securities and
moneys owned by the Fund, provided such Sub-Custodian is a
banking institution located in a foreign country and appointed
by the Custodian pursuant to paragraph 7 of this Article.
9. The Custodian shall not be under any duty or obliga-
tion (a) to ascertain whether any Securities at any time
delivered to, or held by it, for the account of the Fund and
specifically allocated to a Series are such as properly may be
held by the Fund or such Series under the provisions of its
then current prospectus, or (b) to ascertain whether any
transactions by the Fund, whether or not involving the
Custodian, are such transactions as may properly be engaged in
by the Fund.
10. The Custodian shall be entitled to receive and the
Fund agrees to pay to the Custodian all reasonable
out-of-pocket expenses and such compensation as may be agreed
upon from time to time between the Custodian and the Fund.
The Custodian may charge such compensation, and any such
expenses with respect to a Series incurred by the Custodian in
the performance of its duties under this Agreement against any
money specifically allocated to such Series. The Custodian
shall also be entitled to charge against any money held by it
for the account of a Series the amount of any loss, damage,
liability or expense, including counsel fees, for which it
shall be entitled to reimbursement under the provisions of
this Agreement attributable to, or arising out of, its serving
as Custodian for such Series. The expenses for which the
Custodian shall be entitled to reimbursement hereunder shall
include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred
in settling outside of New York City transactions involving
the purchase and sale of Securities of the Fund.
Notwithstanding the foregoing or anything else contained in
this Agreement to the contrary, the Custodian shall, prior to
effecting any charge for compensation, expenses, or any
overdraft or indebtedness or interest thereon, submit an
invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing, Oral
Instructions, or Written Instructions received by the
Custodian and reasonably believed by the Custodian to be
genuine. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming Oral Instructions
or Written Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian,
whether by hand delivery, telecopier or other similar device,
- 34 -
or otherwise, by the close of business of the same day that
such Oral Instructions or Written Instructions are given to
the Custodian. The Fund agrees that the fact that such
confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions thereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no li-
ability to the Fund in acting upon Oral Instructions or Writ-
ten Instructions given to the Custodian hereunder concerning
such transactions provided such instructions reasonably appear
to have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian
and reasonably believed by the Custodian to be given in ac-
cordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing,
the Custodian shall be under no duty to inquire into, and
shall not be liable for, the accuracy of any statements or
representations contained in any such instrument or other
notice including, without limitation, any specification of any
amount to be paid to a broker, dealer, futures commission
merchant or Clearing Member. This paragraph shall not excuse
any failure by the Custodian to have acted in accordance with
any Margin Agreement it has executed or any Certificate, Oral
Instructions, or Written Instructions given in accordance with
this Agreement.
13. The books and records pertaining to the Fund, as
described in Appendix E hereto, which are in the possession of
the Custodian shall be the property of the Fund. Such books
and records shall be prepared and maintained by the Custodian
as required by the Investment Company Act of 1940, as amended,
and other applicable securities laws and rules and regula-
tions. The Fund, or the Fund's authorized representatives,
shall have access to such books and records during the
Custodian's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's
authorized representative, and the Fund shall reimburse the
Custodian its expenses of providing such copies. Upon reason-
able request of the Fund, the Custodian shall provide in hard
copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by
the Custodian on a computer disc, or are similarly maintained,
and the Fund shall reimburse the Custodian for its expenses of
providing such hard copy or micro-film.
14. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, each Depository or O.C.C.,
and with such reports on its own systems of internal account-
ing control as the Fund may reasonably request from time to
time.
- 35 -
15. The Custodian shall furnish upon request annually to
the Fund a letter prepared by the Custodian's accountants with
respect to the Custodian's internal systems and controls in
the form generally provided by the Custodian to other invest-
ment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims,
losses and demands whatsoever, including attorney's fees,
howsoever arising out of, or related to, the Custodian's
performance of its obligations under this Agreement, except
for any such liability, claim, loss and demand arising out of
the Custodian's own negligence, bad faith, or willful
misconduct or that of its officers, employees, or agents.
17. Subject to the foregoing provisions of this Agree-
ment, the Custodian shall deliver and receive Securities, and
receipts with respect to such Securities, and shall make and
receive payments only in accordance with the customs prevail-
ing from time to time among brokers or dealers in such Securi-
ties and, except as may otherwise be provided by this
Agreement or as may be in accordance with such customs, shall
make payment for Securities only against delivery thereof and
deliveries of Securities only against payment therefor.
18. The Custodian shall have no duties or
responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agree-
ment, and no covenant or obligation shall be implied in this
Agreement against the Custodian.
ARTICLE XVI
TERMINATION
1. Except as provided in paragraph 3 of this Article,
this Agreement shall continue until terminated by either the
Custodian giving to the Fund, or the Fund giving to the
Custodian, a notice in writing specifying the date of such
termination, which date shall be not less than 60 days after
the date of the giving of such notice. In the event such
notice or a notice pursuant to paragraph 3 of this Article is
given by the Fund, it shall be accompanied by a copy of a
resolution of the Board of Trustees of the Fund, certified by
an Officer and the Secretary or an Assistant Secretary of the
Fund, electing to terminate this Agreement and designating a
successor custodian or custodians, each of which shall be
eligible to serve as a custodian for the securities of a
management investment company under the Investment Company Act
of 1940. In the event such notice is given by the Custodian,
the Fund shall, on or before the termination date, deliver to
the Custodian a copy of a resolution of the Board of Trustees
- 36 -
of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, designating a
successor custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company
having not less than $2,000,000 aggregate capital, surplus and
undivided profits. Upon the date set forth in such notice
this Agreement shall terminate, and the Custodian shall upon
receipt of a notice of acceptance by the successor custodian
on that date deliver directly to the successor custodian all
Securities and moneys then owned by the Fund and held by it as
Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall
then be entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding
paragraph, the Fund shall upon the date specified in the
notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held
in the Book-Entry System which cannot be delivered to the
Fund) and moneys then owned by the Fund be deemed to be its
own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement,
other than the duty with respect to Securities held in the
Book Entry System which cannot be delivered to the Fund to
hold such Securities hereunder in accordance with this Agree-
ment.
3. Notwithstanding the foregoing, the Fund may
terminate this Agreement upon the date specified in a written
notice in the event of the "Bankruptcy" of The Bank of New
York. As used in this sub-paragraph, the term "Bankruptcy"
shall mean The Bank of New York's making a general assignment,
arrangement or composition with or for the benefit of its
creditors, or instituting or having instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or
the entry of a order for relief under any applicable
bankruptcy law or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors'
rights, or if a petition is presented for the winding up or
liquidation of the party or a resolution is passed for its
winding up or liquidation, or it seeks, or becomes subject to,
the appointment of an administrator, receiver, trustee,
custodian or other similar official for it or for all or
substantially all of its assets or its taking any action in
furtherance or, or indicating its consent to approval of, or
acquiescence in, any of the foregoing.
