<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 11, 1994
REGISTRATION NO.: 2-70421
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. ____ / /
POST-EFFECTIVE AMENDMENT NO. 16 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 17 /X/
-------------------
DEAN WITTER NATURAL RESOURCE DEVELOPMENT
SECURITIES INC.
(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)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
_X_ immediately upon filing pursuant to paragraph (b)
___ on (date) 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 HAS FILED THE RULE 24F-2 NOTICE,
FOR ITS FISCAL YEAR ENDED FEBRUARY 28, 1994, WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MARCH 17, 1994.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
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-------------------------------------------------------
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<S> <C>
ITEM CAPTION
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PART A PROSPECTUS
1. ......................................... Cover Page
2. ......................................... Prospectus Summary; Summary of Fund Expenses
3. ......................................... Financial Highlights; Performance Information
4. ......................................... Investment Objective and Policies; The Fund and its Management; Cover
Page; Investment Restrictions; Prospectus Summary
5. ......................................... The Fund and Its Management; Back Cover; Investment Objective and
Policies
6. ......................................... Dividends, Distributions and Taxes; Additional Information
7. ......................................... Purchase of Fund Shares; Shareholder Services; Redemptions and
Repurchases
8. ......................................... Redemptions and Repurchases; Shareholder Services
9. ......................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. ......................................... Cover Page
11. ......................................... Table of Contents
12. ......................................... The Fund and Its Management
13. ......................................... Investment Practices and Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. ......................................... The Fund and Its Management; Directors and Officers
15. ......................................... Directors and Officers
16. ......................................... The Fund and Its Management; Custodian and Transfer Agent;
Independent Accountants
17. ......................................... Portfolio Transactions and Brokerage
18. ......................................... Shares of the Fund
19. ......................................... Redemptions and Repurchases; Financial Statements; Determination of
Net Asset Value; Shareholder Services
20. ......................................... Dividends, Distributions and Taxes
21. ......................................... The Distributor
22. ......................................... Performance Information
23. ......................................... Experts
</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>
<TABLE>
<S> <C>
PROSPECTUS TABLE OF CONTENTS
MAY 11, 1994 Prospectus Summary/2
Dean Witter Natural Resource Summary of Fund Expenses/3
Development Securities Inc. (the "Fund") is an Financial Highlights/4
open-end diversified management investment The Fund and its Management/4
company whose investment objective is capital Investment Objective and Policies/5
growth. The Fund invests primarily in common Investment Restrictions/9
stock of companies in the natural resources Purchase of Fund Shares/9
and related areas, including companies engaged Shareholder Services/11
in the exploration for and development, Redemptions and Repurchases/14
production and distribution of natural Dividends, Distributions and Taxes/16
resources or in the development of Performance Information/16
energy-efficient technologies or other natural Additional Information/17
resource related supplies or products. (See SHARES OF THE FUND ARE NOT DEPOSITS OR
"Investment Objective and Policies.") OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
Shares of the Fund are ANY BANK, AND THE SHARES ARE NOT FEDERALLY
continuously offered at net asset value. INSURED BY THE FEDERAL DEPOSIT INSURANCE
However, redemptions and/or repurchases are CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
subject in most circumstances to a contingent OTHER AGENCY.
deferred sales charge, scaled down from 5% to THESE SECURITIES HAVE NOT BEEN APPROVED OR
1% of the amount redeemed, if made within six DISAPPROVED BY THE SECURITIES AND EXCHANGE
years of purchase, which charge will be paid COMMISSION OR ANY STATE SECURITIES COMMISSION
to the Fund's Distributor, Dean Witter NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
Distributors Inc. (See "Redemptions and OR ANY STATE SECURITIES COMMISSION PASSED UPON
Repurchases -- Contingent Deferred Sales THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
Charge.") In addition, the Fund pays the ANY REPRESENTATION TO THE CONTRARY IS A
Distributor a distribution fee pursuant to a CRIMINAL OFFENSE.
Plan of Distribution at the annual rate of 1% Dean Witter Distributors Inc.
of the lesser of the (i) average daily Distributor
aggregate net sales since inception of the
Plan of Distribution or (ii) average daily net
assets of the Fund attributable to shares
issued since the inception of the Plan of
Distribution. (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 May 11, 1994, 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 below. The
Statement of Additional Information is
incorporated herein by reference.
Dean Witter
Natural Resource Development
Securities Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550
(800) 526-3143
</TABLE>
<PAGE>
<TABLE>
<S> <C>
PROSPECTUS SUMMARY
The The Fund, a Maryland corporation, is an open-end diversified management
Fund investment company investing primarily in common stock of companies in the
natural resources and related areas.
Shares Offered Common Stock with $0.01 par value (see page 17).
Offering At net asset value without sales charge (see page 9). Shares redeemed within six
Price years of purchase are subject to a contingent deferred sales charge under most
circumstances (see page 14).
Minimum Purchase Minimum initial investment $1,000; minimum subsequent investment $100 (see page
9).
Investment The investment objective of the Fund is capital growth.
Objective
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the
Manager Fund, and its wholly-owned subsidiary, Dean Witter Services Company Inc., serve
in various investment management, advisory, management and administrative
capacities to eighty-three investment companies and other portfolios with assets
of approximately $73 billion at February 28,1994 (see page 4).
Management The Investment Manager receives a monthly fee at an annual rate of 0.625 of 1%
Fee of daily net assets up to $250 million and 0.50 of 1% of daily net assets over
$250 million.
Dividends and Dividends from net investment income dividends paid annually; capital gains, if
Capital Gains any, distributed annually or retained for reinvestment by the Fund. Dividends
Distributions and capital gains distributions automatically reinvested in additional shares at
net asset value unless the shareholder elects to receive cash (see page 16).
Distributor Dean Witter Distributors Inc. (the "Distributor"). 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 Fund's average daily aggregate net sales
or (b) the Fund's average daily net assets. This fee compensates the Distributor
for the services provided in distributing shares of the Fund and for its sales
related expenses. The Distributor also receives the proceeds of any contingent
deferred sales charges (see pages 10 and 14).
Redemption -- Shares are redeemable by the shareholder at net asset value. An account may be
Contingent Deferred involuntarily redeemed if the total value of the account is less than $100.
Sales Charge Although no commission or sales charge is imposed upon the 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 page
14).
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
12).
Risks The net asset value of the Fund's shares will fluctuate with changes in market
value of portfolio securities. Emphasis on natural resources may result in
exposure of some companies to foreign political and currency risks and
substantial price fluctuations (see page 7). Investors should review the
investment objective and policies of the Fund carefully and consider their
ability to assume the risks involved in purchasing shares of the Fund (see page
5). 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 through 7). In addition, the investor is directed to the
discussions of foreign securities on page 7.
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING ELSEWHERE IN THE
PROSPECTUS
AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
</TABLE>
2
<PAGE>
SUMMARY OF FUND EXPENSES
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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 February 28, 1994, except as otherwise noted.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <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%
A contingent deferred sales charge is imposed at the following declining rates:
</TABLE>
<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>
<S> <C> <C> <C>
Redemption Fees............................................................................ None
Exchange Fees.............................................................................. None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<S> <C>
Management Fees.......................................................................... 0.63%
12b-1 Fees*.............................................................................. 0.95%
Other Expenses........................................................................... 0.33%
Total Fund Operating Expenses............................................................ 1.91%
<FN>
- ------------
* A portion of the 12b-1 fee, which may not exceed 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 ("NASD") guidelines.
</TABLE>
<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............................................................... $ 69 $ 90 $123 $223
You would pay the following expenses on the same investment, assuming
no redemption........................................................ $ 19 $ 60 $103 $223
</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."
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.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of capital stock
outstanding throughout each period have been audited by Price Waterhouse,
independent accountants. The per share data and ratios should be read in
conjunction with the financial statements and notes thereto and the unqualified
report of 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 YEARS ENDED FEBRUARY 28,
------------------------------------------------------------------------------------------------
1994 1993 1992* 1991 1990 1989 1988* 1987 1986 1985
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93 $ 9.46 $ 9.10 $ 7.43 $ 7.41 $ 8.06
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Net investment income....... 0.09 0.16 0.20 0.25 0.30 0.23 0.20 0.14 0.22 0.23
Net realized and unrealized
gain (loss) on
investments................ 1.25 1.18 (0.44 ) 0.02 1.80 0.72 0.44 1.75 0.03 (0.62 )
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Total from investment
operations................... 1.34 1.34 (0.24 ) 0.27 2.10 0.95 0.64 1.89 0.25 (0.39 )
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Less dividends and
distributions:
Dividends from net
investment income.......... (0.09 ) (0.18 ) (0.20 ) (0.28 ) (0.32 ) (0.21 ) (0.28 ) (0.22 ) (0.23 ) (0.17 )
Distributions from net
realized gains on
investments................ (0.79 ) 0.00 (0.39 ) (0.29 ) (0.38 ) (0.27 ) 0.00 0.00 0.00 (0.09 )
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Total dividends and
distributions................ (0.88 ) (0.18 ) (0.59 ) (0.57 ) (0.70 ) (0.48 ) (0.28 ) (0.22 ) (0.23 ) (0.26 )
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Net asset value, end of
period....................... $ 11.82 $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93 $ 9.46 $ 9.10 $ 7.43 $ 7.41
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
TOTAL INVESTMENT RETURN+...... 12.16 % 13.31 % (1.91 )% 2.87 % 21.11 % 10.29 % 7.32 % 26.21 % 3.50 % (5.07 )%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)................... $139,459 $118,496 $113,145 $150,636 $154,741 $136,911 $171,725 $82,985 $23,664 $24,940
Ratio of expenses to average
net assets................... 1.91 % 1.96 % 1.93 % 1.80 % 1.81 % 1.92 % 1.81 % 1.74 % 1.39 % 1.28 %
Ratio of net investment income
to average net assets........ 0.73 % 1.46 % 1.67 % 2.28 % 2.57 % 2.09 % 2.14 % 2.61 % 3.07 % 2.68 %
Portfolio turnover rate....... 69 % 52 % 31 % 29 % 22 % 7 % 26 % 14 % 78 % 124 %(1)
<FN>
- -----------------
* YEAR ENDED FEBRUARY 29.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) EXCLUDED LONG-TERM U.S. GOVERNMENT SECURITIES WHICH ARE INCLUDED IN
SUBSEQUENT YEARS.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter Natural Resource Development Securities Inc. (the "Fund") is an
open-end diversified management investment company incorporated in Maryland on
December 22, 1980.
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., serve in various investment management, advisory, management and
administrative capacities to eighty-three investment companies, thirty of which
are listed on the New York Stock Exchange, with combined total assets of
approximately $71 billion as of Febru-
4
<PAGE>
ary 28, 1994. The Investment Manager also manages and advises portfolios of
pension plans, other institutions and individuals which aggregated approximately
$2 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 Dean Witter Services Company Inc. to
perform the aforementioned administrative services to the Fund.
The Fund's Board of Directors reviews the various services provided by 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 to the Fund 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 February 28, 1994, the Fund
accrued total compensation to the Investment Manager amounting to 0.625% of the
Fund's average daily net assets and the Fund's total expenses amounted to 1.91%
of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is capital growth. There is no
assurance that the objective will be achieved. This objective is fundamental and
may not be changed without the approval of the stockholders of the Fund. The
Fund will invest primarily in common stock of companies in the natural resources
and related areas, and will invest at least 65% of its net assets at all times,
except for temporary and defensive purposes, in the securities of companies
engaged in these areas. A portfolio company is considered to be so engaged when
at least 50% of its assets and/or revenues are currently the result of ownership
or development of assets in such areas. Such companies include those engaged in
the exploration for and development, production and distribution of natural
resources, in the development of energy-efficient technologies or in other
natural resource related supplies or services.
The Fund will seek capital growth by investing in securities of issuers
believed to be responsive to domestic and world demand for natural resources. As
a result of the challenges presented by natural resource needs, the Fund
believes that opportunities for growth can be found in securities of issuers
which: (1) own or process natural resources, such as precious metals, other
minerals, water, timberland and forest products; (2) own or produce sources of
energy such as oil, natural gas, coal, uranium, geothermal, oil shale and
biomass; (3) participate in the exploration for and development of natural
resources supplies from new and conventional sources; (4) own or control oil,
gas, or other mineral leases (which may not produce recoverable energy or
resources), rights or royalty interests; (5) provide natural resources
transportation, distribution or processing services, such as refining and
pipeline services; (6) provide related services or supplies, such as drilling,
well servicing, chemicals, parts and equipment; and (7) contribute energy-
efficient technologies, such as systems for energy conversion, conservation and
pollution control. Emphasis on natural resources may result in exposure of some
portfolio companies to foreign political and currency risks and substantial
price fluctuations.
The Fund may purchase securities on a when issued or delayed delivery basis,
may purchase or
5
<PAGE>
sell securities on a forward commitment basis and may purchase securities on a
"when, as and if issued" basis.
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"). OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Fund.
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. The Fund will not write covered options on portfolio securities exceeding
in the aggregate 25% of the value of its total assets.
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. There are no other
limits on the Fund's ability to purchase call and put options. The Fund may also
purchase and write options on stock indexes. See "Risks of Options on Indexes"
in the Statement of Additional Information.
The Fund may also 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). 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. 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.
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 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
6
<PAGE>
thereby the futures contracts prices) may correlate imperfectly with the
behavior of the cash prices of the Fund's portfolio securities. See the
Statement of Additional Information for further discussion of such 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.
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 Directors 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 total assets.
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.
SPECIFIC INVESTMENT POLICIES
The Fund has adopted the following specific policies which are not
fundamental investment policies and which may be changed by the Fund's Board of
Directors:
(1) At least 65% of the Fund's total assets will be invested in common
stock of domestic and foreign companies in the natural resources areas
described above. The Fund may also invest in securities convertible into
common stock and may acquire warrants and other rights to acquire common
stock in connection with purchases of portfolio securities.
(2) The Fund may invest in securities of foreign companies. However, the
Fund will not invest more than 10% of its net assets in securities of such
issuers (other than Canadian issuers on which there is no limit).
Investments in certain Canadian issuers may be speculative due to certain
political risks and may be subject to substantial price fluctuations. 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 total assets. 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
7
<PAGE>
incurred in connection with conversions between various currencies held by
the Fund.
(3) Up to 35% of the value of the Fund's total assets may be invested
in: (a) common stock of companies not in the natural resources areas; (b)
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
(for purposes of this provision, the term "total return" means the
difference between the cost of a security and the aggregate of its market
value and dividends received); (c) U.S. Government securities (securities
issued or guaranteed as to principal and interest by the United States or
its agencies and instrumentalities); and (d) 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.
(4) Notwithstanding any of the foregoing limitations, the Fund may
invest more than 35% of its 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.
The foregoing limitations will apply at the time of acquisition based on the
last determined value of the relevant security or other change in the Fund's
assets. Any subsequent change in any applicable percentage resulting from
fluctuations in value will not require elimination of any security from the
portfolio.
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 the Investment Manager, 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 will be given to investments in
securities for the purpose of earning current income. The Fund's portfolio is
managed within InterCapital's Large Capitalization Equities Group, which manages
twenty-four equity funds and fund portfolios, with approximately $16 billion in
assets as of February 28, 1994. Diane Lisa Sobin and Konrad Krill, Vice
Presidents of InterCapital, are the primary portfolio managers of the Fund. Ms.
Sobin has been the Fund's primary portfolio manager since 1990 and has been a
portfolio manager or investment analyst at InterCapital for over five years. Mr.
Krill has been the portfolio manager of the Fund since May, 1994 and has been a
portfolio manager or investment analyst at InterCapital for over five years.
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.
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. The Fund will incur underwriting discount
costs (on underwritten securities) and 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 full
discussion of the tax implications of the Fund's trading policy.
8
<PAGE>
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 bank
obligations or obligations issued or guaranteed by the United States
Government or its agencies or instrumentalities.