- 37 -
ARTICLE XVII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund
be obligated to have or utilize the Terminal Link, and the
provisions of this Article shall apply if, but only if, the
Fund in its sole and absolute discretion elects to utilize the
Terminal Link to transmit Certificates to and to receive
notices from the Custodian.
2. The parties hereto shall utilize the Terminal Link
only for the purpose of the Fund providing Certificates to the
Custodian and the Custodian providing notices to the Fund and
only after the Fund and the Custodian shall have established
access codes and internal safekeeping procedures to safeguard
and protect the confidentiality and availability of such
access codes. Each use of the Terminal Link by the Fund shall
constitute a representation and warranty that at least two
such access codes have been utilized and that such procedures
have been established.
3. Each party shall obtain and maintain at its own cost
and expense all equipment and services, including, but not
limited to communications services, necessary for it to
utilize the Terminal Link, and the other party shall not be
responsible for the reliability or availability of any such
equipment or services, except that the Custodian shall not pay
any communications costs of any line leased by the Fund, even
if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made
available as part of, or through the Terminal and any
proprietary data, software, processes, information and
documentation (other than any such which are or become part of
the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the
exclusive and confidential property of the Custodian. The
Fund shall, and shall cause others to which it discloses the
Information, to keep the Information confidential by using the
same care and discretion it uses with respect to its own
confidential property and trade secrets, and shall neither
make nor permit any disclosure without the express prior writ-
ten consent of the Custodian.
5. Upon termination of this Agreement for any reason,
each Fund shall return to the Custodian any and all copies of
the Information which are in the Fund's possession or under
its control, or which the Fund distributed to third parties.
The provisions of this Article shall not affect the copyright
status of any of the Information which may be copyrighted and
shall apply to all Information whether or not copyrighted.
- 38 -
6. The Custodian reserves the right to modify the
Terminal Link from time to time without notice to the Fund,
except that the Custodian shall give the Fund notice not less
than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund
agrees not to modify or attempt to modify the Terminal Link
without the Bank's prior written consent. The Fund
acknowledges that the Terminal Link is the property of the
Custodian and, accordingly, the Fund agrees that any
modifications to the Terminal Link, whether by the Fund or the
Custodian and whether with or without the Custodian's consent,
shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and sup-
pliers it utilizes or the Fund utilizes in connection with the
Terminal Link makes any warranties or representations, express
or implied, in fact or in law, including but not limited to
warranties of merchantability and fitness for a particular
purpose.
8. Each party will, and will cause its officers and
employees to, treat the user and authorization codes,
passwords and authentication keys applicable to Terminal Link
with extreme care. Each party hereby irrevocably authorizes
the other to act in accordance with and rely on Certificates
and notices received by it through the Terminal Link. Each
party acknowledges that it is its responsibility to assure
that only its authorized persons use the Terminal Link on its
behalf, and that a party shall not be responsible nor liable
for use of the Terminal Link on its behalf of the other party
by unauthorized persons except that the other party shall be
liable for such use thereof by unauthorized persons who have
obtained access thereto as a result of the bad faith or
willful misconduct of such party or any of its officers or
employees.
9. Notwithstanding anything else in this Agreement to
the contrary, neither party shall have any liability to the
other for any losses, damages, injuries, claims, costs or
expenses arising as a result of a delay, omission or error in
the transmission of a Certificate or notice by use of the
Terminal Link except for money damages for those suffered as
the result of the negligence, bad faith or willfull misconduct
of such party or its officers, employees or agents in an
amount not exceeding for any incident $100,000, provided,
however, that a party shall have no liability under this
Section 9 if the other party fails to comply with the
provisions of Section 11.
10. Without limiting the generality of the foregoing, it
is hereby agreed that in no event shall either party or any
manufacturer or supplier of its computer equipment, software
or services relating to the Terminal Link be responsible for
- 39 -
any special, indirect, incidental or consequential damages
which the other party may incur or experience by reason of its
use of the Terminal Link even if such party, manufacturer or
supplier has been advised of the possibility of such damages,
nor with respect to the use of the Terminal Link shall either
party or any such manufacturer or supplier be liable for acts
of God, or with respect to the following to the extent beyond
such person's reasonable control: machine or computer
breakdown or malfunction, interruption or malfunction of
communication facilities, labor difficulties or any other
similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of,
the Terminal Link as promptly as practicable, and in any event
within 24 hours after the earliest of (i) discovery thereof,
(ii) the business day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case
of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that
discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the
Custodian learns of any errors, omissions or interruption in,
or delay or unavailability of, the Terminal Link.
12. Each party shall, as soon as practicable after its
receipt of a Certificate or of any notice transmitted by the
Terminal Link, verify to the other party by use of the
Terminal Link its receipt of such Certificate or notice, and
in the absence of such verification a party to whom a
Certificate or notice is sent shall not be liable for any
failure to act in accordance with such Certificate or notice,
and the sending party may not claim that such Certificate or
notice was received by the other.
ARTICLE XVIII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed
by two of the present Officers of the Fund under its seal,
setting forth the names and the signatures of the present
Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that
any such present Authorized Person ceases to be an Authorized
Person or in the event that other or additional Authorized
Persons are elected or appointed. Until such new Certificate
shall be received, the Custodian shall be entitled to rely and
to act upon Oral Instructions, Written Instructions, or
signatures of the present Authorized Persons as set forth in
the last delivered Certificate to the extent provided by this
Agreement.
- 40 -
2. Annexed hereto as Appendix B is a Certificate signed
by two of the present Officers of the Fund under its seal,
setting forth the names and the signatures of the present Of-
ficers of the Fund. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event any
such present Officer ceases to be an Officer of the Fund, or
in the event that other or additional Officers are elected or
appointed. Until such new Certificate shall be received, the
Custodian shall be entitled to rely and to act upon the
signatures of the Officers as set forth in the last delivered
Certificate to the extent provided by this Agreement.
3. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Custodian, other than any Certificate or Written Instructions,
shall be sufficiently given if addressed to the Custodian and
mailed or delivered to it at its offices at 90 Washington
Street, New York, New York 10286, or at such other place as
the Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Fund shall be sufficiently given if addressed to the Fund and
mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund
may from time to time designate in writing.
5. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties
with the same formality as this Agreement and approved by a
resolution of the Board of Trustees of the Fund, except that
Appendices A and B may be amended unilaterally by the Fund
without such an approving resolution.
6. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the
Custodian, or by the Custodian or The Bank of New York without
the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Trustees. For purposes of
this paragraph, no merger, consolidation, or amalgamation of
the Custodian, The Bank of New York, or the Fund shall be
deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with
the laws of the State of New York without giving effect to
conflict of laws principles thereof. Each party hereby
consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any
dispute arising hereunder and hereby waives its right to trial
by jury.