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 issued or guaranteed by the United States Government, its
agencies or instrumentalities.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
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 who 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 Natural Resource
Development Securities Inc., directly to Dean Witter Trust Company (the
"Transfer Agent") at P.O. Box 1040, Jersey City, NJ 07303 or by contacting an
account executive of DWR or other Selected Broker-Dealer. 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 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 five
business day settlement basis; that is, payment is due on the fifth 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. Shares
purchased
9
<PAGE>
through the Transfer Agent are entitled to dividends beginning on the next
business day following receipt of an order. As noted above, orders placed
directly with the Transfer Agent must be accompanied by payment. The offering
price will be the net asset value per share next determined following receipt of
an order (see "Determination of Net Asset Value"). 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 Dealer. In addition, some sales
personnel of the Selected Broker-Dealer will receive non-cash compensation in
the form of trips to educational and/or business seminars and merchandise as
special sales incentives. 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
Plan's inception on July 2, 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 Plan's inception upon which a contingent
deferred sales charge has been imposed or waived, or (b) the Fund's average
daily net assets. This fee is treated by the Fund as an expense in the year it
is accrued. 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 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 expenses incurred.
For the fiscal year ended February 28, 1994, the Fund accrued payments under
the Plan amounting to $1,251,125, which amount is equal to 0.95% of the Fund's
average daily net assets for the fiscal year. The payments accrued under the
Plan were calculated pursuant to clause (b) of the compensation formula under
the Plan. A portion of the fee payable pursuant to the Plan, which may not
exceed 0.25% of the Fund's average daily net assets, is characterized as a
service fee within the meaning of NASD guidelines.
At any given time, the Distributor may incur expenses in distributing shares
of the Fund may be in excess of 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 the redemption of shares (see "Redemption and
Repurchases--Contingent Deferred Sales Charge"). For example, if $1 million in
expenses in distributing shares of the Fund had been incurred and $750,000 had
been received as described in (i) and (ii) above, the excess expense would
amount to $250,000. The Distributor has advised the Fund that the excess
distribution expenses, including the carrying charge described above, totalled
$5,711,393 at February 28, 1994, which was equal to 4.10% of the Fund's net
assets on such date. 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 expenses
incurred in excess of payments made to the Distributor under the Plan and
10
<PAGE>
the proceeds of contingent deferred sales charges paid by investors upon
redemption of shares, if for any reason the Plan is terminated the Directors
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 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 of the Fund is determined once daily at 4:00 p.m., New York
time, on each day that the New York Stock Exchange is open. 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 is valued
at its latest sale price on that exchange; 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 by the Directors), 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
and 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
Directors. Short-term debt securities with remaining maturities of sixty days or
less are valued at amortized cost unless the Directors 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 Directors.
Certain of the Fund's portfolio securities 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
- --------------------------------------------------------------------------------
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 AND 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 per
share 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 quar-
11
<PAGE>
terly basis, to the Transfer Agent for investment in shares of the Fund.
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 dollar 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.
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.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, eligible 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.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the Transfer
Agent.
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 and five Dean Witter Funds
which are money market funds (the foregoing eight 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 in the 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 CDSC) 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,
12
<PAGE>
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 incurred on or after that date which are
attributable to those shares. (Exchange Fund 12b-1 distribution fees, if any,
are described in the prospectus 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.
Also, 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 may be
exchanged, upon such notice as may be required by applicable regulatory
agencies. Shareholders maintaining margin accounts with DWR or another Selected
Broker-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 one and examine it carefully before
investing. Exchanges are subject to the minimum investment requirement and any
other conditions imposed by each fund. In the case of any shareholder holding a
share certificate or certificates, no exchanges may be made until the share
certificate(s) have been received by the Transfer Agent and deposited in the
shareholder's account. 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 other 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 writing or 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 by contacting the Transfer Agent at (800) 526-3143 (toll free). The Fund
will employ reasonable procedures to confirm that exchange instructions
communicated over the telephone are genuine. Such
13
<PAGE>
procedures 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 will 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.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at net
asset value per share next determined; however, such redemption proceeds will 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 stock
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 along with any additional information 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"), which 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>
<S> <C>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
-------------------
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 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. Morevoer, 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, no CDSC
will be imposed on redemptions of shares which were purchased by certain Unit
Investment Trusts (on which a sales charge has been paid) or which
14
<PAGE>
are attributable to reinvestment of dividends or distributions from, or the
proceeds of, such Unit Investment Trusts.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of (i) 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 or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability, and (ii) 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 Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue code following attainment of age 59 1/2; or (c) a tax-free return of an
excess contribution to an IRA. For the purpose of determining disability, the
Distributor utilizes the definition contained in Section 72(m)(7) of the
Internal Revenue Code, which relates to the inability to engage in gainful
employment. 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 stock certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a stock
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 repurchase 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-Dealers. The offers 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, e.g. when normal trading is not taking place on the New
York Stock Exchange. 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.
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 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 their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Sec-
15
<PAGE>
tion 403(b)(7) of the Internal Revenue Code) whose shares have a value of less
than $100, or such lesser amount as may be fixed by the Fund's Board of
Directors. 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 $100 and allow the shareholder to make an additional investment in
an amount which will increase the value of the account to $100 or more 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 dividends and to
distribute substantially all of the Fund's net investment income and net
short-term capital gains, if any, at least once each year. The Fund may,
however, determine either to distribute or to retain all or part of any net
long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in additional
Fund shares (without sales charge) and will be automatically credited to the
shareholder's account without issuance of a stock 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 of 1986, it is not expected that the Fund will be required to pay
any federal income tax on such income and capital gains. Shareholders who are
required to pay taxes on their income will normally have to pay Federal income
taxes, and any state income taxes and/or local 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 net 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.
As a regulated investment company, the Fund is subject to the requirements
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. This
requirement may limit the Fund's ability to engage in options and futures
transactions.
After the end of the year, shareholders will receive full information on
their dividends and capital gains distributions for tax purposes. 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.
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.
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
16
<PAGE>
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. 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 may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund.
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.).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of common stock of the Fund are of $0.01 par
value and are equal as to earnings, assets and voting privileges. There are no
conversion, pre-emptive or other subscription rights. In the event of
liquidation, each share of common stock of the Fund is entitled to its portion
of all of the Fund's assets after all debts and expenses have been paid. The
shares do not have cumulative voting rights.
Under ordinary circumstances, the Fund is not required, nor does it intend,
to hold Annual Meetings of Stockholders. The Directors may call Special Meetings
of Stockholders for action by stockholder vote as may be required by the Act or
the Fund's By-Laws.
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.
17
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS DEAN WITTER RETIREMENT SERIES
Dean Witter Liquid Asset Fund Inc. Liquid Asset Series
Dean Witter Tax-Free Daily Income Trust U.S. Government Money Market Series
Dean Witter New York Municipal Money U.S. Government Securities Series
Market Trust Intermediate Income Securities Series
Dean Witter California Tax-Free Daily American Value Series
Income Trust Capital Growth Series
Dean Witter U.S. Government Money Dividend Growth Series
Market Trust Stategist Series
EQUITY FUNDS Utilities Series
Dean Witter American Value Fund Value-Added Market Series
Dean Witter Natural Resource Global Equity Series
Development Securities Inc. ASSET ALLOCATION FUNDS
Dean Witter Dividend Growth Securities Dean Witter Managed Assets Trust
Inc. Dean Witter Strategist Fund
Dean Witter Developing Growth ACTIVE ASSETS ACCOUNT PROGRAM
Securities Trust Active Assets Money Trust
Dean Witter World Wide Investment Trust Active Assets Tax-Free Trust
Dean Witter Value-Added Market Series Active Assets California Tax-Free Trust
Dean Witter Utilities Fund Active Assets Government Securities
Dean Witter Precious Metals and Trust
Minerals Trust
Dean Witter Capital Growth Securities
Dean Witter European Growth Fund Inc.
Dean Witter Pacific Growth Fund Inc.
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth
Securities
Dean Witter Global Utilities 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 California Tax-Free Income
Fund
Dean Witter New York Tax-Free Income
Fund
Dean Witter Convertible Securities
Trust
Dean Witter Federal Securities Trust
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
<PAGE>
Dean Witter
Natural Resource Development Securities Inc.
Two World Trade Center
New York, New York 10048
BOARD OF DIRECTORS DEAN WITTER
Jack F. Bennett NATURAL RESOURCE
Michael Bozic DEVELOPMENT
Charles A. Fiumefreddo SECURITIES
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Diane Lisa Sobin
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
110 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
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
PROSPECTUS -- MAY 11, 1994
5/11/94
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION Dean Witter
MAY 11, 1994 Natural Resource
Development
Securities
- --------------------------------------------------------------------------------
Dean Witter Natural Resource Development Securities Inc. (the "Fund") is an
open-end diversified management investment company whose investment objective is
capital growth. The Fund invests primarily in common stock of companies in the
natural resources and related areas, including companies engaged in the
exploration for and development, production and distribution of natural
resources or in the development of energy-efficient technologies or other
natural resource related supplies or products. (See "Investment Practices and
Policies.")
A Prospectus for the Fund dated May 11, 1994, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone number 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
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Dean Witter
Natural Resource Development
Securities Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management................................................................. 3
Directors and Officers...................................................................... 6
Investment Practices and Policies........................................................... 8
Investment Restrictions..................................................................... 20
Portfolio Transactions and Brokerage........................................................ 21
The Distributor............................................................................. 22
Shareholder Services........................................................................ 26
Redemptions and Repurchases................................................................. 30
Dividends, Distributions and Taxes.......................................................... 32
Performance Information..................................................................... 33
Shares of the Fund.......................................................................... 34
Custodian and Transfer Agent................................................................ 34
Independent Accountants..................................................................... 35
Reports to Shareholders..................................................................... 35
Legal Counsel............................................................................... 35
Experts..................................................................................... 35
Registration Statement...................................................................... 35
Report of Independent Accountants........................................................... 36
Financial Statements--February 28, 1994..................................................... 37
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund was incorporated in the State of Maryland on December 22, 1980
under the name InterCapital Natural Resource Development 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 Natural Resource Development Securities
Inc.
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 to 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
Directors. In addition, Directors of the Fund provide guidance on economic
factors and interest rate trends. Information as to these Directors and Officers
is contained under the caption "Directors 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., InterCapital Insured Municipal Bond Trust, InterCapital
Insured Municipal Trust, Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Developing Growth Securities Trust,
Dean Witter Tax-Exempt Securities Trust, Dean Witter Dividend Growth Securities
Inc., Dean Witter American Value Fund, Dean Witter U.S. Government Money Market
Trust, 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 California Tax-Free Income Fund, 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 Utilities
Fund, Dean Witter Managed Assets Trust, Dean Witter California Tax-Free Daily
Income Trust, Dean Witter Strategist Fund, Dean Witter World Wide Income Trust,
Dean Witter Intermediate Income Securities, Dean Witter New York Municipal Money
Market Trust, Dean Witter Capital Growth Securities, Dean Witter European Growth
Fund Inc., Dean Witter Precious Metals and Minerals Trust, Dean Witter Global
Short-Term Income Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter
Multi-State Municipal Series Trust, Dean Witter Short-Term U.S. Treasury Trust,
Dean Witter Diversified Income Trust, Dean Witter Premier Income Trust,
InterCapital Quality Municipal Investment Trust, InterCapital Quality Municipal
Income Trust, Dean Witter Retirement Series, Dean Witter Health Sciences Trust,
InterCapital Insured Municipal Income Trust, InterCapital California Insured
Municipal Income Trust, Dean Witter Global Dividend Growth Securities, Dean
Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund,
InterCapital Quality Municipal Securities, InterCapital California Quality
Municipal Securities, InterCapital New York Quality Municipal Securities,
InterCapital Insured Municipal Securities, InterCapital Insured California
Municipal Securities, Dean Witter Global Utilities Fund, Active Assets Money
Trust, Active Assets Tax-Free Trust, Active Assets California Tax-Free Trust,
Active Assets Government Securities Trust, Municipal Income Trust, Municipal
Income Trust II, Municipal Income Trust III, Municipal Income Opportunities
Trust, Municipal Income Opportunities Trust II, Municipal Income Opportunities
Trust III, Prime Income Trust and Municipal Premium 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
3
<PAGE>
Growth Fund, TCW/DW Balanced Fund, TCW/DW North American Intermediate Income
Trust, TCW/DW Term Trust 2000, TCW/DW Term Trust 2002, TCW/DW Term Trust 2003
and TCW/DW Emerging Markets Opportunities Trust (the "TCW/DW Funds").
InterCapital also serves as (i) sub-advisor to Templeton Global Opportunities
Trust, an open-end investment company; (ii) administrator of The Black Rock
Strategic Term Trust Inc., a closed-end investment company; and (iii)
sub-administrator of Mass Mutual Participation Investors and Templeton Global
Governments Income Trust, closed-end investment companies.
The Investment Manager also serves as an investment adviser for Dean Witter
World Wide Investment Fund, an investment company organized under the laws of
Luxembourg, shares of which are not available for purchase in the United States
or by American citizens outside the United States.
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 and policies.
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. The foregoing
internal reorganization 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:
expenses of the Plan of Distribution pursuant to Rule 12b-1 (see "The
Distributor"); charges and expenses of any registrar, custodian, stock transfer
and dividend disbursing agent; brokerage commissions; taxes; engraving and
printing stock 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 and Statements of Additional
Information of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and Directors' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of Directors 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
Directors who are not interested persons of the Fund or of the Investment
Manager (not including compensation or expenses of attorneys who are employees
of the Investment Manager) and independent accountants; membership dues of
industry associations; interest on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Directors) 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.
4
<PAGE>
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 February 29, 1992, February
28, 1993 and February 28, 1994, the Fund accrued to the Investment Manager total
compensation under the Agreement in the amounts of $817,716, $718,454 and
$819,273, respectively.
Pursuant to the Agreement, 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 the Fund for the amount of
such excess. Such amount, if any, will be calculated daily and credited on a
monthly basis. During the fiscal years ended February 29, 1992, February 28,
1993 and February 28, 1994, the Fund's expenses did not exceed the limitations
set forth above.
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 Directors on October 30, 1992
and by the Shareholders at a Meeting of Shareholders on January 12, 1993. The
Agreement is substantially identical to a prior investment management agreement
which was initially approved by the Board of Directors on January 18, 1983 and
by the shareholders on March 16, 1983. The Agreement took effect on June 30,
1993 upon the spin-off by Sears, Roebuck & Co. of its remaining shares of DWDC.
The Agreement may be terminated at any time, without penalty, on thirty days'
notice by the Board of Directors of the Fund, by the holders of a majority, as
defined in the Investment Company Act of 1940, as amended (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).
Under its terms, the Agreement continued in effect until April 30, 1994 and
will continue 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 Board of Directors of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Directors of
the Fund who are not parties to the Agreement or "interested persons" (as
defined in the Act) of any such party, which vote must be cast in person at a
meeting called for the purpose of voting on such approval. The continuation of
the Agreement until April 30, 1995, was approved by the Directors of the Fund,
including a majority of the Independent Directors, at their meeting held on
April 8, 1994.
The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that the 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/or DWR and its parent company is terminated, the Fund will
eliminate the name "Dean Witter" from its name if InterCapital and/or DWR its
parent company shall so request.
5
<PAGE>
DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
The Directors 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 Dean Witter Funds and the TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -----------------------------------------------------------------------------
<S> <C>
Jack F. Bennett Retired; Director or Trustee of the Dean Witter Funds; formerly Senior Vice
Director President and Director of Exxon Corporation (1975-January, 1989) and Under
141 Taconic Road Secretary of the U.S. Treasury for Monetary Affairs (1974-1975); Director of
Greenwich, Connecticut Philips Electronics N.V., Tandem Computers Inc. and Massachusetts Mutual
Insurance Company; director or trustee of various not-for-profit and business
organizations.
Michael Bozic President and Chief Executive Officer of Hills Department Stores (since May,
Director 1991); formerly Chairman and Chief Executive Officer (January, 1987-August,
c/o Hills Stores Inc. 1990) and President and Chief Operating Officer (August, 1990-February, 1991)
15 Dan Road of the Sears Merchandise Group of Sears, Roebuck and Co.; Director or Trustee
Canton, Massachusetts of the Dean Witter Funds; Director of Harley Davidson Credit Inc., the United
Negro College Fund and Domain Inc. (home decor retailer).
Charles A. Fiumefreddo* Chairman, Chief Executive Officer and Director of InterCapital and
Chairman, Director, Distributors and DWSC; Executive Vice President and Director of DWR;
President and Chief Chairman, Trustee or Director, President and Chief Executive Officer of the
Executive Officer Dean Witter Funds; Chairman, Chief Executive Officer and Trustee of the
Two World Trade Center TCW/DW Funds; formerly Executive Vice President and Director of DWDC (until
New York, New York February, 1993); Chairman and Director of Dean Witter Trust Company ("DWTC")
(since October, 1989); Director and/or officer of various DWDC subsidiaries.
Edwin J. Garn Director or Trustee of the Dean Witter Funds; formerly United States Senator
Director (R-Utah) (1974-1992) and Chairman, Senate Banking Committee (1980-1986);
2000 Eagle Gate Tower formerly Mayor of Salt Lake City, Utah (1971-1974); formerly Astronaut, Space
Salt Lake City, Utah Shuttle Discovery (April 12-19, 1985); Vice Chairman, Huntsman Chemical
Corporation (since January, 1993); member of the board of various civic and
charitable organizations.
John R. Haire Chairman of the Audit Committee and Chairman of the Committee of the
Director Independent Directors or Trustees and Director or Trustee of the Dean Witter
439 East 51st Street Funds; Trustee of the TCW/DW Funds; formerly President, Council for Aid to
New York, New York Education (1978-October, 1989) and Chairman and Chief Executive Officer of
Anchor Corporation, an Investment Adviser (1964-1978); Director of Washington
National Corporation (insurance) and Bowne & Co. Inc. (printing).
Dr. John E. Jeuck Retired; Director or Trustee of the Dean Witter Funds; formerly Robert Law
Director Professor of Business Administration, Graduate School of Business, University
70 East Cedar Street of Chicago (until July, 1989); Business consultant.
Chicago, Illinois
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -----------------------------------------------------------------------------
<S> <C>
Dr. Manuel H. Johnson Senior Partner, Johnson Smick International, Inc., a consulting firm; Koch
Director Professor of International Economics and Director of the Center for Global
7521 Old Dominion Drive Market Studies at George Mason University (since September, 1990);
Maclean, Virginia Co-Chairman and a founder of the Group 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
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 Director or Trustee of the Dean Witter Funds; Chairman of the Audit Committee
Director and Chairman of the Committee of Independent Trustees and Trustee of the
9 Hunting Ridge Road TCW/DW Funds; formerly Chairman of the Financial Accounting Standards
Stamford, Connecticut Advisory Council and Chairman and Chief Executive Officer of the American
Stock Exchange; Director of UCC Investors Holding Inc. (Uniroyal Chemical
Company, Inc.); director or trustee of various not-for-profit organizations.
Michael E. Nugent General Partner, Triumph Capital, LP., a private investment partnership
Director (since April, 1988); Director or Trustee of the Dean Witter Funds; Trustee of
237 Park Avenue the TCW/DW Funds; formerly Vice President, Bankers Trust Company and BT
New York, New York Capital Corporation (September, 1984-March, 1988); Director of various
business organizations.
Philip J. Purcell* Chairman of the Board of Directors and Chief Executive Officer of DWDC, DWR
Director and Novus Credit Services Inc.; Director of InterCapital, DWSC and
Two World Trade Center Distributors; Director or Trustee of the Dean Witter Funds; Director and/or
New York, New York officer of various DWDC subsidiaries.
John L. Schroeder Executive Vice President and Chief Investment Officer of the Home Insurance
Director Company (since August, 1991); Director or Trustee of the Dean Witter Funds;
Northgate 3A Director of Citizens Utilities Company; formerly Chairman and Chief
Alger Court Investment Officer of Axe-Houghton Management and the Axe-Houghton Funds
Bronxville, New York (April, 1983-June, 1991) and President of USF&G Financial Services, Inc.
(June 1990-June, 1991).
Edward R. Telling* Retired; Director or Trustee of the Dean Witter Funds; formerly Chairman of
Director the Board of Directors and Chief Executive Officer (1978-1985) and President
Sears Tower (from January, 1981-March, 1982 and from February, 1984-August, 1984) of
Chicago, Illinois Sears, Roebuck and Co.; formerly Director of Sears, Roebuck and Co.
Sheldon Curtis Senior Vice President, Secretary and General Couns3el of InterCapital and
Vice President, Secretary DWSC; Senior Vice President and Secretary of DWTC (since October, 1989);
and General Counsel Senior Vice President, Assistant Secretary and Assistant General Counsel of
Two World Trade Center Distributors; Assistant Secretary of DWDC and DWR; Vice President, Secretary
New York, New York and General Counsel of the Dean Witter Funds and the TCW/DW Funds.
Diane Lisa Sobin Vice President of InterCapital (since 1991); previously Assistant Vice
Vice President President and Portfolio Manager of InterCapital (May, 1986-1991).
Two World Trade Center
New York, New York
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -----------------------------------------------------------------------------
<S> <C>
Thomas F. Caloia First Vice President (since May, 1991) and Assistant Treasurer (since
Treasurer January, 1993) of InterCapital; Treasurer of the Dean Witter Funds and the
Two World Trade Center TCW/DW Funds; previously Vice President of InterCapital.
New York, New York
<FN>
- ------------------------
*Denotes Directors who are "interested persons" of the Fund, as defined in the
Act.
</TABLE>
In addition, Robert M. Scanlan, President 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 Paul Vance, Senior Vice
President of InterCapital, and Ira Ross, Vice President of InterCapital, are
Vice Presidents of the Fund. Marilyn K. Cranney and Barry Fink, First Vice
Presidents and Assistant General Counsels of InterCapital and DWSC and Lawrence
S. Lafer, LouAnne D. McInnis and Ruth Rossi, Vice Presidents and Assistant
General Counsels of InterCapital and DWSC are Assistant Secretaries of the Fund.
The Fund pays each Director who is not an employee or former employee of the
Investment Manager or an affiliated company an annual fee of $1,200 plus $50 for
each meeting of the Board of Directors, the Audit Committee or the Committee of
Independent Directors attended by the Director in person (the Fund pays the
Chairman of the Audit Committee an additional annual fee of $1,000, and pays the
Chairman of the Committee of Independent Directors an additional annual fee of
$2,400, in each case inclusive of the Committee meeting fees). The Fund also
reimburses Directors for travel and other out-of-pocket expenses incurred by
them in connection with attending such meetings. Directors 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 a Director who is not an
"interested person" of the Fund and who retires after a minimum required period
of service would be entitled to retirement payments upon reaching the eligible
retirement age (normally, after attaining age 72) based upon length of service
and computed as a percentage of one-fifth of the total compensation earned by
such Director for service to the Fund in the five-year period prior to the date
of the Director's retirement . No Independent Director has retired since the
adoption of the program and no payments by the Fund have been made under the
program to any Director. For the fiscal year ended February 28, 1994, the Fund
accrued a total of $35,165 for directors' fees and expenses and benefits under
the retirement program. As of the date of this Statement of Additional
Information, the aggregate shares of the Fund owned by the Fund's officers and
directors as a group was less than 1 percent of the Fund's shares outstanding.
INVESTMENT PRACTICES AND POLICIES
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As discussed in the Prospectus, the Fund may invest in securities of foreign
companies. It should be noted that there may be less publicly available
information about foreign issuers than about domestic issuers, and foreign
issuers may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those of domestic issuers. Securities
of some foreign issuers are less liquid and more volatile than securities of
comparable domestic issuers and foreign brokerage commissions are generally
higher than in the United States. Foreign securities markets may also be less
liquid, more volatile and less subject to government supervision than in the
United States. Investments in foreign countries could be affected by other
factors not present in the United States, including expropriation, confiscatory
taxation and potential difficulties in enforcing contractual obligations. During
the fiscal year ended February 28, 1994 the Fund's purchases of securities of
foreign issuers did not exceed 5% of the Fund's net assets.
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 (subject to notice
provisions described below), and are at all times secured by cash or cash
equivalents, which are
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maintained in a segregated account pursuant to applicable regulations and that
are at least equal to 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 of the securities during the period of the loan would
inure to the Fund. The Fund will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities. The creditworthiness
of firms to which the Fund lends its portfolio securities will be monitored on
an ongoing basis.
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. During its fiscal year ended February 28, 1994, the Fund
did not loan any of its portfolio securities and it has no intention of doing so
in the foreseeable future.
BORROWING OF MONEY
The Fund did not borrow any money during its fiscal year ended February 28,
1994 and it has no intention of borrowing any money in the foreseeable future.
(See Investment Restriction 6.)
OPTIONS AND FUTURES TRANSACTIONS
As discussed in the Prospectus, 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 interest 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 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
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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. This 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. As stated in the Prospectus, 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 no 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
calls 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
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.
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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 stated in the Prospectus, 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 obligations in an amount equal to at
least the exercise price of the option, at all times during the option period.
Similarly, 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
differences 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 the 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.
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
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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 excercisable 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
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.
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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. As stated in the Prospectus, 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.
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
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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 has 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.
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
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<PAGE>
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 sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same aggregate amount of the specific
type of security 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 brokers' 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.
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
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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. As stated
in the Prospectus, the Fund may sell a futures contract to protect against the
decline in the value of securities held by the Fund. However, it is possible
that the futures market may advance and the value of securities held in the
portfolio of the Fund may decline. If this occurred, the Fund would lose money
on the futures contract and also experience a decline in value of its portfolio
securities. However, while this could occur for a very brief period or to a very
small degree, over time the value of a diversified portfolio will tend to move
in the same direction as the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Fund 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.
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In order to assure that the Fund is entering into transactions in futures
contracts for hedging purposes as such is defined by the CFTC either: 1) a
substantial majority (i.e., approximately 75%) of all anticipatory hedge
transactions (transactions in which the Fund does not own at the time of the
transaction, but expects to acquire, the securities underlying the relevant
futures contract) involving the purchase of futures contracts will be completed
by the purchase of securities which are the subject of the hedge or 2) the
underlying value of all long positions in futures contracts will not exceed the
total value of a) all short-term debt obligations held by the Fund; b) cash held
by the Fund; c) cash proceeds due to the Fund on investments within thirty days;
d) the margin deposited on the contracts; and e) any unrealized appreciation in
the value of the contracts.
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.
As stated in the Prospectus, 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.
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As stated in the Prospectus, 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 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.
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 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 Directors 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
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<PAGE>
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 February 28, 1994, 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 Board of Directors 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 February 28, 1994, the
Fund's commitments to purchase securities on a "when, as and if issued" basis
did not exceed 5% of the value of the Fund's net assets. 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, or which are otherwise not readily
marketable. 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 recently adopted Rule 144A under
the Securities Act of 1933, which will permit the Fund to sell restricted
securities to qualified institutional buyers without limitation. The Board of
Directors 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 total assets. The Rule 144A marketplace of sellers and qualified
institutional buyers is new and still developing and may take a period of time
to develop into a mature liquid market. As such, the market for certain private
placements purchased pursuant to Rule 144A may be initially small or may,
subsequent to purchase, become illiquid. Furthermore, the Investment Manager may
not be possessed of all the information concerning an issue of securities that
it wishes to purchase in a private placement to which it would normally have had
access, had the registration statement necessitated by a public offering been
filed with the Securities and Exchange Commission. During the fiscal year ended
February 28, 1994, the Fund's purchases of restricted securities did not exceed
5% of the value of the Fund's net assets.
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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 of the Fund, if the holders of more than 50% of the
outstanding shares 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 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 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 which are
secured by real estate or interests therein.
3. Purchase or sell commodities except that the Fund may purchase and
sell 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).
7. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in
restriction (6). (To meet the requirements of regulations in certain states,
the Fund, as a matter of operating policy but not as a fundamental policy,
will limit any pledge of its assets to 4.5% of its net assets so long as
shares of the Fund are being sold in those states.) For the purposes 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 purchases 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.
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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 and then only in an aggregate amount not
to exceed 5% of the Fund's total assets.
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
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Subject to the general supervision of the Board of Directors, 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 February 29, 1992, February
28, 1993 and February 28, 1994, the Fund paid a total of $259,764, $326,314, and
$439,781, respectively, in brokerage commissions.
The Investment Manager currently serves as investment manager or adviser 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 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 price and execution 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
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<PAGE>
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 February
28, 1994, the Fund directed the payment of $326,581 in brokerage commissions in
connection with transactions in the aggregate amount of $114,899,564 to brokers
because of research services provided.
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 Directors of the Fund,
including a majority of the Directors 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
February 29, 1992, February 28, 1993 and February 28, 1994, the Fund paid a
total of $39,240, $43,525, and $52,240, 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 February 28, 1994, the brokerage commissions paid to DWR represented
approximately 11.88% 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 19.51% of the aggregate dollar value of all
portfolio transactions of the Fund during the year for which commissions were
paid.
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 its fiscal year ended February 28, 1994, the Fund did
not effect any principal transactions with DWR.
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 Fund does not reduce the management fee it
pays to the Investment Manager by any amount that may be attributable to the
value of such services.
PORTFOLIO TRADING
It is anticipated that the Fund's portfolio turnover rate will not exceed
100% during the fiscal year ending February 28, 1995. A 100% turnover rate would
occur, for example, if 100% of the securities held in the Fund's portfolio
(excluding all securities whose maturities at acquisition were one year or less)
were sold and replaced within one year. During the fiscal years ended February
28, 1993 and February 28, 1994, the Fund's portfolio turnover rates were 52% and
69%, respectively.
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 an indirect wholly-owned subsidiary of DWDC. The
Directors of the Fund, including a majority of the Directors who are not, and
were not at the time they voted, interested persons of the Fund, as defined in
the Act (the "Independent Directors"), approved, at their meeting held on
October 30, 1992, a Distribution Agreement (the "Distribution
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Agreement") appointing the Distributor 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 & Co. of its remaining shares of DWDC. By its terms,
the Distribution Agreement has 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.
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 prospective
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 judgement 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 on July 2, 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 Plan's inception 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. The Distributor also
receives the proceeds of contingent deferred sales charges imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan (see "Redemptions and Repurchases -- Contingent Deferred Sales
Charge" in the Prospectus). The Distributor has informed the Fund that it and/or
DWR received approximately $289,000, $182,000 and $143,000 in contingent
deferred sales charges for the fiscal years ended February 29, 1992, February
28, 1993 and February 28, 1994, respectively, none of which was retained by the
Distributor.
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 (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 of Distribution fee payments made by the Fund is characterized as an
"asset-based sales charge" pursuant to the aforementioned Rules of Fair
Practice.
The Plan was originally adopted by a majority vote of the Board of
Directors, including all of the Directors who are not "interested persons" of
the Fund, as defined in the Act, (the "Independent Directors") none of whom had
or have any direct or indirect financial interest in the operation of the Plan
(the "Independent 12b-1 Directors"), cast in person at a meeting called for the
purpose of voting on the Plan, on April 16, 1984, 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 June 22, 1984.
At their meeting held on October 30, 1992, the Directors of the Fund,
including all of the Independent 12b-1 Directors, 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
23
<PAGE>
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.
Pursuant to the Plan, and as required by Rule 12b-1, the Distributor shall
provide the Fund, for review by the Directors, and the Directors shall review,
at least quarterly, a written report of the amounts expended under the Plan and
the purpose for which such expenditures were made. The Fund accrued $1,251,125
to the Distributor, pursuant to the Plan, for the fiscal year ended February 28,
1994. This is an accrual at an annual rate of 1% of the average daily net assets
of the Fund attributable to shares issued, net of related shares redeemed, since
the implementation of the Plan.
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 .25 of 1% of the current value of the amount sold
(not including reinvested dividends and distributions). 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. The distribution fee that the Distributor receives
from the Fund under the Plan, in effect, offsets distribution expenses incurred
on behalf of the Fund and DWR's opportunity costs, such as the gross sales
credit and an assumed interest charge thereon ("carrying charge"). In the
Distributor's reporting of 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 the Distributor under the
Plan and any contingent deferred sales charges received by the Distributor upon
redemption of shares of the Fund. No other interest charge is included as a
distribution expense in the Distributor's calculation of its distribution costs
for this purpose. The broker's call rate is the interest rate charged to
securities brokers on loans secured by exchange-listed securities.