- 41 -
8. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
9. A copy of the Declaration of Trust of the Fund is on
file with the Secretary of The Commonwealth of Massachusetts,
and notice is hereby given that this instrument is executed on
behalf of the Board of Trustees of the Fund as Trustees and
not individually and that the obligations of this instrument
are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property
of the Fund; provided, however, that the Declaration of Trust
of the Fund provides that the assets of a particular Series of
the Fund shall under no circumstances be charged with li-
abilities attributable to any other Series of the Fund and
that all persons extending credit to, or contracting with or
having any claim against a particular Series of the Fund shall
look only to the assets of that particular Series for payment
of such credit, contract or claim.
- 42 -
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers,
thereunto duly authorized and their respective seals to be
hereunto affixed, as of the day and year first above written.
Dean Witter American Value Fund
[SEAL] By:
_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:
_______________________
Attest:
__________________________
- 43 -
APPENDIX A
I, , President and I,
, of
, a Massachusetts business trust (the "Fund"), do
hereby certify that:
The following individuals have been duly authorized by
the Board of Trustees of the Fund in conformity with the
Fund's Declaration of Trust and By-Laws to give Oral Instruc-
tions and Written Instructions on behalf of the Fund, except
that those persons designated as being an "Officer of DWTC"
shall be an Authorized Person only for purposes of Articles
XII and XIII. The signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
_________________ ________________ _________________
APPENDIX B
I, , President and I,
, of , a
Massachusetts business trust (the "Fund"), do hereby certify
that:
The following individuals for whom a position other than
"Officer of DWTC" is specified serve in the following posi-
tions with the Fund and each has been duly elected or ap-
pointed by the Board of Trustees of the Fund to each such
position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws. With respect to the
following individuals for whom a position of "Officer of DWTC"
is specified, each such individual has been designated by a
resolution of the Board of Trustees of the Fund to be an
Officer for purposes of the Fund's Custody Agreement with The
Bank of New York, but only for purposes of Articles XII and
XIII thereof and a certified copy of such resolution is
attached hereto. The signatures of each individual below set
forth opposite their respective names are their true and
correct signatures:
Name Position Signature
____________________ ___________________ _________________
<PAGE>
APPENDIX C
The undersigned, hereby
certifies that he or she is the duly elected and acting
(the "Fund"), further
certifies that the following resolutions were adopted by the
Board of Trustees of the Fund at a meeting duly held on
, 1991, at which a quorum at all times present and that such
resolutions have not been modified or rescinded and are in
full force an effect as of the date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the
Fund dated as of , 1991 (the "Custody Agree-
ment") is authorized and instructed on a continuous and ongo-
ing basis to act in accordance with, and to rely on instruc-
tions by the Fund to the Custodian communicated by a Terminal
Link as defined in the Custody Agreement.
RESOLVED, that the Fund shall establish access codes and
grant use of such access codes only to officers of the Fund as
defined in the Custody Agreement, and shall establish internal
safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes.
RESOLVED, that Officers of the Fund as defined in the
Custody Agreement shall, following the establishment of such
access codes and such internal safekeeping procedures, advise
the Custodian that the same have been established by deliver-
ing a Certificate, as defined in the Custody Agreement, and
the Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of
, as of the day of ,
1991.
_________________
APPENDIX D
I, Richard P. Lando, an Assistant Vice President with
THE BANK OF NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
APPENDIX E
The following books and records pertaining to Fund shall
be prepared and maintained by the Custodian and shall be the
property of the Fund:
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting of
, a Massachusetts business trust (the "Fund"),
and further certifies that the following resolution was
adopted by the Board of Trustees of the Fund at a meeting
duly held on , 1991, at which a quorum was at all
times present and that such resolution has not been modified
or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1991, (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to deposit in the Book-Entry
System, as defined in the Custody Agreement, all securi-
ties eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and
to utilize the Book-Entry System to the extent possible
in connection with its performance thereunder, including,
without limitation, in connection with settlements of
purchases and sales of securities, loans of securities,
and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of , as of the day of
, 1991.
________________________________
,
[SEAL]
EXHIBIT B
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts
business Trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees
of the Fund at a meeting duly held on , 1991, at
which a quorum was at all times present and that such reso-
lution has not been modified or rescinded and is in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1991, (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in The Depository Trust
Company ("DTC"), as a "Depository" as defined in the
Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are
specifically allocated, and to utilize DTC to the extent
possible in connection with its performance thereunder,
including, without limitation, in connection with
settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of , as of the day of , 1991.
________________________________
,
[SEAL]
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts
business Trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of
the Fund at a meeting duly held on , 1991, at
which a quorum was at all times present and that such reso-
lution has not been modified or rescinded and is in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1991 (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agree-
ment, to the contrary to deposit in the Participants
Trust Company as a Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are
specifically allocated, and to utilize the Participants
Trust Company to the extent possible in connection with
its performance thereunder, including, without limita-
tion, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of , as of the day
of , 1991.
___________________________________
,
[SEAL]
EXHIBIT C
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts business
trust (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at
a meeting duly held on , 1991, at which a quorum was
at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of
the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1991, (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agree-
ment, to the contrary, to accept, utilize and act with
respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which
the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the
Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of , as of the day of April, 1991.
______________________________________
,
[SEAL]
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a Delaware
corporation (herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement")
with certain investment companies as set forth on Schedule A (each such
investment company being herein referred to as a "Fund" and, collectively, as
the "Funds") pursuant to which InterCapital is to perform, or supervise the
performance of, among other services, administrative services for the Funds
(and, in the case of Funds with multiple portfolios, the Series or Portfolios
of the Funds (such Series and Portfolio being herein individually referred to
as "a Series" and, collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice);
(ii) provide the Fund with full administrative services, including the
maintenance of certain books and records, such as journals, ledger accounts
and other records required under the Investment Company Act of 1940, as
amended (the "Act"), the notification to the Fund and InterCapital of
available funds for investment, the reconciliation of account information and
balances among the Fund's custodian, transfer agent and dividend disbursing
agent and InterCapital, and the calculation of the net asset value of the
Fund's shares; (iii) provide the Fund with the services of persons competent
to perform such supervisory, administrative and clerical functions as are
necessary to provide effective operation of the Fund; (iv) oversee the
performance of administrative and professional services rendered to the Fund
by others, including its custodian, transfer agent and dividend disbursing
agent, as well as accounting, auditing and other services; (v) provide the
Fund with adequate general office space and facilities; (vi) assist in the
preparation and the printing of the periodic updating of the Fund's
registration statement and prospectus (and, in the case of an open-end Fund,
the statement of additional information), tax returns, proxy statements, and
reports to its shareholders and the Securities and Exchange Commission; and
(vii) monitor the compliance of the Fund's investment policies and
restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to
perform administrative services hereunder, it shall notify DWS in writing. If
DWS is willing to render such services, it shall notify InterCapital in
writing, whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to
time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of DWS shall be deemed to include officers
of DWS and persons employed or otherwise retained by DWS (including officers
and employees of InterCapital, with the consent of InterCapital) to furnish
services, statistical and other factual data, information with respect to
technical and scientific developments, and such other information, advice and
assistance as DWS may desire. DWS shall maintain each Fund's records and
books of account (other than those maintained by the Fund's transfer agent,
registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, DWS
shall surrender to InterCapital or to the Fund such of the books and records
so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as DWS may
reasonably require in order to discharge its duties and obligations to the
Fund under this Agreement or to comply with any applicable law and regulation
or request of the Board of Directors/Trustees of the Fund.
1
<PAGE>
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of
a closed-end Fund) by applying the annual rate or rates set forth on Schedule
B to the net assets of each Fund. Except as hereinafter set forth, (i) in the
case of an open-end Fund, compensation under this Agreement shall be
calculated by applying 1/365th of the annual rate or rates to the Fund's or
the Series' daily net assets determined as of the close of business on that
day or the last previous business day and (ii) in the case of a closed-end
Fund, compensation under this Agreement shall be calculated by applying the
annual rate or rates to the Fund's average weekly net assets determined as of
the close of the last business day of each week. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before
the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth on Schedule B. Subject to the provisions
of paragraph 5 hereof, payment of DWS' compensation for the preceding month
shall be made as promptly as possible after completion of the computations
contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof
imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, or, in the case of
InterCapital Income Securities Inc. or Dean Witter Variable Investment Series
or any Series thereof, the expense limitation specified in the Fund's
Investment Management Agreement, the fee payable hereunder shall be reduced
on a pro rata basis in the same proportion as the fee payable by the Fund
under the Investment Management Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by
DWS, and such clerical help and bookkeeping services as DWS shall reasonably
require in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, DWS shall not be liable to the Fund or any of its
investors for any error of judgment or mistake of law or for any act or
omission by DWS or for any losses sustained by the Fund or its investors. It
is understood that, subject to the terms and conditions of the Investment
Management Agreement between each Fund and InterCapital, InterCapital shall
retain ultimate responsibility for all services to be performed hereunder by
DWS. DWS shall indemnify InterCapital and hold it harmless from any liability
that InterCapital may incur arising out of any act or failure to act by DWS
in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person
controlling, controlled by or under common control with DWS, and that DWS and
any person controlling, controlled by or under common control with DWS may
have an interest in the Fund. It is also understood that DWS and any
affiliated persons thereof or any persons controlling, controlled by or under
common control with DWS have and may have advisory, management,
administration service or other contracts with other organizations and
persons, and may have other interests and businesses, and further may
purchase, sell or trade any securities or commodities for their own accounts
or for the account of others for whom they may be acting.
9. This Agreement shall continue until April 30, 1995, and thereafter
shall continue automatically for successive periods of one year unless
terminated by either party by written notice delivered to the other party
within 30 days of the expiration of the then-existing period. Notwithstanding
the foregoing, this Agreement may be terminated at any time, by either party
on 30 days' written notice delivered to the other party. In the event that
the Investment Management Agreement between any Fund and InterCapital is
terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
2
<PAGE>
11. This Agreement may be assigned by either party with the written
consent of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By: .........................
Attest:
......................................
DEAN WITTER SERVICES COMPANY INC.
By: .........................
Attest:
......................................
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
AT APRIL 17, 1995
<TABLE>
<CAPTION>
<S> <C>
OPEN-END FUNDS
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter Balanced Growth Fund
7. Dean Witter Balanced Income Fund
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter California Tax-Free Income Fund
10. Dean Witter Capital Growth Securities
11. Dean Witter Convertible Securities Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter Diversified Income Trust
14. Dean Witter Dividend Growth Securities Inc.
15. Dean Witter European Growth Fund Inc.
16. Dean Witter Federal Securities Trust
17. Dean Witter Global Asset Allocation Fund
18. Dean Witter Global Dividend Growth Securities
19. Dean Witter Global Short-Term Income Fund Inc.
20. Dean Witter Global Utilities Fund
21. Dean Witter Health Sciences Trust
22. Dean Witter High Income Securities
23. Dean Witter High Yield Securities Inc.
24. Dean Witter Intermediate Income Securities
25. Dean Witter International Small Cap Fund
26. Dean Witter Limited Term Municipal Trust
27. Dean Witter Liquid Asset Fund Inc.
28. Dean Witter Managed Assets Trust
29. Dean Witter Mid-Cap Growth Fund
30. Dean Witter Multi-State Municipal Series Trust
31. Dean Witter National Municipal Trust
32. Dean Witter Natural Resource Development Securities Inc.
33. Dean Witter New York Municipal Money Market Trust
34. Dean Witter New York Tax-Free Income Fund
35. Dean Witter Pacific Growth Fund Inc.
36. Dean Witter Precious Metals and Minerals Trust
37. Dean Witter Premier Income Trust
38. Dean Witter Retirement Series
39. Dean Witter Select Dimensions Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Short-Term Bond Fund
42. Dean Witter Short-Term U.S. Treasury Trust
43. Dean Witter Strategist Fund
44. Dean Witter Tax-Exempt Securities Trust
45. Dean Witter Tax-Free Daily Income Trust
46. Dean Witter U.S. Government Money Market Trust
47. Dean Witter U.S. Government Securities Trust
48. Dean Witter Utilities Fund
49. Dean Witter Value-Added Market Series
50. Dean Witter Variable Investment Series
51. Dean Witter World Wide Income Trust
52. Dean Witter World Wide Investment Trust
CLOSED-END FUNDS
53. High Income Advantage Trust
54. High Income Advantage Trust II
55. High Income Advantage Trust III
56. InterCapital Income Securities Inc.
57. Dean Witter Government Income Trust
58. InterCapital Insured Municipal Bond Trust
59. InterCapital Insured Municipal Trust
60. InterCapital Insured Municipal Income Trust
61. InterCapital California Insured Municipal Income Trust
62. InterCapital Insured Municipal Securities
63. InterCapital Insured California Municipal Securities
64. InterCapital Quality Municipal Investment Trust
65. InterCapital Quality Municipal Income Trust
66. InterCapital Quality Municipal Securities
67. InterCapital California Quality Municipal Securities
68. InterCapital New York Quality Municipal Securities
</TABLE>
4
<PAGE>
SCHEDULE B
DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES--APRIL 17, 1995
Monthly compensation calculated daily by applying the following annual
rates to a fund's net assets:
<TABLE>
<CAPTION>
FIXED INCOME FUNDS
<S> <C>
Dean Witter Balanced Income Fund 0.60% to the net assets.