The Fund paid 100% of the $1,251,125 accrued under the Plan for the fiscal
year ended February 28, 1994 to the Distributor and DWR. The Distributor and DWR
estimate that they have spent, pursuant to the Plan, $18,791,485 on behalf of
the Fund since the inception of the Plan. It is estimated that this amount was
spent in approximately the following ways: (i) 11.12% ($2,089,417) --
advertising and promotional expenses; (ii) 1.25% ($234,667) -- printing of
prospectuses for distribution to other than current shareholders; and (iii)
87.63% ($16,467,401) -- other expenses, including the gross sales credit and the
carrying charge, of which 12.74% ($2,098,423) represents carrying charges,
35.27% ($5,807,941) represents commission credits to DWR branch offices for
payments of commissions to account executives and 51.99% ($8,561,037) 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. The Distributor has advised the Fund that
the excess distribution expenses, 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 $5,711,393 as of February 28,
1994. 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
Directors 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.
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<PAGE>
No interested person of the Fund nor any Director 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 interest as a result of benefits derived from the successful operation
of the Plan or as a result of receiving a portion of the amounts expended
thereunder by the Fund.
Under its terms, the Plan will continue in effect from year to year,
provided such continuance is approved annually by a vote of the Directors in the
manner described above. Continuance of the Plan for one year, until April 30,
1995, was approved by the Board of Directors of the Fund, including a majority
of the Independent 12b-1 Directors, at a Board meeting held on April 8, 1994. At
that meeting, the Directors of the Fund, including a majority of the Independent
12b-1 Directors, also approved certain technical amendments to the Plan in
connection with recent amendments adopted by the National Association of
Securities Dealers to its Rules of Fair Practice. Prior to approving the
continuation of the Plan, the Board requested and received from DWR and reviewed
all the information which it deemed necessary to arrive at an informed
determination. In making their determination to continue the Plan, the Directors
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 the Distributor to the Fund and its stockholders. Based upon their
review, the Directors of the Fund, including each of the Independent 12b-1
Directors, 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 Directors' quarterly review of the
Plan, they will consider its continued appropriateness and the level of
compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of the
Fund, and all material amendments of the Plan must also be approved by the
Directors in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Directors 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 Directors shall be
committed to the discretion of the Independent Directors.
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, 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 debt securities with remaining
maturities of 60 days or less at the time of purchase are valued at amortized
cost, unless the Directors 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
60 days, whereupon they will be valued at amortized cost using their value on
the 61st day unless the Directors 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 Directors. 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 Directors
determine that such price does not reflect their market value, in which case
they will be valued at their fair value as determined by the Directors. 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
Directors.
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<PAGE>
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 of issuance of
a stock certificate. If a stock 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 written confirmation of the transaction from the Fund or from
DWR or other 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.-TM- 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 Natural Resource Development Securities. 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 of 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.-TM- 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. Any shareholder
who receives a cash payment representing a dividend or distribution may invest
such dividend or distribution at net asset value by returning the check or the
proceeds to the Transfer Agent within thirty 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 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,
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<PAGE>
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. Any
applicable contingent deferred sales charge will be imposed on shares redeemed
under the Withdrawal Plan (see "Redemptions and Repurchases -- Contingent
Deferred Sales Charge" in the Prospectus). 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.
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 or other
broker-dealer 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 shareholder'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") 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
Natural Resource Development Securities Inc., 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 and for five Dean Witter Funds which are money market funds (the foregoing
eight non-CDSC funds are hereinafter collectively referred to 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
27
<PAGE>
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.
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 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 holding 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 the Fund. However, in the case of shares of the Fund
exchanged into 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 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 the Fund from the
Exchange Fund, with no CDSC being imposed on such exchange. The holding 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
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 CDSC 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 Dean Witter American Value Fund (formerly Dean Witter Industry-Valued
Securities Inc.) acquired prior to April 30, 1984, shares of the Fund and Dean
Witter Dividend Growth 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
28
<PAGE>
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 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 purchase payment for, or (b) the current net asset value
of, those exchanged 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.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of other
fund shares. In the absence of negligence on its part, neither the Transfer
Agent nor the Fund shall be liable for any redemption of Fund shares caused by
unauthorized telephone instructions. Accordingly, in such event the investor
shall bear the risk of loss. The staff of the Securities and Exchange Commission
is currently considering the propriety of such a policy.
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 New York Municipal Money Market Trust and Dean Witter California
Tax-Free Daily Income Trust although those funds may, at their discretion,
accept initial investments of as low as $1,000. The minimum initial investment
for Dean Witter Short-Term U.S. Treasury Trust is $10,000. 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 those
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 this
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
29
<PAGE>
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.
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. 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.
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. 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" in the Prospectus) 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
30
<PAGE>
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 certain Unit Investment Trusts (on which a sales
charge has been paid) or which are attributable to reinvestment of dividends or
distributions from, or the proceeds of, such Unit Investment Trusts.
In determining the applicability of the 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 the
shares of other Dean Witter funds for which shares of front-end sales charge
funds have been exchanged. A portion of the 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 the 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 payment 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
PURCHASE AS A 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>
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. 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
31
<PAGE>
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 (including a certified or bank cashier's
check), payment of 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 investment of the check by the Transfer
Agent). If the shares to be redeemed have recently been purchased by check
(including a certificate or bank cashier's check), payment of 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 investment 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.
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 shares to be transferred will be determined by using
the same order as used in processing a redemption (see "Redemptions and
Repurchases" in the Prospectus). 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 30 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 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, 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 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
and/or 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 income regardless of whether the shareholder receives
such payments in additional shares or in cash. Any dividends declared in the
last quarter of any year which are paid in the following year prior to February
1 will be deemed received by the shareholder in the prior year.
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have been held by the Fund for more than one
year. Gains or losses on the sale of securities held for one year or less will
be short-term gains or losses.
32
<PAGE>
The Fund has qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986. If
so qualified, the Fund will not be subject to federal income tax on its net
investment income and net short-term and long-term capital gains, if any,
realized during any fiscal year in which it distributes such income and capital
gains to its shareholders. 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.
Dividends and interest received by the Fund with respect to foreign
securities in its portfolio may give rise to withholding and other taxes imposed
by foreign countries. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes.
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 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.
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. The
amount of dividends paid by the Fund which may qualify for the dividends
received deduction is limited to the aggregate amount of qualifying dividends
which the Fund derives from its portfolio investments which the Fund had held to
a minimum period, usually 46 days. Any distributions made by the Fund will not
be eligible for the dividends received deduction with respect to shares which
are held by the shareholder for 45 days or less. Any long-term capital gain
distributions will also not be eligible for the dividends received deduction.
The ability to take the dividends received deduction will also be limited in the
case of a Fund shareholder which incurs or continues indebtedness which is
directly attributable to its investment in the Fund.
After the end of the 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 portion eligible for the dividends received
deduction. 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 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. 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 year ended February 28,
1994, the five years ended February 28, 1994, and for the ten years ended
February 28, 1994, were 7.16%, 8.92% and 8.59%, respectively.
33
<PAGE>
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. 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 total return of the Fund
may be calculated in the manner described in the preceding paragraph, but
without deduction of any applicable contingent deferred sales charge. Based on
this calculation, the average annual total returns of the Fund for the year
ended February 28, 1994, for the five years ended February 28, 1994, and for the
ten years ended February 28, 1994 were 12.16%, 9.20% and 8.59%, respectively.
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 the
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 year ended February 28, 1994 was
12.16%, the total return for the five years ended February 28, 1994 was 55.31%,
and the total return for the ten years ended February 28, 1994 was 127.95%.
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
and $100,000. Investments of $10,000, $50,000 and $100,000 in the Fund at
inception would have grown to $21,791, $108,955 and $217,910, respectively at
February 28, 1994.
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 Fund is authorized to issue 500,000,000 shares of common stock of $0.01
par value. Shares of the Fund, when issued, are fully paid, nonassessable, fully
transferable and redeemable at the option of the holder. Except for agreements
entered into by the Fund in its ordinary course of business within the
limitations of the Fund's fundamental investment policies (which may be modified
only by shareholder vote), the Fund will not issue any securities other than
common stock.
The shares of the Fund do not have cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of the
directors can elect 100% of the directors if they choose to do so, and in such
event, the holders of the remaining shares voting for the election of directors
will not be able to elect any person or persons to the Board of Directors.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 110 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 of 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; disbursing
cash dividends and
34
<PAGE>
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 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 ends on the last day of February. 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 Directors.
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 included in this Statement of
Additional Information and incorporated by reference in the Prospectus have been
so included and incorporated in reliance on the report of Price Waterhouse,
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.
35
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of Dean Witter Natural Resource
Development Securities Inc.
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 Natural Resource
Development Securities Inc. (the "Fund") at February 28, 1994, 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 owned at February 28, 1994 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York 10036
April 6, 1994
36
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $126,772,238) (Note
1)...................................... $ 140,311,765
Cash...................................... 665,000
Receivable for:
Investments sold........................ 4,133,306
Dividends............................... 549,989
Capital stock sold...................... 424,105
Foreign withholding taxes reclaimed..... 13,555
Prepaid expenses and other assets......... 25,635
-------------
TOTAL ASSETS...................... 146,123,355
-------------
LIABILITIES:
Payable for:
Investments purchased................... 6,218,815
Capital stock repurchased............... 138,785
Plan of distribution fee (Note 3)....... 103,993
Investment management fee (Note 2)...... 67,645
Accrued expenses and other payables (Note
4)...................................... 135,195
-------------
TOTAL LIABILITIES................. 6,664,433
-------------
NET ASSETS:
Paid-in-capital........................... 120,451,959
Accumulated undistributed net investment
income.................................. 309,709
Accumulated undistributed net realized
gains on investments.................... 5,157,727
Net unrealized appreciation............... 13,539,527
-------------
NET ASSETS........................ $ 139,458,922
-------------
-------------
NET ASSET VALUE PER SHARE, 11,800,251
shares outstanding (500,000,000 shares
authorized of $.01 par value)...........
$11.82
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME
Dividends (net of $45,456 foreign
withholding tax)..................... $ 3,366,442
Interest............................... 89,658
------------
TOTAL INCOME....................... 3,456,100
------------
EXPENSES
Plan of distribution fee (Note 3)...... 1,251,125
Investment management fee (Note 2)..... 819,273
Transfer agent fees and expenses (Note
4)................................... 234,726
Shareholder reports and notices........ 46,670
Registration fees...................... 46,232
Professional fees...................... 36,413
Directors' fees and expenses (Note
4)................................... 35,165
Custodian fees......................... 21,374
Other.................................. 6,494
------------
TOTAL EXPENSES..................... 2,497,472
------------
NET INVESTMENT INCOME............ 958,628
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (Note 1):
Net realized gain on investments....... 11,362,433
Net change in unrealized appreciation
on investments....................... 2,278,548
------------
NET GAIN ON INVESTMENTS............ 13,640,981
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...... $ 14,599,609
------------
------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
FEBRUARY 28, 1994 FEBRUARY 28, 1993
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................. $ 958,628 $ 1,679,924
Net realized gain on investments...................................... 11,362,433 3,692,455
Net change in unrealized appreciation on investments.................. 2,278,548 8,768,245
------------------ ------------------
Net increase in net assets resulting from operations.............. 14,599,609 14,140,624
------------------ ------------------
Dividends and distributions from:
Net investment income................................................. (923,181) (1,929,434)
Net realized gain..................................................... (8,542,530) -0-
------------------ ------------------
(9,465,711) (1,929,434)
------------------ ------------------
Net increase (decrease) from capital stock transactions (Note 5)........ 15,828,824 (6,859,908)
------------------ ------------------
Total increase.................................................... 20,962,722 5,351,282
NET ASSETS:
Beginning of period..................................................... 118,496,200 113,144,918
------------------ ------------------
END OF PERIOD (including undistributed net investment income of $309,709
and $274,262, respectively)............................................ $ 139,458,922 $ 118,496,200
------------------ ------------------
------------------ ------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
COMMON STOCKS (98.8%)
BASIC ENERGY (47.7%)
NATURAL GAS (11.0%)
20,000 Anardarko Petroleum Corp............. $ 890,000
60,000 Apache Corp.......................... 1,500,000
43,000 Canadian Natural Resources*.......... 588,867
100,000 Eastex Energy, Inc.*................. 437,500
45,000 Enron Corp........................... 1,434,375
34,000 Noble Affiliates, Inc................ 875,500
34,600 Nuevo Energy Co.*.................... 726,600
47,000 Questar Corp......................... 1,445,250
53,000 Renaissance Energy*.................. 1,078,910
34,000 Seagull Energy Corp.*................ 845,750
35,000 Sonat, Inc........................... 1,063,125
25,000 Talisman Energy*..................... 534,366
21,000 Tenneco, Inc......................... 1,170,750
65,000 TransCanada Pipelines, Ltd........... 958,750
50,000 Trident Ngl Holding, Inc............. 525,000
35,000 United Meridian Corp.*............... 542,500
32,000 Williams Companies, Inc.............. 788,000
---------------
15,405,243
---------------
OIL INTEGRATED - INTERNATIONAL (19.6%)
50,000 British Petroleum PLC (ADR)+......... 3,256,250
34,000 Chevron Corp......................... 2,949,500
79,000 Exxon Corp........................... 5,125,125
35,000 Imperial Oil Ltd. Common 'F'......... 1,211,875
49,000 Mobil Corp........................... 3,852,625
38,000 Royal Dutch Petroleum Co............. 4,061,250
67,500 Societe National Elf Aquitaine
(ADR)+............................. 2,413,125
69,000 Texaco, Inc.......................... 4,476,375
---------------
27,346,125
---------------
OIL PRODUCTION - DOMESTIC (15.9%)
25,800 Amerada Hess Corp.................... 1,196,475
35,000 Amoco Corp........................... 1,828,750
13,000 Atlantic Richfield Co................ 1,309,750
46,000 Kerr McGee Corp...................... 2,064,250
61,000 Louisiana Land & Exploration Co.