Dean Witter California Tax-Free
Income Fund 0.055% of the portion of daily net assets not exceeding $500 million;
0.0525% of the portion exceeding $500 million but not exceeding $750
million; 0.050% of the portion exceeding $750 million but not exceeding
$1 billion; and 0.0475% of the portion of the daily net assets exceeding
$1 billion.
Dean Witter Convertible Securities
Securities Trust 0.060% of the portion of the daily net assets not exceeding $750 million;
.055% of the portion of the daily net assets exceeding $750 million but not
exceeding $1 billion; 0.050% of the portion of the daily net assets of the
exceeding $1 billion but not exceeding $1.5 billion; 0.0475% of the portion
of the daily net assets exceeding $1.5 billion but not exceeding $2 billion;
0.045% of the portion of the daily net assets exceeding $2 billion but not
exceeding $3 billion; and 0.0425% of the portion of the daily net assets
exceeding $3 billion.
Dean Witter Diversified
Income Trust 0.040% of the net assets.
Dean Witter Federal Securities Trust 0.055% of the portion of the daily net assets not exceeding $1 billion;
0.0525% of the portion of the daily net assets exceeding $1 billion but not
exceeding $1.5 billion; 0.050% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2 billion; 0.0475% of the portion
of the daily net assets exceeding $2 billion but not exceeding $2.5 billion;
0.045% of the portion of daily net assets exceeding $2.5 billion but not
exceeding $5 billion; 0.0425% of the portion of the daily net assets
exceeding $5 billion but not exceeding $7.5 billion; 0.040% of the
portion of the daily net assets exceeding $7.5 billion but not exceeding $10
billion; 0.0375% of the portion of the daily net assets exceeding $10
billion but not exceeding $12.5 billion; and 0.035% of the portion of
the daily net assets exceeding $12.5 billion.
Dean Witter Global Short-Term
Income Fund 0.055% of the portion of the daily net assets not exceeding $500 million;
and 0.050% of the portion of the daily net assets exceeding $500 million.
Dean Witter High Income
Securities 0.050% to the net assets.
Dean Witter High Yield
Securities Inc. 0.050% of the portion of the daily net assets not exceeding $500 million;
0.0425% of the portion of the daily net assets exceeding $500 million but
not exceeding $750 million; 0.0375% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.035% of the
portion of
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
the daily net assets exceeding $1 billion but not exceeding $2 billion;
0.0325% of the portion of the daily net assets exceeding $2 billion but
not exceeding $3 billion; and 0.030% of the portion of daily net assets
exceeding $3 billion.
Dean Witter Intermediate
Income Securities 0.060% of the portion of the daily net assets not exceeding $500 million;
0.050% of the portion of the daily net assets exceeding $500 million but not
exceeding $750 million; 0.040% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; and 0.030% of the
portion of the daily net assets exceeding $1 billion.
Dean Witter Limited Term
Municipal Trust 0.050% to the net assets.
Dean Witter Multi-State Municipal
Series Trust (10) 0.035% to the net assets.
Dean Witter National
Municipal Trust 0.035% to the net assets.
Dean Witter New York Tax-Free
Income Fund 0.055% to the net assets not exceeding $500 million and 0.0525% of the net
assets exceeding $500 million.
Dean Witter Premier
Income Trust 0.050% to the net assets.
Dean Witter Retirement Series
Intermediate Income 0.065% to the net assets.
Dean Witter Retirement Series
U.S. Government Securities Trust 0.065% to the net assets.
Dean Witter Select Dimensions
Series-North American Government
Securities Portfolio 0.65% to the net assets.
Dean Witter Short-Term
Bond Fund 0.070% to the net assets.
Dean Witter Short-Term U.S.
Treasury Trust 0.035% to the net assets.
Dean Witter Tax-Exempt
Securities Trust 0.050% of the portion of the daily net assets not exceeding $500 million;
0.0425% of the portion of the daily net assets exceeding $500 million but
not exceeding $750 million; 0.0375% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; and 0.035% of the
portion of the daily net assets exceeding $1 billion but not exceeding $1.25
billion; .0325% of the portion of the daily net assets exceeding $1.25
billion.
Dean Witter U.S. Government
Securities Trust 0.050% of the portion of such daily net assets not exceeding $1 billion;
0.0475% of the portion of such daily net assets exceeding $1 billion but not
exceeding $1.5 billion; 0.045% of the portion of such daily net assets
exceeding $1.5 billion but not exceeding $2 billion; 0.0425% of the portion
of such daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.040% of that portion of such daily net assets exceeding $2.5
billion but not exceeding $5 billion; 0.0375% of that portion
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
of such daily net assets exceeding $5 billion but not exceeding $7.5
billion; 0.035% of that portion of such daily net assets exceeding $7.5
billion but not exceeding $10 billion; 0.0325% of that portion of
such daily net assets exceeding $10 billion but not exceeding $12.5
billion; and 0.030% of that portion of such daily net assets exceeding
$12.5 billion.
Dean Witter Variable Investment
Series-High Yield 0.050% to the net assets.
Dean Witter Variable Investment
Series-Quality Income 0.050% to the net assets.
Dean Witter World Wide Income
Trust 0.075% of the daily net assets up to $250 million; 0.060% of the portion of
the daily net assets exceeding $250 million but not exceeding $500 million;
0.050% of the portion of the daily net assets of the exceeding $500 million
but not exceeding $750 milliion; 0.040% of the portion of the daily net
assets exceeding $750 million but not exceeding $1 billion; and 0.030% of
the daily net assets exceeding $1 billion.
Dean Witter Select Municipal
Reinvestment Fund 0.050% to the net assets.
EQUITY FUNDS
Dean Witter American Value
Fund 0.0625% of the portion of the daily net assets not exceeding $250 million
and 0.050% of the portion of the daily net assets exceeding $250 million.
Dean Witter Balanced Growth Fund 0.60% to the net assets.
Dean Witter Capital Growth
Securities 0.065% to the portion of daily net assets not exceeding $500 million; 0.055%
of the portion exceeding $500 million but not exceeding $1 billion; 0.050%
of the portion exceeding $1 billion but not exceeding $1.5 billion; and
0.0475% of the net assets exceeding $1.5 billion.
Dean Witter Developing Growth
Securities Trust 0.050 of the portion of daily net assets not exceeding $500 million; and
0.0475% of the portion of daily net assets exceeding $500 million.
Dean Witter Dividend Growth
Securities Inc. 0.0625% of the portion of the daily net assets not exceeding $250 million;
0.050% of the portion exceeding $250 million but not exceeding $1 billion;
0.0475% of the portion of daily net assets exceeding $1 billion but not
exceeding $2 billion; 0.045% of the portion of daily net assets exceeding $2
billion but not exceeding $3 billion; 0.0425% of the portion of daily net
assets exceeding $3 billion but not exceeding $4 billion; 0.040% of the
portion of daily net assets exceeding $4 billion but not exceeding $5
billion; 0.0375% of the portion of the daily net assets exceeding $5 billion
but not exceeding $6 billion; 0.035% of the portion of the daily net assets
exceeding $6 billion but not exceeding $8 billion; and 0.0325% of the
portion of the daily net assets exceeding $8 billion.
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Dean Witter European Growth
Fund Inc. 0.060% of the portion of daily net assets not exceeding $500 million; and
0.057% of the portion of daily net assets exceeding $500 million.
Dean Witter Global Asset Allocation Fund 1.0% to the net assets.
Dean Witter Global Dividend
Growth Securities 0.075% to the net assets.
Dean Witter Global Utilities Fund 0.065% to the net assets.
Dean Witter Health Sciences Trust 0.10% to the net assets.
Dean Witter International
Small Cap Fund 0.075% to the net assets.
Dean Witter Managed Assets Trust 0.060% to the daily net assets not exceeding $500 million and 0.055% to the
daily net assets exceeding $500 million.
Dean Witter Mid-Cap Growth Fund 0.75% to the net assets.
Dean Witter Natural Resource
Development Securities Inc. 0.0625% of the portion of the daily net assets not exceeding $250 million
and 0.050% of the portion of the daily net assets exceeding $250 million.
Dean Witter Pacific Growth
Fund Inc. 0.060% of the portion of daily net assets not exceeding $1 billion; and
0.057% of the portion of daily net assets exceeding $1 billion.
Dean Witter Precious Metals
and Minerals Trust 0.080% to the net assets.
Dean Witter Retirement Series
American Value 0.085% to the net assets.
Dean Witter Retirement Series
Capital Growth 0.085% to the net assets.
Dean Witter Retirement Series
Dividend Growth 0.075% to the net assets.
Dean Witter Retirement Series
Global Equity 0.10% to the net assets.
Dean Witter Retirement Series
Intermediate Income Securities 0.065% to the net assets.
Dean Witter Retirement Series
Liquid Asset 0.050% to the net assets.
Dean Witter Retirement Series
Strategist 0.085% to the net assets.
Dean Witter Retirement Series
U.S. Government Money Market 0.050% to the net assets.
Dean Witter Retirement Series
U.S. Government Securities 0.065% to the net assets.
Dean Witter Retirement Series
Utilities 0.075% to the net assets.
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Dean Witter Retirement Series
Value Added 0.050% to the net assets.
Dean Witter Select Dimensions Series-
American Value Portfolio 0.625% to the net assets.
Balanced Portfolio 0.75% to the net assets.
Core Equity Portfolio 0.85% to the net assets.
Developing Growth Portfolio 0.50% to the net assets.
Diversified Income Portfolio 0.40% to the net assets.
Dividend Growth Portfolio 0.625% to the net assets.
Emerging Markets Portfolio 1.25% to the net assets.
Global Equity Portfolio 1.0% to the net assets.
Utilities Portfolio 0.65% to the net assets.
Value-Added Market Portfolio 0.50% to the net assets.
Dean Witter Strategist Fund 0.060% of the portion of daily net assets not exceeding $500 million; 0.055%
of the portion of the daily net assets exceeding $500 million but not
exceeding $1 billion; and 0.050% of the portion of the daily net assets
exceeding $1 billion.
Dean Witter Utilities Fund 0.065% of the portion of daily net assets not exceeding $500 million; 0.055%
of the portion exceeding $500 million but not exceeding $1 billion; 0.0525%
of the portion exceeding $1 billion but not exceeding $1.5 billion; 0.050%
of the portion exceeding $1.5 billion but not exceeding $2.5 billion;
0.0475% of the portion exceeding $2.5 billion but not exceeding $3.5
billion; 0.045% of the portion of the daily net assets exceeding $3.5 but
not exceeding $5 billion; and 0.0425% of the portion of daily net assets
exceeding $5 billion.
Dean Witter Value-Added Market
Series 0.050% of the portion of daily net assets not exceeding $500 million; and
0.45% of the portion of daily net assets exceeding $500 million.
Dean Witter Variable Investment
Series-Capital Growth 0.065% to the net assets.
Dean Witter Variable Investment
Series-Dividend Growth 0.0625% of the portion of daily net assets not exceeding $500 million; and
0.050% of the portion of daily net assets exceeding $500 million.
Dean Witter Variable Investment
Series-Equity 0.050% to the net assets.
Dean Witter Variable Investment
Series-European Growth 0.060% to the net assets.
Dean Witter Variable Investment
Series-Managed 0.050% to the net assets.
Dean Witter Variable Investment
Series-Utilities 0.065% of the portion of daily net assets exceeding $500 million and 0.055%
of the portion of daily net assets exceeding $500 million.
Dean Witter World Wide
Investment Trust 0.055% of the portion of daily net assets not exceeding $500 million; and
0.05225% of the portion of daily net assets exceeding $500 million.
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MONEY MARKET FUNDS
Active Assets Account (4) 0.050% of the portion of the daily net assets not exceeding $500 million;
0.0425% of the portion of the daily net assets exceeding $500 million but
not exceeding $750 million; 0.0375% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.0275% of the portion
of the daily net assets exceeding $2.5 billion but not exceeding $3 billion;
and 0.025% of the portion of the daily net assets exceeding $3 billion.
Dean Witter California Tax-Free
Daily Income Trust 0.050% of the portion of the daily net assets not exceeding $500 million;
0.0425% of the portion of the daily net assets exceeding $500 million but
not exceeding $750 million; 0.0375% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.0275% of the portion
of the daily net assets exceeding $2.5 billion but not exceeding $3 billion;
and 0.025% of the portion of the daily net assets exceeding $3 billion.
Dean Witter Liquid Asset
Fund Inc. 0.050% of the portion of the daily net assets not exceeding $500 million;
0.0425% of the portion of the daily net assets exceeding $500 million but
not exceeding $750 million; 0.0375% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion but not exceeding $1.35
billion; 0.0325% of the portion of the daily net assets exceeding $1.35
billion but not exceeding $1.75 billion; 0.030% of the portion of the daily
net assets exceeding $1.75 billion but not exceeding $2.15 billion; 0.0275%
of the portion of the daily net assets exceeding $2.15 billion but not
exceeding $2.5 billion; 0.025% of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $15 billion; 0.0249% of the
portion of the daily net assets exceeding $15 billion but not exceeding
$17.5 billion; and 0.0248% of the portion of the daily net assets exceeding
$17.5 billion.