(The).............................. 2,272,250
32,000 Murphy Oil Corp...................... 1,272,000
143,000 Occidental Petroleum Corp............ 2,591,875
66,000 Oryx Energy Co....................... 1,188,000
29,700 Parker & Parsley Petroleum Co........ 668,250
18,000 Pennzoil Co.......................... 963,000
56,000 Phillips Petroleum Co................ 1,519,000
50,000 Snyder Oil Corp...................... 918,750
27,000 Triton Energy Corp.*................. 783,000
75,000 Union Texas Petroleum Holdings,
Inc................................ 1,443,750
55,000 USX Delhi-Group...................... 893,750
70,000 USX-Marathon Group................... 1,207,500
---------------
22,120,350
---------------
OIL REFINERIES (1.2%)
50,000 Sun Co............................... 1,706,250
---------------
TOTAL BASIC ENERGY................... 66,577,968
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
ENERGY DEVELOPMENT & TECHNOLOGY (12.1%)
OIL DRILLING (1.7%)
150,000 Energy Service Co., Inc.*............ $ 515,625
70,000 Nabors Industries, Inc.*............. 463,750
130,000 Rowan Cos., Inc.*.................... 942,500
25,000 Sonat Offshore Drilling, Inc......... 434,375
---------------
2,356,250
---------------
OIL EQUIPMENT & SERVICES (10.4%)
53,000 Baker Hughes, Inc.................... 1,007,000
40,000 BJ Services.......................... 770,000
20,000 Camco, Inc........................... 345,000
50,000 Dresser Industries, Inc.............. 1,137,500
29,000 Halliburton Co....................... 909,875
45,000 Hornbeck Offshore Svcs., Inc.*....... 680,625
48,000 McDermott International, Inc......... 1,110,000
50,000 Offshore Logistics, Inc.*............ 718,750
45,000 Offshore Pipelines, Inc.*............ 826,875
50,000 Schlumberger, Ltd.................... 2,843,750
29,000 SEACOR Holdings, Inc.*............... 652,500
125,000 Smith International, Inc.*........... 1,265,625
55,000 Tidewater, Inc....................... 1,223,750
101,500 Weatherford International*........... 1,065,750
---------------
14,557,000
---------------
TOTAL ENERGY DEVELOPMENT &
TECHNOLOGY......................... 16,913,250
---------------
METALS & BASIC MATERIALS (39.0%)
ALUMINUM (2.5%)
47,500 Alcan Aluminium, Ltd................. 1,128,125
40,000 Alumax, Inc.......................... 1,080,000
17,000 Aluminum Co. of America.............. 1,279,250
---------------
3,487,375
---------------
BUILDING MATERIALS (1.0%)
45,000 Crane Co............................. 1,282,500
8,000 Martin Marietta Materials............ 191,000
---------------
1,473,500
---------------
CHEMICALS (14.1%)
35,000 Corning, Inc......................... 1,067,500
18,000 Dow Chemical Co...................... 1,145,250
51,400 DuPont (E.I.) de Nemours & Co........ 2,743,475
37,000 Fuller (H.B.) Company................ 1,341,250
50,000 Georgia Gulf Corp.*.................. 1,425,000
28,000 Grace (W.R.) Co...................... 1,253,000
45,000 Lubrizol Corp........................ 1,693,125
41,000 Minerals Technologies, Inc........... 1,158,250
11,000 Monsanto Co.......................... 842,875
27,000 Nalco Chemical Co.................... 972,000
35,000 OM Group, Inc........................ 796,250
50,000 Pall Corp............................ 900,000
65,000 Praxair, Inc......................... 1,218,750
18,000 Rohm & Haas Co....................... 1,028,250
30,000 Virgoro Corp......................... 975,000
34,000 Witco Corp........................... 1,151,750
---------------
19,711,725
---------------
</TABLE>
38
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
CONSTRUCTION & MATERIALS HANDLING (4.1%)
17,000 Deere & Co........................... $ 1,434,375
33,000 Fluor Corp........................... 1,464,375
80,400 Indresco, Inc.*...................... 1,105,500
24,000 Ingersoll-Rand Co.................... 921,000
31,000 Morrison Knudsen Company, Inc........ 809,875
---------------
5,735,125
---------------
COPPER (3.8%)
45,000 Cyprus Amax Minerals Co.............. 1,361,250
55,000 Freeport-McMoran, Copper, Inc........ 1,388,750
55,000 Freeport-McMoran, Inc................ 1,065,625
26,000 Phelps Dodge Corp.................... 1,459,250
---------------
5,274,875
---------------
GOLD MINING (3.5%)
35,000 American Barrick Resource Corp....... 883,750
50,000 Homestake Mining Co.................. 1,062,500
62,800 Horsham Corp......................... 871,350
24,000 Newmont Mining Corp.................. 1,302,000
30,000 Placer Dome, Inc..................... 723,750
---------------
4,843,350
---------------
PAPER & FOREST PRODUCTS (4.4%)
35,000 Boise Cascade Corp................... 910,000
55,000 Longview Fibre Co.................... 1,079,375
24,000 Louisiana-Pacific Corp............... 1,032,000
25,000 Potlatch Corp........................ 1,162,500
20,000 Rayonier, Inc.*...................... 665,000
26,000 Weyerhaeuser Co...................... 1,235,000
---------------
6,083,875
---------------
RAILROADS (4.0%)
100,000 Canadian Pacific, Ltd................ 1,725,000
60,000 Santa Fe Pacific Corp................ 1,365,000
70,000 Southern Pacific Rail Corp.*......... 1,470,000
17,000 Union Pacific Corp................... 1,015,750
---------------
5,575,750
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ---------------
<C> <S> <C>
STEEL (1.6%)
23,000 Huntco, Inc. (Class A)............... $ 626,750
60,000 Northwestern Steel & Wire Co.*....... 667,500
15,000 Nucor Corp........................... 868,125
---------------
2,162,375
---------------
TOTAL METALS & BASIC MATERIALS....... 54,347,950
---------------
TOTAL COMMON STOCKS (IDENTIFIED COST
$124,428,341)...................... 137,839,168
---------------
CONVERTIBLE PREFERRED STOCK (0.9%)
STEEL (0.9%)
22,000 USX Corp. 6.50% (Identified Cost
$1,106,050)........................ 1,234,750
---------------
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS)
- -----------
<C> <S> <C>
SHORT-TERM INVESTMENT (0.9%)
REPURCHASE AGREEMENT (0.9%)
$ 1,238 The Bank of New York 3.375% due
3/1/94 (dated 2/28/94; proceeds
$1,237,963; collateralized by
$803,365 U.S. Treasury Bond 12.50%
due 8/15/14 valued at $1,262,604)
(Identified Cost $1,237,847)...... 1,237,847
-------------
TOTAL INVESTMENTS (IDENTIFIED
COST $126,772,238)(A).......... 100.6% 140,311,765
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS................... (0.6) (852,843)
---------- -------------
NET ASSETS....................... 100.0% $ 139,458,922
---------- -------------
---------- -------------
<FN>
- ------------------
+ AMERICAN DEPOSITORY RECEIPT.
* NON-INCOME PRODUCING SECURITY.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $126,859,264; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $18,415,733 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $4,963,232, RESULTING IN NET UNREALIZED
APPRECIATION OF $13,452,501.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Organization and Accounting Policies--Dean Witter Natural Resource
Development Securities Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company and was incorporated in Maryland on December 22,
1980.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS--(1) an equity portfolio 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 bid price; (3)
when market quotations are not readily available, 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 Board of
Directors (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); (4) the value of short-term debt securities
which mature at a date less than sixty days subsequent to the valuation date
are determined on an amortized cost basis; and (5) the value of other assets
will be determined in good faith at fair value under procedures established
by and under the general supervision of the Fund's Directors.
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 on the identified cost
method. Dividend income is recorded on the ex-dividend date. Interest income
is accrued daily.
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 that 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.
E. REPURCHASE AGREEMENTS--The Fund's custodian takes possession on behalf of
the Fund of the collateral pledged for investments in repurchase agreements.
It is the policy of the Fund to value the underlying collateral daily on a
mark-to-market basis to determine that the value, including accrued interest,
is at least equal to the repurchase price plus accrued interest. In the event
of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation.
40
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. Investment Management Agreement--Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc. (the "Investment
Manager"), the Fund pays its Investment Manager a management fee, accrued daily
and payable monthly, by applying the following annual rates to the daily 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.
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 office space and 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 Fund's shares since the
implementation of the Plan on July 2, 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 Plan's implementation 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 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 Dean Witter Reynolds Inc.'s, an
affiliate of the Investment Manager, and other account executives 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
by the Distributor, 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 February 28,
1994, it received approximately $143,000 in 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 the proceeds from sales of portfolio securities for the year ended
February 28, 1994, excluding short-term investments, aggregated $97,447,669 and
$88,848,508, respectively. For the same period, the Fund incurred brokerage
commissions of $52,240 with Dean Witter Reynolds Inc. for executing transactions
on behalf of the Fund.
41
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At February 28, 1994, the Fund had transfer agent fees
and expenses payable of approximately $45,000.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Directors of the Fund who will
have served as an independent Director 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 cost for
the year ended February 28, 1994, included in Directors' fees and expenses in
the Statement of Operations amounted to $11,554. At February 28, 1994 the Fund
had an accrued pension liability of $40,658 which is included in accrued
expenses in the Statement of Assets and Liabilities.
5. Capital Stock--Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
FEBRUARY 28, 1994 FEBRUARY 28, 1993
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
Sold.................................... 6,076,972 $72,864,840 3,254,176 $34,980,137
<S> <C> <C> <C> <C>
Reinvestment of dividends and
distributions.......................... 774,911 8,863,719 168,471 1,764,014
---------- ----------- ---------- -----------
6,851,883 81,728,559 3,422,647 36,744,151
Repurchased............................. (5,482,912) (65,899,735) (4,089,373) (43,604,059)
---------- ----------- ---------- -----------
Net increase (decrease)................. 1,368,971 $15,828,824 (666,726) ($6,859,908)
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
6. Federal Income Taxes--The Fund had permanent book/tax differences primarily
attributable to dividend redesignations. To reflect cumulative reclassifications
arising from permanent book/tax differences for the year ended February 28,
1993, accumulated undistributed net investment income was credited $266,293,
accumulated net realized gain on investments was charged for $102,221 and
paid-in-capital was charged for $164,072.
1994 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended February 28, 1994, the Fund paid to shareholders
$0.317137 per share from long-term capital gains. For such period, 68.07% of
the income dividend qualified for the dividends received deduction available
to corporations.
42
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data and ratios for a share of capital stock outstanding throughout
each period:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FEBRUARY 28,
-----------------------------------------------------------------------------------------------
1994 1993 1992* 1991 1990 1989 1988* 1987 1986 1985
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period...................... $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93 $ 9.46 $ 9.10 $ 7.43 $ 7.41 $ 8.06
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Net investment income....... 0.09 0.16 0.20 0.25 0.30 0.23 0.20 0.14 0.22 0.23
Net realized and unrealized
gain (loss) on
investments................ 1.25 1.18 (0.44 ) 0.02 1.80 0.72 0.44 1.75 0.03 (0.62 )
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Total from investment
operations.................. 1.34 1.34 (0.24 ) 0.27 2.10 0.95 0.64 1.89 0.25 (0.39 )
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Less dividends and
distributions:
Dividends from net
investment income.......... (0.09 ) (0.18 ) (0.20 ) (0.28 ) (0.32 ) (0.21 ) (0.28 ) (0.22 ) (0.23 ) (0.17 )
Distributions from net
realized gains on
investments................ (0.79 ) 0.00 (0.39 ) (0.29 ) (0.38 ) (0.27 ) 0.00 0.00 0.00 (0.09 )
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Total dividends and
distributions............... (0.88 ) (0.18 ) (0.59 ) (0.57 ) (0.70 ) (0.48 ) (0.28 ) (0.22 ) (0.23 ) (0.26 )
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Net asset value, end of
period...................... $ 11.82 $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93 $ 9.46 $ 9.10 $ 7.43 $ 7.41
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
-------- -------- -------- -------- -------- -------- -------- ------- ------- -------
TOTAL INVESTMENT RETURN+...... 12.16 % 13.31 % (1.91 )% 2.87 % 21.11 % 10.29 % 7.32 % 26.21 % 3.50 % (5.07 )%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).................. $139,459 $118,496 $113,145 $150,636 $154,741 $136,911 $171,725 $82,985 $23,664 $24,940
Ratio of expenses to average
net assets.................. 1.91 % 1.96 % 1.93 % 1.80 % 1.81 % 1.92 % 1.81 % 1.74 % 1.39 % 1.28 %
Ratio of net investment income
to average net assets....... 0.73 % 1.46 % 1.67 % 2.28 % 2.57 % 2.09 % 2.14 % 2.61 % 3.07 % 2.68 %
Portfolio turnover rate....... 69 % 52 % 31 % 29 % 22 % 7 % 26 % 14 % 78 % 124 %(1)
<FN>
- -----------------
* YEAR ENDED FEBRUARY 29.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) EXCLUDED LONG-TERM U.S. GOVERNMENT SECURITIES WHICH ARE INCLUDED IN
SUBSEQUENT YEARS.
</TABLE>
See Notes to Financial Statements
43
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
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 the fiscal years ended
February 28, 1985, 1986, 1987, 1988, 1989, 1990
1991, 1992, 1993 and 1994 . . . . . . . . . . . . . . . 04
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
---
Statement of assets and liabilities at
February 28, 1994 . . . . . . . . . . . . . . . . . . . 37
Statement of operations for the year
ended February 28, 1994 . . . . . . . . . . . . . . . . 37
Statement of changes in net assets for the years
ended February 28, 1993 and 1994. . . . . . . . . . . . 37
Portfolio of Investments at February 28, 1994 . . . . . 38
Notes to Financial Statements . . . . . . . . . . . . . 40
Financial highlights for the fiscal years ended
February 28, 1985, 1986, 1987, 1988, 1989, 1990
1991, 1992, 1993 and 1994 . . . . . . . . . . . . . . . 43
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
5. - Form of Investment Management Agreement
between Registrant and Dean Witter InterCapital
Inc.
<PAGE>
6.(a) - Form of Distribution Agreement between
Registrant and Dean Witter Distributors Inc.
6.(b) - Form of Selected Dealers Agreement
8. - Amended and Restated Transfer Agency and
Services Agreement between Registrant and
Dean Witter Trust Company
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services
Company Inc.
11. - Consent of Independent Accountants
16. - Schedules for Computation of Performance
Quotations
Other - Power of Attorney for Messrs. Bozic, Schroeder
and Purcell
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 April 7, 1994
-------------- --------------------------
Shares of Common Stock 19,051
Item 27. INDEMNIFICATION
Reference is made to Section 3.15 of the Registrant's By-Laws and
Section 2-418 of the Maryland General Corporation Law.
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
2
<PAGE>
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. Information regarding the other
officers of InterCapital is included in Item 29(b) below. The term "Dean Witter
Funds" used below refers to the following Funds: (1) InterCapital Income
Securities Inc., (2) High Income Advantage Trust, (3) High Income Advantage
Trust II, (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
3
<PAGE>
Securities, (22) InterCapital California Municipal Securities, (23) InterCapital
Insured California Municipal Securities and (24) InterCapital Insured Municipal
Securities, registered closed-end investment companies, and (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 Managed Assets Trust, (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., (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 and (44) Dean
Witter Global Utilities Fund, registered open-end investment companies.
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 "TCW/DW Funds" refers to the following Funds: (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 North American
Intermediate Income Trust, registered open-end investment companies and (8)
TCW/DW Term Trust 2002, (9) TCW/DW Term Trust 2003 (10) TCW/DW Term Trust 2000,
and (11) TCW/DW Emerging Markets Opportunities Trust, registered closed-end
investment companies.
4
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
<S> <C> <C>
Charles A. Chairman, Chief Executive Vice
Fiumefreddo Executive Officer President and Director
and Director of Dean Witter
Reynolds Inc.
("DWR"); Chairman,
Director or Trustee,
President and
Chief 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"); Chairman,
Chief Executive
Officer and Director
of Dean Witter
Distributors Inc.
("Distributors") and
Dean Witter Services
Company Inc. ("DWSC");
Formerly Executive
Vice President and
Director of Dean
Witter, Discover & Co.
("DWDC"); Director
and/or officer of DWDC
subsidiaries.
Philip J. Director Chairman, Chief
Purcell Executive Officer and
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.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
<S> <C> <C>
Richard M. Director President and Chief
DeMartini Operating Officer of
Dean Witter Capital
and Director of DWR,
DWSC and Distibutors;
Trustee of the TCW/DW
Funds.
James F. Director President and Chief
Higgins Operating Officer of
Dean Witter Financial;
Director of DWR, DWSC
and Distributors.
Thomas C. Executive Vice Executive Vice
Schneider President, Chief President, Chief
Financial Officer Financial Officer
and Director and Director of
DWSC, DWR and
Distributors.
Christine A. Director Executive Vice
Edwards President, Secretary,
General Counsel and
Director of DWR, DWR
DWSC and Distributors.
Robert M. Scanlan President and Vice President of
Chief Operating the Dean Witter Funds
Officer and the TCW/DW Funds;
President of DWSC;
Executive Vice
President of
Distributors;
Executive Vice
President and
Director of DWTC.
David A. Hughey Executive Vice Vice President of the
President and Dean Witter Funds and
Chief Administrative the TCW/DW Funds;
Officer Executive Vice
President, Chief
Administrative Officer
and Director of DWTC;
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
<S> <C> <C>
Executive Vice
President and Chief
Administrative Officer
of DWSC and
Distributors.
Edmund C. Executive Vice Vice President of the
Puckhaber President Dean Witter Funds.
John Van Heuvelen Executive Vice President and Chief
President Executive Officer of
DWTC.
Sheldon Curtis Senior Vice Vice President,
President, Secretary and
General Counsel General Counsel of the
and Secretary Dean Witter Funds and
the TCW/DW Funds;
Senior Vice
President and Secretary of
DWTC; Assistant
Secretary
of DWR and DWDC;
Senior Vice
President, General
Counsel and Secretary
of DWSC; Senior Vice
President, Assistant
General Counsel and
Assistant Secretary
of Distributors.