Dean Witter New York Municipal
Money Market Trust 0.050% of the portion of the daily net assets not exceeding $500 million;
0.0425% of the portion of the daily net assets exceeding $500 million but
not exceeding $750 million; 0.0375% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.030% of the portion of the daily net assets
exceeding $2 bil-
</TABLE>
B-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
lion but not exceeding $2.5 billion; 0.0275% of the portion of the daily net
assets exceeding $2.5 billion but not exceeding $3 billion; and 0.025% of
the portion of the daily net assets exceeding $3 billion.
Dean Witter Retirement Series
Liquid Assets 0.050% of the net assets.
Dean Witter Retirement Series
U.S. Government Money Market 0.050% of the net assets.
Dean Witter Select Dimensions Series-
Money Market Portfolio 0.50% to the net assets.
Dean Witter Tax-Free Daily
Income Trust 0.050% of the portion of the daily net assets not exceeding $500 million;
0.0425% of the portion of the daily net assets exceeding $500 million but
not exceeding $750 million; 0.0375% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.0275% of the portion
of the daily net assets exceeding $2.5 billion but not exceeding $3 billion;
and 0.025% of the portion of the daily net assets exceeding $3 billion.
Dean Witter U.S. Government
Money Market Trust 0.050% of the portion of the daily net assets not exceeding $500 million;
0.0425% of the portion of the daily net assets exceeding $500 million but
not exceeding $750 million; 0.0375% of the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion but not exceeding $1.5 billion;
0.0325% of the portion of the daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5 billion; 0.0275% of the portion
of the daily net assets exceeding $2.5 billion but not exceeding $3 billion;
and 0.025% of the portion of the daily net assets exceeding $3 billion.
Dean Witter Variable Investment
Series-Money Market 0.050% to the net assets.
</TABLE>
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
<TABLE>
<CAPTION>
<S> <C>
CLOSED-END FUNDS
Dean Witter Government Income
Trust 0.060% to the average weekly net assets.
High Income Advantage Trust 0.075% of the portion of the average weekly net assets not exceeding $250
million; 0.060% of the portion of average weekly net assets exceeding $250
million and not exceeding $500 million; 0.050% of the portion of average
weekly net assets exceeding $500 million and not exceeding $750 million;
0.040% of the portion of average weekly net assets exceeding
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
$750 million and not exceeding $1 billion; and 0.030% of the portion of
average weekly net assets exceeding $1 billion.
High Income Advantage Trust II 0.075% of the portion of the average weekly net assets not exceeding $250
million; 0.060% of the portion of average weekly net assets exceeding $250
million and not exceeding $500 million; 0.050% of the portion of average
weekly net assets exceeding $500 million and not exceeding $750 million;
0.040% of the portion of average weekly net assets exceeding $750
million and not exceeding $1 billion; and 0.030% of the portion of
average weekly net assets exceeding $1 billion.
High Income Advantage Trust III 0.075% of the portion of the average weekly net assets not exceeding $250
million; 0.060% of the portion of average weekly net assets exceeding $250
million and not exceeding $500 million; 0.050% of the portion of average
weekly net assets exceeding $500 million and not exceeding $750 million;
0.040% of the portion of the average weekly net assets exceeding $750
million and not exceeding $1 billion; and 0.030% of the portion of
average weekly net assets exceeding $1 billion.
InterCapital Income Securities Inc. 0.050% to the average weekly net assets.
InterCapital Insured Municipal
Bond Trust 0.035% to the average weekly net assets.
InterCapital Insured Municipal
Trust 0.035% to the average weekly net assets.
InterCapital Insured Municipal
Income Trust 0.035% to the average weekly net assets.
InterCapital California Insured
Municipal Income Trust 0.035% to the average weekly net assets.
InterCapital Quality Municipal
Investment Trust 0.035% to the average weekly net assets.
InterCapital New York Quality
Municipal Securities 0.035% to the average weekly net assets.
InterCapital Quality Municipal
Income Trust 0.035% to the average weekly net assets.
InterCapital Quality Municipal
Securities 0.035% to the average weekly net assets.
InterCapital California Quality
Municipal Securities 0.035% to the average weekly net assets.
InterCapital Insured Municipal
Securities 0.035% to the average weekly net assets.
InterCapital Insured California
Municipal Securities 0.035% to the average weekly net assets.
</TABLE>
B-8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 19 to the registration
statement on Form N-1A ( the "Registration Statement") of our report dated
February 7, 1996, relating to the financial statements and financial highlights
of Dean Witter American Value Fund, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Independent Accountants" and
"Experts" in such Statement of Additional Information and to the reference to us
under the heading "Financial Highlights" in such Prospectus.
Price Waterhouse LLP
New York, New York
February 20, 1996
95NYC7094
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER AMERICAN VALUE FUND
Whereas, Dean Witter American Value Fund (the "Fund") is engaged in
business as an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended (the "Act"); and
Whereas, on April 28, 1993, the Fund most recently amended and restated
a Plan of Distribution pursuant to Rule 12b-1 under the Act which had initially
been adopted on April 30, 1984, and the Trustees then determined that there was
a reasonable likelihood that adoption of the Plan of Distribution, as then
amended and restated, would benefit the Fund and its shareholders; and
Whereas, the Trustees believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to continue
to benefit the Fund and its shareholders; and
Whereas, on April 30, 1987, the Fund and Dean Witter Reynolds Inc.
("DWR") entered into a Distribution Agreement pursuant to which the Fund
employed DWR as distributor of the Fund's shares; and
Whereas, on January 4, 1993, the Fund and DWR substituted Dean Witter
Distributors Inc. (the "Distributor") in the place of DWR as distributor of the
Fund's shares; and
Whereas, the Fund, DWR and the Distributor intend that DWR will
continue to promote the sale of Fund shares and provide personal services to
Fund shareholders with respect to their holdings of Fund shares; and
Whereas, the Fund and the Distributor entered into a separate
Distribution Agreement dated as of June 30, 1993, pursuant to which the Fund has
employed the Distributor in such capacity during the continuous offering of
shares of the Fund.
Now, Therefore, the Fund hereby amends the Plan of Distribution
previously adopted and amended and restated, and the Distributor hereby agrees
to the terms of said Plan of Distribution (the "Plan"), as amended herein, in
accordance with Rule 12b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of
securities of which the Fund is the issuer, compensation for distribution of its
shares at the rate of the lesser of (i) 1.0% per annum of the average daily
aggregate sales of the shares of the Fund since inception of the Plan (not
including reinvestment of dividends and capital gains distributions from the
Fund) less the average daily aggregate net asset value of the shares of the Fund
redeemed since the inception of the Plan upon which a contingent deferred sales
charge has been imposed or upon which such charge has been waived, or (ii) 1.0%
per annum of the Fund's average daily net assets attributable to shares issued
since the inception of the Plan. Such compensation shall be calculated and
accrued daily and paid monthly or at such other intervals as the Trustees shall
determine. The Distributor may direct that all or any part of the amounts
receivable by it under this Plan be paid directly to DWR, its affiliates or
other broker-dealers who provide distribution and shareholder services. All
payments made hereunder pursuant to the Plan shall be in accordance with the
terms and limitations of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc.
2. The amount set forth in paragraph 1 of this Plan shall be paid
for services of the Distributor, DWR, its affiliates and other broker-dealers it
may select in connection with the distribution of the Fund's shares, including
personal services to shareholders with respect to their holdings of Fund shares,
and may be spent by the Distributor, DWR, its affiliates and such broker-dealers
on any activities or expenses related to the distribution of the Fund's shares
or services to shareholders, including, but not limited to: compensation to, and
expenses of, account executives or other employees of the Distributor, DWR, its
affiliates or other broker-dealers; overhead and other branch office
distribution-related expenses and telephone expenses of persons who engage in or
support distribution of shares or who provide personal services to shareholders;
printing of prospectuses and reports for other than existing shareholders;
preparation, printing and distribution of sales literature and advertising
materials and opportunity costs in incurring the foregoing expenses
(which may be calculated as a carrying charge on the excess of the distribution
expenses incurred by the Distributor, DWR, its affiliates or other broker-
dealers over distribution revenues received by them, such excess being
hereinafter referred to as "carryover expenses"). The overhead and other branch
office distribution-related expenses referred to in this paragraph 2 may
include: (a) the expenses of operating the branch offices of the Distributor or
other broker-dealers, including DWR, 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. Payments may
also be made with respect to distribution expenses incurred in connection with
the distribution of shares, including personal services to shareholders with
respect to holdings of such shares, of an investment company whose assets are
acquired by the Fund in a tax-free reorganization, provided that carryover
expenses as a percentage of Fund assets will not be materially increased
thereby.
3. This Plan, as amended and restated, shall not take effect until
it has been approved, together with any related agreements, by votes of a
majority of the Board of Trustees of the Fund and of the Trustees who are not
"interested persons" of the Fund (as defined in the Act) and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
4. This Plan shall continue in effect until April 30, 1996, and
from year to year thereafter, provided such continuance is specifically approved
at least annually in the manner provided for approval of this Plan in paragraph
3 hereof.
5. The Distributor shall provide to the Trustees of the Fund and
the Trustees shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made. In this
regard, the Trustees shall request the Distributor to specify such items of
expenses as the Trustees deem appropriate. The Trustees shall consider such
items as they deem relevant in making the determinations required by paragraph 4
hereof.
6. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. In the event of any such termination or in the event of
nonrenewal, the Fund shall have no obligation to pay expenses which have been
incurred by the Distributor, DWR, its affiliates or other broker-dealers in
excess of payments made by the Fund pursuant to this Plan. However, this shall
not preclude consideration by the Trustees of the manner in which such excess
expenses shall be treated.
7. This Plan may not be amended to increase materially the amount
the Fund may spend for distribution provided in paragraph 1 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the Act)
of the outstanding voting securities of the Fund, and no material amendment to
the Plan shall be made unless approved in the manner provided for approval in
paragraph 3 hereof.
8. While this Plan is in effect, the selection and nomination of
Trustees who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the Trustees who are not interested
persons.
9. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 5 hereof, for a period of
not less than six years from the date of this Plan, any such agreement or any
such report, as the case may be, the first two years in an easily accessible
place.
10. The Declaration of the Trust establishing Dean Witter American
Value Fund, dated April 6, 1987, a copy of which, together with all amendments
thereto (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Dean Witter American Value
Fund refers to the Trustees under the Declaration collectively as Trustees, but
not as individuals or personally; and no Trustee, shareholder, officer, employee
or agent of Dean Witter American Value Fund shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Dean Witter American Value Fund, but the Trust Estate only shall
be liable.
In Witness Whereof, the Fund, the Distributor and DWR have executed this
amended and restated Plan of Distribution as of the day and year set forth below
in New York, New York.
Date: April 30, 1984 Dean Witter American Value Fund
As amended on April 30, 1987,
January 4, 1993, April 28, 1993
and October 26, 1995
By
Attest:
Dean Witter Distributors Inc.
By
Attest:
Dean Witter Reynolds Inc.
By
Attest:
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
AMERICAN VALUE FUND
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-95 YEARS - n TOTAL RETURN - T
- ----------- ----------- ----------- --------------------
<S> <C> <C> <C>
31-Dec-94 $1,372.00 1 37.20%
31-Dec-90 $2,534.00 5 20.44%
31-Dec-85 $4,190.00 10 15.40%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
- -
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-DEC-95 RETURN - TR YEARS - n TOTAL RETURN - t
- ----------- ----------- ----------- -------------- ----------------------
<S> <C> <C> <C> <C>
31-Dec-94 $1,422.00 42.20% 1 42.20%
31-Dec-90 $2,554.00 155.40% 5 20.63%
31-Dec-85 $4,190.00 319.00% 10 15.40%
</TABLE>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ ----------- ------------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
27-Mar-80 756.44 $85,644 $428,220 $856,440
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,135,788,128
<INVESTMENTS-AT-VALUE> 2,392,265,444
<RECEIVABLES> 40,581,955
<ASSETS-OTHER> 65,674
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,432,913,073
<PAYABLE-FOR-SECURITIES> 37,554,057
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,471,637
<TOTAL-LIABILITIES> 44,025,694
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,981,034,438
<SHARES-COMMON-STOCK> 87,963,108
<SHARES-COMMON-PRIOR> 70,253,058
<ACCUMULATED-NII-CURRENT> 1,103,834
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 150,271,791
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 256,477,316
<NET-ASSETS> 2,388,887,379
<DIVIDEND-INCOME> 17,672,185
<INTEREST-INCOME> 13,839,031
<OTHER-INCOME> 0
<EXPENSES-NET> 30,395,956
<NET-INVESTMENT-INCOME> 1,115,260
<REALIZED-GAINS-CURRENT> 449,119,481
<APPREC-INCREASE-CURRENT> 204,343,705
<NET-CHANGE-FROM-OPS> 654,598,446
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 193,886
<DISTRIBUTIONS-OF-GAINS> 231,910,868
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,784,767
<NUMBER-OF-SHARES-REDEEMED> 18,333,417
<SHARES-REINVESTED> 8,258,700
<NET-CHANGE-IN-ASSETS> 898,933,315
<ACCUMULATED-NII-PRIOR> 182,460
<ACCUMULATED-GAINS-PRIOR> (66,936,822)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,736,912
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30,395,956
<AVERAGE-NET-ASSETS> 1,884,882,477
<PER-SHARE-NAV-BEGIN> 21.21
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 8.87
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 2.93
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 27.16
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