Peter M. Avelar Senior Vice Vice President of
President various Dean Witter
Funds.
Mark Bavoso Senior Vice Vice President of
President various Dean Witter
Funds.
Thomas H. Connelly Senior Vice Vice President of
President various Dean Witter
Funds.
Edward Gaylor Senior Vice Vice President of
President various Dean Witter
Funds.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
<S> <C> <C>
Rajesh K. Gupta Senior Vice Vice President of
President various Dean Witter
Funds.
Kenton J. Senior Vice Vice President of
Hinchliffe President various Dean Witter
Funds.
John B. Kemp, III Senior Vice Director of the
President Provident Savings
Bank, Jersey City,
New Jersey.
Anita Kolleeny Senior Vice Vice President of
President various Dean Witter
Funds.
Jonathan R. Page Senior Vice Vice President of
President various Dean Witter
Funds.
Ira Ross Senior Vice Vice President of
President various Dean Witter
Funds.
Rochelle G. Siegel Senior Vice Vice President of
President various Dean Witter
Funds.
Paul D. Vance Senior Vice Vice President of
President various Dean Witter
Funds.
Elizabeth A. Senior Vice
Vetell President
James F. Willison Senior Vice Vice President of
President various Dean Witter
Funds.
Ronald Worobel Senior Vice Vice President of
President various Dean Witter
Funds.
Thomas F. Caloia First Vice Treasurer of the
President and Dean Witter Funds
Assistant Treasurer and the TCW/DW Funds;
Assistant Treasurer
of DWSC; Assistant
Treasurer of
Distributors.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
<S> <C> <C>
Marilyn K. Cranney First Vice Assistant Secretary
President and of the Dean Witter
Assistant Funds and the TCW/DW
Secretary Funds; Vice President
and Assistant
Secretary of DWSC;
Assistant Secretary
of DWR and DWDC.
Barry Fink First Vice Assistant Secretary
President of the Dean Witter
Funds and TCW/DW
Funds; First Vice
President and
Assistant Secretary
of DWSC.
Michael First Vice First Vice President
Interrante President and and Controller of
Controller DWSC; Assistant
Treasurer of
Distributors.
Robert Zimmerman First Vice
President
Joan G. Allman Vice President
Joseph Arcieri Vice President
Terence P. Brennan, II Vice President
Douglas Brown Vice President
Rosalie Clough Vice President
B. Catherine Vice President
Connelly
Salvatore DeSteno Vice President Vice President of
DWSC.
Frank J. DeVito Vice President
Dwight Doolan Vice President
Bruce Dunn Vice President
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
<S> <C> <C>
June Ewers Vice President
Geoffrey D. Flynn Vice President Vice President of
DWSC.
Bette Freedman Vice President
Jeffrey D. Geffen Vice President
Deborah Genovese Vice President
Peter W. Gurman Vice President
Shant Harootunian Vice President
John Hechtlinger Vice President
Jack C. Henry Vice President
David T. Hoffman Vice President
David Johnson Vice President
Christopher Jones Vice President
Stanley Kapica Vice President
Konrad J. Krill Vice President
Paula LaCosta Vice President Vice President of
various Dean Witter
Funds.
Lawrence S. Lafer Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
Assistant Secretary
of DWSC.
Thomas Lawlor Vice President
Lou Anne D. McInnis Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
of DWSC.
Sharon K. Milligan Vice President
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
<S> <C> <C>
James Mulcahy Vice President
James Nash Vice President
Hugh Rose Vice President
Ruth Rossi Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Assistant
Secretary of DWSC.
Carl F. Sadler Vice President
Rafael Scolari Vice President
Rose Simpson Vice President
Stuart Smith Vice President
Diane Lisa Sobin Vice President Vice President of
various Dean Witter
Funds.
Susanne Stager Vice President
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.
Jayne M. Wolff Vice President
Marianne Zalys Vice President
</TABLE>
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
11
<PAGE>
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(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 Federal Securities Trust
(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 Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(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 Premier Income 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 Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(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 North American Intermediate Income Trust
(8) TCW/DW Emerging Markets Opportunities 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.
12
<PAGE>
<TABLE>
<CAPTION>
Positions and
Office with
Name Distributors
- ---- ------------
<S> <C>
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Edward C. Oelsner III Vice President of Distributors.
Samuel Wolcott III Vice President of Distributors.
</TABLE>
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
<PAGE>
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 10th day of May, 1994.
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
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. 16 has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer President, Chief
Executive Officer,
Director and Chairman
By /s/ Charles A. Fiumefreddo 05/10/94
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 05/10/94
--------------------------
Thomas F. Caloia
(3) Majority of the Directors
Charles A. Fiumefreddo (Chairman)
Edward R. Telling
Philip J. Purcell
By /s/ Sheldon Curtis 05/10/94
--------------------------
Sheldon Curtis
Attorney-in-Fact
Jack F. Bennett Manuel H. Johnson
Michael Bozic Paul Kolton
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
John E. Jeuck
By /s/ David M. Butowsky 05/10/94
---------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
5. - Form of Investment Management Agreement between
Registrant and Dean Witter InterCapital Inc.
6.(a) - Form of Distribution Agreement between Registrant
and Dean Witter Distributors Inc.
6.(b) - Form of Selected Dealers Agreement
8. - Amended and Restated Transfer Agency and
Services Agreement between Registrant and Dean
Witter Trust Company
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services
Company Inc.
11. - Consent of Independent Accountants
16. - Schedules for Computation of Performance Quotations
Other - Power of Attorney for Messrs. Bozic, Schroeder and
Purcell
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of June, 1993 by and between Dean Witter
Natural Resource Development Securities Inc., a Maryland corporation
(hereinafter called the "Fund"), and Dean Witter InterCapital Inc., a Delaware
corporation (hereinafter called the "Investment Manager"):
WHEREAS, 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, The Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, and engages in the business of acting
as investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Fund and, subject to the supervision of the Directors, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities and commodities markets and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; shall continuously manage
the assets of the Fund in a manner consistent with the investment objectives and
policies of the Fund; shall determine the securities and commodities to be
purchased, sold or otherwise disposed of by the Fund and the timing of such
purchases, sales and dispositions; and shall take such further action, including
the placing of purchase and sale orders on behalf of the Fund, as the Investment
Manager shall deem necessary or appropriate. The Investment Manager shall also
furnish to or place at the disposal of the Fund such of the information,
evaluations, analyses and opinions formulated or obtained by the Investment
Manager in the discharge of its duties as the Fund may, from time to time,
reasonably request.
2. The Investment Manager shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Manager shall be deemed to
include persons employed or otherwise retained by the Investment Manager to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and scientific developments,
and such other information, advice and assistance as the Investment Manager may
desire. The Investment Manager shall, as agent for the Fund, maintain the Fund's
records and books of account (other than those maintained by the Fund's transfer
agent, registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, the
Investment Manager shall surrender to the Fund such of the books and records so
requested.
3. The Fund will, from time to time, furnish or otherwise make available
to the Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Investment
Manager may reasonably require in order to discharge its duties and obligations
hereunder.
4. The Investment Manager shall bear the cost of rendering the
investment management and supervisory services to be performed by it under this
Agreement, and shall, at its own expense, pay the compensation of the officers
and employees, if any, of the Fund, and provide such office space, facilities
and equipment
<PAGE>
and such clerical help and bookkeeping services as the Fund shall reasonably
require in the conduct of its business. The Investment Manager shall also bear
the cost of telephone service, heat, light, power and other utilities provided
to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses
of the Fund, including without limitation: the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the safekeeping
of its cash, portfolio securities or commodities and other property, and any
stock transfer or dividend agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio transactions to
which the Fund is a party; all taxes, including securities or commodities
issuance and transfer taxes, and fees payable by the Fund to federal, state or
other governmental agencies; the cost and expense of engraving or printing
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the Securities and Exchange Commission and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the cost and expense of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing
proxy statements and reports to shareholders; fees and travel expenses of
Directors or members of any advisory board or committee who are not employees of
the Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Directors of the Fund who are not interested
persons (as defined in the Act) of the Fund or the Investment Manager, and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Directors) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to, legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the Investment
Manager monthly compensation determined by applying the following annual rates
to the Fund's daily net assets: 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. Except as hereinafter set forth, compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. Such calculations shall be made by applying
1/365ths of the annual rates to the Fund's net assets each day determined as of
the close of business on that day or the last previous business day. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth above.
Subject to the provisions of paragraph 7 hereof, payment of the Investment
Manager's compensation for the preceding month shall be made as promptly as
possible after completion of the computations contemplated by paragraph 7
hereof.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to paragraph 6 hereof, for any fiscal
year ending on a date on which this Agreement is in effect, exceed the expense
limitations applicable to the Fund imposed by state securities laws or
regulations thereunder, as such limitations may be raised or lowered from time
to time, the Investment Manager shall reduce its management fee to the extent of
such excess and, if required, pursuant to any such laws or regulations, will
reimburse the Fund for annual operating expenses in excess of any expense
limitation that may be applicable; provided, however, there shall be excluded
from such expenses the amount of any interest, taxes, brokerage commissions,
distribution fees and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a
2
<PAGE>
monthly basis, and shall be based upon the expense limitation applicable to the
Fund as at the end of the last business day of the month. Should two or more
such expense limitations be applicable as at the end of the last business day of
the month, that expense limitation which results in the largest reduction in the
Investment Manager's fee shall be applicable.
For purposes of this provision, should any applicable expense limitation be
based upon the gross income of the Fund, such gross income shall include, but
not be limited to, interest on debt securities in the Fund's portfolio accrued
to and including the last day of the Fund's fiscal year, and dividends declared
on equity securities in the Fund's portfolio, the record dates for which fall on
or prior to the last day of such fiscal year, but shall not include gains from
the sale of securities.
8. The Investment Manager will use its best efforts in the supervision
and management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund or
any of its investors for any error of judgment or mistake of law or for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors.
9. Nothing contained in this Agreement shall prevent the Investment
Manager or any affiliated person of the Investment Manager from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way bind or restrict the Investment Manager or any such
affiliated person from buying, selling or trading any securities or commodities
for their own accounts or for the account of others for whom they may be acting.
Nothing in this Agreement shall limit or restrict the right of any Director,
officer or employee of the Investment Manager to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any other business whether of a similar or dissimilar nature.
10. This Agreement shall remain in effect until April 30, 1994 and from
year to year thereafter provided such continuance is approved at least annually
by the vote of holders of a majority, as defined in the Investment Company Act
(the "Act"), of the outstanding voting securities of the Fund or by the
Directors of the Fund; provided that in either event such continuance is also
approved annually by the vote of a majority of the Directors of the Fund who are
not parties to this Agreement or "interested persons" (as defined in the Act) of
any such party, which vote must be cast in person at a meeting called for the
purpose of voting on such approval; provided, however, that (a) the Fund may, at
any time and without the payment of any penalty, terminate this Agreement upon
thirty days' written notice to the Investment Manager, either by majority vote
of the Directors of the Fund or by the vote of a majority of the outstanding
voting securities of the Fund; (b) this Agreement shall immediately terminate in
the event of its assignment (to the extent required by the Act and the rules
thereunder) unless such automatic terminations shall be prevented by an
exemptive order of the Securities and Exchange Commission; and (c) the
Investment Manager may terminate this Agreement without payment of penalty on
thirty days' written notice to the Fund. Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed post-paid, to the other
party at the principal office of such party.
11. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure, correct
or supplement any ambiguous, defective or inconsistent provision hereof, or if
they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund nor the Investment
Manager shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.
13. The Investment Manager and the Fund each agree that the name "Dean
Witter", which comprises a component of the Fund's name, is a property right of
Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will only use
the name "Dean Witter" as a component of its name and for no other purpose, (ii)
it will not purport to grant to any third party the right to use the name "Dean
Witter" for any
3
<PAGE>
purpose, (iii) the Investment Manager or its parent, Dean Witter Reynolds Inc.,
or any corporate affiliate of the Investment Manager's parent, 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, (iv) at the request of the Investment Manager or its parent, the Fund
will take such action as may be required to provide its consent to the use of
the name "Dean Witter", or any combination or abbreviation thereof, by the
Investment Manager or its parent or any corporate affiliate of the Investment
Manager's parent, or by any person to whom the Investment Manager or its parent
or any corporate affiliate of the Investment Manager's parent shall have granted
the right to such use, and (v) upon the termination of any investment advisory
agreement into which the Investment Manager and the Fund may enter, or upon
termination of affiliation of the Investment Manager with its parent, the Fund
shall, upon request by the Investment Manager or its parent, cease to use the
name "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, Directors and shareholders to
take any and all actions which the Investment Manager or its parent may request
to effect the foregoing and to reconvey to the Investment Manager or its parent
any and all rights to such name.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
DEAN WITTER NATURAL RESOURCE
DEVELOPMENT SECURITIES INC.
By__________________________________
Attest:
_________________________________________
DEAN WITTER INTERCAPITAL INC.
By__________________________________
Attest:
_________________________________________
4
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 30th day of June, 1993, by and between Dean Witter
Natural Resource Development Securities Inc., a Maryland corporation (the
"Fund"), and Dean Witter Distributors Inc., a Delaware corporation (the
"Distributor");
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a diversified open-end investment company and it
is in the interest of the Fund to offer its shares for sale continuously, and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's shares of
Common Stock, of $.01 par value ("Shares"), in order to promote the growth of
the Fund and facilitate the distribution of its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR. (a) The Fund hereby appoints the
Distributor as the principal underwriter of the Fund to sell Shares to the
public on the terms set forth in this Agreement and the Fund's Prospectus
(defined below) and the Distributor hereby accepts such appointment and agrees
to act hereunder. The Fund, during the term of this Agreement, shall sell Shares
to the Distributor upon the terms and conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from the Fund and to sell Shares as principal to investors and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in the Fund's prospectus
and statement of additional information (both hereinafter referred to as the
"Prospectus") included in the Fund's registration statement (the "Registration
Statement") most recently filed from time to time with the Securities and
Exchange Commission (the "SEC") and effective under the Securities Act of 1933,
as amended (the "1933 Act"), and 1940 Act or as said Prospectus may be otherwise
amended or supplemented and filed with the SEC pursuant to Rule 497 under the
1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of the Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by the Fund: (i) in connection with the merger or consolidation
of any other investment company or personal holding company with the Fund or the
acquisition by purchase or otherwise of all (or substantially all) the assets or
the outstanding shares of any such company by the Fund; or (ii) pursuant to
reinvestment of dividends or capital gains distributions; or (iii) pursuant to
the reinstatement privilege afforded redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM THE FUND. (a) The Distributor shall have
the right to buy from the Fund the Shares needed, but not more than the Shares
needed (except for clerical errors in transmission), to fill unconditional
orders for Shares placed with the Distributor by investors. The price which the
Distributor shall pay for the Shares so purchased from the Fund shall be their
net asset value per share, determined as set forth in the Prospectus, used in
determining the public offering price on which such orders were based.
(b) The shares are to be resold by the Distributor to investors at the net
asset value per share, as set forth in the Prospectus or to securities dealers
(including DWR) having selected dealer agreements with the Distributor pursuant
to Section 7 ("Selected Dealers").
(c) The Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(d) hereof. The Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of the Fund, makes it impracticable to sell the Shares.
(d) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by the
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Fund; provided, however, that the Fund will not arbitrarily or without
reasonable cause, refuse to accept orders for the purchase of Shares. The
Distributor will confirm orders upon their receipt, and the Fund (or its agent)
upon receipt of payment therefor and instructions will deliver share
certificates for such Shares or a statement confirming the issuance of Shares.
Payment shall be made to the Fund in New York Clearing House funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to the Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES. (a) Any of the outstanding
Shares may be tendered for redemption at any time, and the Fund agrees to redeem
the Shares so tendered in accordance with the applicable provisions set forth in
the Prospectus. The price to be paid upon the redemption of Shares shall be
equal to the net asset value determined as set forth in the Prospectus. All
payments by the Fund hereunder shall be made in the manner set forth below.
The proceeds of any redemption of Shares shall be paid by the Fund as
follows: (i) any applicable contingent deferred sales charge shall be paid to
the Distributor or to the Selected Dealer, or, when applicable, pursuant to the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
("NASD"), retained by the Fund and (ii) the balance shall be paid to the
redeeming shareholders, in each case in accordance with applicable provisions of
the Prospectus in New York Clearing House funds.
(b) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in the
Prospectus. The Distributor shall promptly transmit to the transfer agent of the
Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(c) The Distributor is authorized, as agent for the Fund, to repurchase
Shares held in a shareholder's account with the Fund for which no share
certificate has been issued, upon the telephonic or telegraphic request of the
shareholder, or at the discretion of the Distributor. The Distributor shall
promptly transmit to the transfer agent of the Fund, for redemption, all such
orders for repurchase of shares. Payment for shares repurchased may be made by
the Fund to the Distributor for the account of the shareholder. The Distributor
shall be responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
With respect to Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of the Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and to
instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer and
maintain a record of such orders. The Distributor is further authorized to
obtain from the Fund and shall maintain, a record of payments made directly to
the Selected Dealer on behalf of the Distributor.
(d) Redemption of Shares or payment by the Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange Commission, by order,
so permits.
SECTION 5. DUTIES OF THE FUND. (a) The Fund shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use in connection with the
distribution of the Shares, including one certified copy, upon request by the
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Distributor, of all financial statements prepared by the Fund and examined by
independent accountants. The Fund shall, at the expense of the Distributor, make
available to the Distributor such number of copies of the Prospectus as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 7(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of annual and
interim reports of the Fund.
SECTION 6. DUTIES OF THE DISTRIBUTOR. (a) The Distributor shall sell shares
of the Fund through DWR, and may sell shares through other securities dealers
and its own Account Executives, if any, and devote reasonable time and effort to
effect sales of the Shares, but shall not be obligated to sell any specific
number of Shares. The services of the Distributor hereunder are not exclusive
and it is understood that the Distributor acts as principal underwriter for ot
er registered investment companies and intends to do so in the future.
(b) The Distributor shall not give any information or make any
representations, other than those contained in the Registration Statement or
related Prospectus and any sales literature specifically approved by the Fund.
(c) The Distributor agrees that it will comply with the terms and
limitations of the Rules of Fair Practice of the NASD.
SECTION 7. SELECTED DEALERS AGREEMENTS. (a) The Distributor shall have the
right to enter into selected dealers agreements with Selected Dealers for the
sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Fund. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public offering
price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by the
Fund, for the confirmation of sales of Shares to investors and Selected Dealers,
the collection of amounts payable by investors and Selected Dealers on such
sales, and the cancellation of unsettled transactions, as may be necessary to
comply with the requirements of the NASD, as such requirements may from time to
time exist.
SECTION 8. PAYMENT OF EXPENSES. (a) The Distributor shall bear all expenses
incurred by it in connection with its duties and activities under this Agreement
including the payment of any sales commissions for sales of the Fund's shares
(except such expenses as are specifically undertaken herein by the Fund). It is
understood and agreed that, so long as the Fund's Plan of Distribution pursuant
to Rule 12b-1 (the "Rule 12b-1 Plan") continues in effect, any expenses incurred
by the Distributor hereunder may be paid from amounts received by it from the
Fund under such Plan.
(b) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund or
the Distributor, and independent accountants, in connection with the preparation
and filing of any required Registration Statements and Prospectuses and all
amendments and supplements thereto, and the expenses of preparing, printing,
mailing and otherwise distributing Prospectuses, annual or interim reports or
proxy materials to shareholders.
(c) The Fund shall bear the cost and expenses of qualification of the
Shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Fund as a broker or dealer, in such states
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of the United States or other jurisdictions as shall be selected by the Fund and
the Distributor pursuant to Section 5(c) hereof and the cost and expenses
payable to each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION. (a) The Fund shall indemnify and hold harmless
the Distributor and each person, if any, who controls the Distributor against
any loss, liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith) arising by reason
of any person acquiring any Shares, which may be based upon the 1933 Act, or on
any other statute or at common law, on the ground that the Registration
Statement or related Prospectus, as from time to time amended and supplemented,
or the annual or interim reports to stockholders of the Fund, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, unless such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Fund in connection therewith by or
on behalf of the Distributor; provided, however, that in no case (i) is the
indemnity of the Fund in favor of the Distributor and any such controlling
persons to be deemed to protect the Distributor or any such controlling persons
thereof against any liability to the Fund or its security holders to which the
Distributor or any such controlling persons would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of reckless disregard of its obligations and duties under
this Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense, of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. the Fund shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or trustees in connection with the
issuance or sale of the Shares.
(b)(i) The Distributor shall indemnify and hold harmless the Fund and each
of its directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus, as from time to time amended, or the annual or interim reports to
shareholders.
(ii) The Distributor shall indemnify and hold harmless the Fund and the
Fund's transfer agent, individually and in its capacity as the Fund's transfer
agent, from and against any claims, damages and liabilities which arise as a
result of actions taken pursuant to instructions from the Distributor to: (1)
redeem all or a part of shareholder accounts in the Fund pursuant to subsection
4(c) hereof; and (2) pay the proceeds to the Distributor for the account of each
shareholder whose Shares are so redeemed.
(iii) In case any action shall be brought against the Fund or any person so
indemnified by this subsection 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to the Fund, and the Fund and each person so indemnified shall have the rights
and duties given to the Distributor by the provisions of subsection (a) of this
Section 9.
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(c) If the indemnification provided for in this Sction 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Fund on the one hand and the Distributor on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Fund on the one hand and
the Distributor on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Fund on the one hand and
the Distributor on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Fund bear to the total compensation received by the Distributor, in each case
set forth in the Prospectus. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Fund or the Distributor and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Fund and the Distributor agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such claim. Notwithstanding
the provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages which it has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudelent misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective as of the date first above written and shall remain in
force until April 30, 1993, and thereafter, but only so long as such continuance
is specifically approved at least annually by (i) the Board of Directors of the
Fund, or by the vote of a majority of the outstanding voting securities of the
Fund, cast in person or by proxy, and (ii) a majority of those Directors who are
not parties to this Agreement or interested persons of any such party and who
have no direct or indirect financial interest in this Agreement or in the
operation of the Fund's Rule 12b-1 Plan or in any agreement related thereto,
cast in person at a meeting called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Directors of the Fund, by a majority of the Directors of the
Fund who are not interested persons of the Fund and who have no direct or
indirect financial interest in this Agreement, or by vote of a majority of the
outstanding voting securities of the Fund, or by the Distributor, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Directors
of the Fund, or by the vote of a majority of outstanding voting securities of
the Fund, and (ii) a majority of those Directors of the Fund who are not parties
to this Agreement or interested persons of any such party and who have no direct
or indirect financial interest in this Agreement or in any agreement related to
the Fund's Rule 12b-1 Plan, cast in person at a meeting called for the purpose
of voting on such approval.
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SECTION 12. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
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 NATURAL RESOURCE
DEVELOPMENT SECURITIES INC.
By: ________________________________________
DEAN WITTER DISTRIBUTORS INC.
By: ________________________________________
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DEAN WITTER DISTRIBUTORS INC.
Gentlemen:
Dean Witter Distributors Inc. (the "Distributor") has a distribution
agreement (the "Distribution Agreement") with Dean Witter Natural Resource
Development Securities Inc., a Maryland corporation (the "Fund"), pursuant to
which it acts as the Distributor for the sale of the Fund's shares of common
stock, par value $0.01 per share (the "Shares"). Under the Distribution
Agreement, the Distributor has the right to distribute Shares for resale.
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to the
public are registered under the Securities Act of 1933, as amended. You have
received a copy of the Distribution Agreement between us and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms used herein, including "Prospectus" and "Registration Statement" of
the Fund and "Selected Dealer" shall have the same meaning in this Agreement as
in the Distribution Agreement. As principal, we offer to sell shares to your
customers, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act on behalf of your
customers, and in no transaction shall you have any authority to act as agent
for the Fund, for us or for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order, as set forth in the
current Prospectus. The procedure relating to the handling of orders shall be
subject to instructions which we or the Fund shall forward from time to time to
you. All orders are subject to acceptance or rejection by the Distributor or the
Fund in the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable net asset values and
subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares except
under circumstances that will result in compliance with the applicable Federal
and state securities laws and that in connection with sales and offers to sell
Shares you will furnish to each person to whom any such sale or offer is made a
copy of the Prospectus (as then amended or supplemented) and will not furnish to
any person any information relating to the Shares, which is inconsistent in any
respect with the information contained in the Prospectus (as then amended or
supplemented) or cause any advertisement to be published by radio or television
or in any newspaper or posted in any public place or use any sales promotional
material without our consent and the consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund and
personal services to Fund shareholders by paying you a sales charge and/or other
commission (which may be in the form of a gross sales credit and/or an annual
residual commission) and/or a service fee, under the terms as are set forth in
the Fund's Prospectus.
5. If any Shares sold to your customers under the terms of this Agreement
are repurchased by us for the account of the Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and refund
to us, any commission received by you with respect to such Shares.
6. No person is authorized to make any representations concerning the
Shares or the Fund except those contained in the current Prospectus and in such
printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus. In selling Shares, you shall rely solely on the
representations contained in the Prospectus and supplemental information
mentioned above. Any printed information which we furnish you other than the
Prospectus and the Fund's periodic reports and proxy solicitation material are
our sole responsibility and not the responsibility of the Fund, and you agree
that the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
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7. You agree to deliver to each of the purchasers making purchases 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.
8. You are hereby authorized (i) to place orders directly with the Fund or
its agent for shares of the Fund to be sold by us subject to the applicable
terms and conditions governing the placement of orders for the purchase of Fund
shares, as set forth in the Distribution Agreement, and (ii) to tender shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in the Distribution Agreement.
9. 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.
10. I. You shall indemnify and hold harmless the Distributor, from and
against any claims, damages and liabilities which arise as a result of action
taken pursuant to instructions from you, or on your behalf to: a)(i) place
orders for Shares of the Fund with the Fund's transfer agent or direct the
transfer agent to receive instructions for the order of Shares, and (ii) accept
monies or direct that the transfer agent accept monies as payment for the order
of such Shares, all as contemplated by and in accordance with Section 3 of the
Distribution Agreement; b)(i) place orders for the redemption of Shares of the
Fund with the Fund's transfer agent or direct the transfer agent to receive
instruction for the redemption of Shares and (ii) to pay redemption proceeds or
to direct that the transfer agent pay redemption proceeds in connection with
orders for the redemption of Shares, all as contemplated by and in accordance
with Section 4 of the Distribution Agreement; provided, however, that in no
case, (i) is this indemnity in favor of the Distributor and any such controlling
persons to be deemed to protect the Distributor or any such controlling persons
thereof against any liability to which the Distributor or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of reckless
disregard of its obligations and duties under this Agreement or the Distribution
Agreement; or (ii) are you to be liable under the indemnity agreement contained
in this paragraph with respect to any claim made against the Distributor or any
such controlling persons, unless the Distributor or any such controlling
persons, as the case may be, shall have notified you in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify you of any such claim shall not relieve you from
any liability which you may have to the person against whom such action is
brought otherwise than on account of the indemnity agreement contained in this
paragraph. You will be entitled to participate at your own expense in the
defense, or, if you so elect, to assume the defense, of any suit brought to
enforce any such liability, but if you elect to assume the defense, such defense
shall be conducted by counsel chosen by you and satisfactory to the Distributor
or such controlling person or persons, defendant or defendants in the suit. In
the event you elect to assume the defense of any such suit and retain such
counsel, the Distributor or such controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them, but, in case you do not elect to assume the defense of
any such suit, you will reimburse the Distributor or such controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. You shall promptly notify the
Distributor of the commencement of any litigation or proceedings against it or
any of its officers or directors in connection with the issuance or sale of the
Shares.
II. If the indemnification provided for in this Section 10 is unavailable
or insufficient to hold harmless the Distributor, as provided above in respect
of any losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to herein, then you shall contribute to the amount paid or
payable by the Distributor as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by you on the one hand and
the
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Distributor on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then you shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also your relative fault on the one hand and the relative
fault of the Distributor on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. You and the Distributor agree that it would not be
just and equitable if contribution were determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by the Distributor
as a result of the losses, claims, damages, liabilities or expenses (or actions
in respect thereof) referred to above shall be deemed to include any legal or
other expenses reasonably incurred by the Distributor in connection with
investigating or defending any such claim. Notwithstanding the provisions of
this subsection (II), you shall not be required to contribute any amount in
excess of the amount by which the total price at which the Shares distributed by
it to the public were offered to the public exceeds the amount of any damages
which it has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act of
1933 Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
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.
3
<PAGE>
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.
DEAN WITTER DISTRIBUTORS INC.
By ...................................
(Authorized Signature)
Please return one signed copy
of this agreement to:
Dean Witter Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: ...........................
By: ..................................
Address: .............................
.....................................
Date: ................................
4
<PAGE>
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
DEAN WITTER TRUST COMPANY
DWR
[open-end]
<PAGE>
TABLE OF CONTENTS
PAGE
----
Article 1 Terms of Appointment; Duties of DWTC. . . . . . . . . . . . . 2
Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 6
Article 3 Representations and Warranties of DWTC. . . . . . . . . . . . 7
Article 4 Representations and Warranties of the
Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Article 5 Duty of Care and Indemnification. . . . . . . . . . . . . . . . 9
Article 6 Documents and Covenants of the Fund and
DWTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Article 7 Duration and Termination of Agreement . . . . . . . . . . . . 16
Article 8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Article 9 Affiliations. . . . . . . . . . . . . . . . . . . . . . . . . 17
Article 10 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Article 11 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . 18
Article 12 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 18
Article 13 Merger of Agreement . . . . . . . . . . . . . . . . . . . . . 20
Article 14 Personal Liability. . . . . . . . . . . . . . . . . . . . . . 21
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<PAGE>
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 1st day of August, 1993
by and between each of the Dean Witter Funds listed on the signature pages
hereof, each of such Funds acting severally on its own behalf and not jointly
with any of such other Funds (each such Fund hereinafter referred to as the
"Fund"), each such Fund having its principal office and place of business at Two
World Trade Center, New York, New York, 10048, and DEAN WITTER TRUST COMPANY, a
trust company organized under the laws of New Jersey, having its principal
office and place of business at Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 ("DWTC").
WHEREAS, the Fund desires to appoint DWTC as its transfer agent,
dividend disbursing agent and shareholder servicing agent and DWTC desires to
accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
-1-
<PAGE>
Article 1 TERMS OF APPOINTMENT; DUTIES OF DWTC
1.1 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints DWTC to act as, and DWTC agrees
to act as, the transfer agent for each series and class of shares of the Fund,
whether now or hereafter authorized or issued ("Shares"), dividend disbursing
agent and shareholder servicing agent in connection with any accumulation, open-
account or similar plans provided to the holders of such Shares ("Shareholders")
and set out in the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 DWTC agrees that it will perform the following services:
(a) In accordance with procedures established from time to time
by agreement between the Fund and DWTC, DWTC shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
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<PAGE>
(ii) Pursuant to purchase orders, issue the appropriate number
of Shares and issue certificates therefor or hold such Shares in book form in
the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and
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<PAGE>
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding. DWTC
shall also provide to the Fund on a regular basis the total number of Shares
which are authorized, issued and outstanding and shall notify the Fund in case
any proposed issue of Shares by the Fund would result in an overissue. In case
any issue of Shares would result in an overissue, DWTC shall refuse to issue
such Shares and shall not countersign and issue any certificates requested for
such Shares. When recording the issuance of Shares, DWTC shall have no
obligation to take cognizance of any Blue Sky laws relating to the issue of sale
of such Shares, which functions shall be the sole responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in
the above paragraph (a), DWTC shall: (i) perform all of the customary services
of a transfer agent, dividend disbursing agent and, as relevant, shareholder
servicing agent in connection with dividend reinvestment, accumulation, open-
account or similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to, maintaining
all Shareholder accounts, preparing Shareholder meeting lists,
-4-
<PAGE>
mailing proxies, receiving and tabulating proxies, mailing shareholder reports
and prospectuses to current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing appropriate forms required
with respect to dividends and distributions by federal tax authorities for all
Shareholders, preparing and mailing confirmation forms and statements of account
to Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders and providing Shareholder account information; (ii)
open any and all bank accounts which may be necessary or appropriate in order to
provide the foregoing services; and (iii) provide a system which will enable the
Fund to monitor the total number of Shares sold in each State or other
jurisdiction.
(c) In addition, the Fund shall (i) identify to DWTC in writing
those transactions and assets to be treated as exempt from Blue Sky reporting
for each State and (ii) verify the establishment of transactions for each State
on the system prior to activation and thereafter monitor the daily activity for
each State. The responsibility of DWTC for the Fund's registration status under
the Blue Sky or securities laws of any State or other jurisdiction is solely
limited to the initial establishment of transactions subject to Blue Sky
compliance by the Fund and the reporting of such transactions
-5-
<PAGE>
to the Fund as provided above and as agreed from time to time by the Fund and
DWTC.
(d) DWTC shall provide such additional services and functions
not specifically described herein as may be mutually agreed between DWTC and
the Fund. Procedures applicable to such services may be established from time
to time by agreement between the Fund and DWTC.
Article 2 FEES AND EXPENSES
2.1 For performance by DWTC pursuant to this Agreement, each
Fund agrees to pay DWTC an annual maintenance fee for each Shareholder account
and certain transactional fees, if applicable, as set out in the respective fee
schedule attached hereto as Schedule A. Such fees and out-of-pocket expenses
and advances identified under Section 2.2 below may be changed from time to time
subject to mutual written agreement between the Fund and DWTC.
2.2 In addition to the fees paid under Section 2.1 above, the
Fund agrees to reimburse DWTC in connection with the services rendered by DWTC
hereunder. In addition, any other expenses incurred by DWTC at the request or
with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses
within a reasonable period of time
-6-
<PAGE>
following the mailing of the respective billing notice. Postage for mailing of
dividends, proxies, Fund reports and other mailings to all Shareholder accounts
shall be advanced to DWTC by the Fund upon request prior to the mailing date of
such materials.
Article 3 REPRESENTATIONS AND WARRANTIES OF DWTC
DWTC represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in
good standing under the laws of New Jersey and it is duly qualified to carry on
its business in New Jersey.
3.2 It is and will remain registered with the U.S. Securities
and Exchange Commission ("SEC") as a Transfer Agent pursuant to the requirements
of Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and
By-Laws to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
-7-
<PAGE>
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to DWTC that:
4.1 It is a corporation duly organized and existing and in good
standing under the laws of Delaware or Maryland or a trust duly organized and
existing and in good standing under the laws of Massachusetts, as the case may
be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its By-Laws
to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to
enter into and perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under
the Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933
(the "1933 Act") is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale.
-8-
<PAGE>
Article 5 DUTY OF CARE AND INDEMNIFICATION
5.1 DWTC shall not be responsible for, and the Fund shall
indemnify and hold DWTC harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTC or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by DWTC or its agents or subcontractors of
information, records and documents which (i) are received by DWTC or its agents
or subcontractors and furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other person or firm on
behalf of the Fund.
(d) The reliance on, or the carrying out by DWTC or its agents or
subcontractors of, any instructions or requests
-9-
<PAGE>
of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities or Blue Sky laws of
any State or other jurisdiction that such Shares be registered in such State or
other jurisdiction or in violation of any stop order or other determination or
ruling by any federal agency or any State or other jurisdiction with respect to
the offer or sale of such Shares in such State or other jurisdiction.
5.2 DWTC shall indemnify and hold the Fund harmless from or
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by DWTC as a result of the lack of good faith, negligence or
willful misconduct of DWTC, its officers, employees or agents.
5.3 At any time, DWTC may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by DWTC under
this Agreement, and DWTC and its agents or subcontractors shall not be liable
and shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. DWTC, its
-10-
<PAGE>
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided to DWTC or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. DWTC, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signature of the officers of the
Fund, and the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
5.4 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.
-11-
<PAGE>
5.5 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.
5.6 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 DOCUMENTS AND COVENANTS OF THE FUND AND DWTC
6.1 The Fund shall promptly furnish to DWTC the following:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of DWTC and the execution and delivery of
this Agreement;
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<PAGE>
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the Secretary of the
Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of DWTC and the execution and delivery of
this Agreement;
(ii) A certified copy of the Declaration of Trust and By-laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
-13-
<PAGE>
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the Secretary of the
Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the 1933
Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered or
to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTC deems to
be appropriate or necessary for the proper performance of its duties.
6.2 DWTC hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of Share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.3 DWTC shall prepare and keep records relating to the services
to be performed hereunder, in the form and manner as it may deem advisable and
as required by applicable laws and regulations. To the extent required by
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<PAGE>
Section 31 of the 1940 Act, and the rules and regulations thereunder, DWTC
agrees that all such records prepared or maintained by DWTC relating to the
services performed by DWTC hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section 31 of
the 1940 Act, and the rules and regulations thereunder, and will be surrendered
promptly to the Fund on and in accordance with its request.
6.4 DWTC and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to any other person
except as may be required by law or with the prior consent of DWTC and the Fund.
6.5 In case of any request or demands for the inspection of the
Shareholder records of the Fund, DWTC will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. DWTC reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
-15-
<PAGE>
Article 7 DURATION AND TERMINATION OF AGREEMENT
7.1 This Agreement shall remain in full force and effect until
July 31, 1996 and from year-to-year thereafter unless terminated by either party
as provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days
written notice, and by DWTC on 90 days written notice, to the other party
without payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and other materials will
be borne by the Fund. Additionally, DWTC reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 ASSIGNMENT
8.1 Except as provided in Section 8.3 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.2 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
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<PAGE>
8.3 DWTC may, in its sole discretion and without further consent
by the Fund, subcontract, in whole or in part, for the performance of its
obligations and duties hereunder with any person or entity including but not
limited to companies which are affiliated with DWTC; PROVIDED, HOWEVER, that
such person or entity has and maintains the qualifications, if any, required to
perform such obligations and duties, and that DWTC shall be as fully responsible
to the Fund for the acts and omissions of any agent or subcontractor as it is
for its own acts or omissions under this Agreement.
Article 9 AFFILIATIONS
9.1 DWTC may now or hereafter, without the consent of or notice
to the Fund, function as transfer agent and/or shareholder servicing agent for
any other investment company registered with the SEC under the 1940 Act and for
any other issuer, including without limitation any investment company whose
adviser, administrator, sponsor or principal underwriter is or may become
affiliated with Dean Witter, Discover & Co. or any of its direct or indirect
subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees
(as the case may be), officers, employees, agents and shareholders of the Fund,
and the directors, officers, employees, agents and shareholders of the
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<PAGE>
Fund's investment adviser and/or distributor, are or may be interested in DWTC
as directors, officers, employees, agents and shareholders or otherwise, and
that the directors, officers, employees, agents and shareholders of DWTC may be
interested in the Fund as Directors or Trustees (as the case may be), officers,
employees, agents and shareholders or otherwise, or in the investment adviser
and/or distributor as directors, officers, employees, agents, shareholders or
otherwise.
Article 10 AMENDMENT
10.1 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Board of Directors or the Board of Trustees (as the case may be) of the
Fund.
Article 11 APPLICABLE LAW
11.1 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
York.
Article 12 MISCELLANEOUS
12.1 In the event that one or more additional investment
companies managed or administered by Dean Witter InterCapital Inc. or any of its
affiliates ("Additional Funds") desires to retain DWTC to act as transfer agent,
dividend disbursing agent and/or shareholder servicing agent,
-18-
<PAGE>
and DWTC desires to render such services, such services shall be provided
pursuant to a letter agreement, substantially in the form of Exhibit A hereto,
between DWTC and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to DWTC an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or destroyed,
supported by an appropriate bond satisfactory to DWTC and the Fund issued by a
surety company satisfactory to DWTC, except that DWTC may accept an affidavit of
loss and indemnity agreement executed by the registered holder (or legal
representative) without surety in such form as DWTC deems appropriate
indemnifying DWTC and the Fund for the issuance of a replacement certificate, in
cases where the alleged loss is in the amount of $1000 or less.
12.3 In the event that any check or other order for payment of money
on the account of any Shareholder or new investor is returned unpaid for any
reason, DWTC will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTC
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<PAGE>
may, in its sole discretion, deem appropriate or as the Fund and, if applicable,
the Distributor may instruct DWTC.
12.4 Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or to DWTC shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTC:
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 MERGER OF AGREEMENT
13.1 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
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<PAGE>
Article 14 PERSONAL LIABILITY
14.1 In the case of a Fund organized as a Massachusetts business
trust, a copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Agreement to be executed in their names and on their behalf by and
through their duly authorized officers, as of the day and year first above
written.
(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 Natural Resource Development Securities Inc.
(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 Equity Income Trust
(15) Dean Witter Federal Securities Trust
(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 Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(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 Premier Income 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
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<PAGE>
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Select Municipal Reinvestment Fund
(44) Dean Witter Variable Investment Series
By:/s/ Sheldon Curtis
-------------------------------------
Sheldon Curtis
Vice President and General Counsel
ATTEST:
/s/ Barry Fink
- ---------------------------
Barry Fink
Assistant Secretary
DEAN WITTER TRUST COMPANY
By:/s/ Charles A. Fiumefreddo
------------------------------------
Charles A. Fiumefreddo
Chairman
ATTEST:
/s/ David A. Hughey
- ------------------------
David A. Hughey
Executive Vice President
f:\transfer.dw
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<PAGE>
EXHIBIT A
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned,( Name of Fund ) a (Massachusetts
business trust/Maryland Corporation) (the "Fund"), desires to employ and appoint
Dean Witter Trust Company ("DWTC") to act as transfer agent for each series and
class of shares of the Fund, whether now or hereafter authorized or issued
("Shares"), dividend disbursing agent and shareholder servicing agent, registrar
and agent in connection with any accumulation, open-account or similar plan
provided to the holders of Shares, including without limitation any periodic
investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the
Fund to DWTC of fees as set out in the fee schedule attached hereto as Schedule
A, DWTC shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
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<PAGE>
Please indicate DWTC's acceptance of employment and appointment by the
Fund in the capacities set forth above by so indicating in the space provided
below.
Very truly yours,
[ Fund Name ]
By:__________________________________
Sheldon Curtis
Vice President and General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST COMPANY
By:_______________________
Its:______________________
Date:_____________________
f:\transfer.dw
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<PAGE>
SCHEDULE A
Fund: Dean Witter Natural Resource Development Securities Inc.
Fees: (1) Annual maintenance fee of $11.00 per shareholder account,
payable monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
f:\schedA\26
-26-
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 31st day of December, 1993 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a New Jersey 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
1
<PAGE>
reasonably require in order to discharge its duties and obligations to the Fund
under this Agreement or to comply with any applicable law and regulation or
request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by 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, 1994, 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
2
<PAGE>
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 mutual written agreement executed by each of the parties hereto.
11. 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 December 31, 1993
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 California Tax-Free Daily Income Trust
7. Dean Witter California Tax-Free Income Fund
8. Dean Witter Capital Growth Securities
9. Dean Witter Convertible Securities Trust
10. Dean Witter Developing Growth Securities Trust
11. Dean Witter Diversified Income Trust
12. Dean Witter Dividend Growth Securities Inc.
13. Dean Witter Equity Income Trust
14. Dean Witter European Growth Fund Inc.
15. Dean Witter Federal Securities Trust
16. Dean Witter Global Dividend Growth Securities
17. Dean Witter Global Short-Term Income Fund Inc.
18. Dean Witter Health Sciences Trust
19. Dean Witter High Yield Securities Inc.
20. Dean Witter Intermediate Income Securities
21. Dean Witter Limited Term Municipal Trust
22. Dean Witter Liquid Asset Fund Inc.
23. Dean Witter Managed Assets Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter Natural Resource Development Securities Inc.
26. Dean Witter New York Municipal Money Market Trust
27. Dean Witter New York Tax-Free Income Fund
28. Dean Witter Pacific Growth Fund Inc.
29. Dean Witter Precious Metals and Minerals Trust
30. Dean Witter Premier Income Trust
31. Dean Witter Retirement Series
32. Dean Witter Select Municipal Reinvestment Fund
33. Dean Witter Short-Term U.S. Treasury Trust
34. Dean Witter Strategist Fund
35. Dean Witter Tax-Exempt Securities Trust
36. Dean Witter Tax-Free Daily Income Trust
37. Dean Witter U.S. Government Money Market Trust
38. Dean Witter U.S. Government Securities Trust
39. Dean Witter Utilities Fund
40. Dean Witter Value-Added Market Series
41. Dean Witter Variable Investment Series
42. Dean Witter World Wide Income Trust
43. Dean Witter World Wide Investment Trust
Closed-End Funds
44. High Income Advantage Trust
45. High Income Advantage Trust II
46. High Income Advantage Trust III
47. InterCapital Income Securities Inc.
48. Dean Witter Government Income Trust
49. InterCapital Insured Municipal Bond Trust
50. InterCapital Insured Municipal Trust
51. InterCapital Insured Municipal Income Trust
52. InterCapital California Insured Municipal Income Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. InterCapital Quality Municipal Securities
56. InterCapital California Quality Municipal Securities
57. InterCapital New York Quality Municipal Securities
4
<PAGE>
DEAN WITTER SERVICES COMPANY
SCHEDULE OF ADMINISTRATIVE FEES - JANUARY 1, 1994
MONTHLY COMPENSATION CALCULATED DAILY BY APPLYING THE FOLLOWING ANNUAL RATES TO
THE FUND'S NET ASSETS.
Dean Witter Natural Resource 0.0625% of the portion of the daily net assets
Development Securities Inc. not exceeding $250 million and 0.050% of the
portion of the daily net assets exceeding
$250 million.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 16 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
April 6, 1994, relating to the financial statements and financial highlights
of Dean Witter Natural Resource Development Securities Inc., 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 heading "Financial
Highlights" in the Prospectus and under the headings "Independent Accountants"
and "Experts" in the Statement of Additional Information.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York
May 9, 1994
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
NATURAL RESOURCE DEVELOPMENT SECURTITIES
(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
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 28-Feb-94 YEARS - n TOTAL RETURN - T
- ------------- ----------- ----------- -------------------
28-Feb-93 $1,071.60 1 7.16%
28-Feb-89 $1,533.10 5 8.92%
28-Feb-84 $2,279.50 10 8.59%
(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 28-Feb-94 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------- ----------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C>
28-Feb-93 $1,121.60 12.16% 1 12.16%
28-Feb-89 $1,553.10 55.31% 5 9.20%
28-Feb-84 $2,279.50 127.95% 10.00 8.59%
<FN>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
</TABLE>
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>
30-Mar-81 117.91 $21,791 $108,955 $217,910
</TABLE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Philip J. Purcell, whose signature
appears below, constitutes and appoints Sheldon Curtis, Marilyn K. Cranney and
Barry Fink, or any of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution among himself and each of the persons appointed
herein, for him and in his name, place and stead, in any and all capacities, to
sign any amendments to any registration statement of any of the Dean Witter
Funds set forth on Schedule A attached hereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
Dated: April 8, 1994
Philip J. Purcell
- --------------------
Philip J. Purcell
<PAGE>
DEAN WITTER FUNDS
MONEY MARKET
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Active Assets Tax-Free Trust
4. Active Assets California Tax-Free Trust
5. Active Assets Government Securities Trust
6. Dean Witter Tax-Free Daily Income Trust
7. Dean Witter U.S. Government Money Market Trust
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Dividend Growth Securities Inc.
12. Dean Witter Capital Growth Securities
13. Dean Witter Natural Resource Development Securities Inc.
14. Dean Witter Precious Metals & Minerals Trust
15. Dean Witter Developing Growth Securities Trust
16. Dean Witter World Wide Investment Trust
17. Dean Witter Value-Added Market Series
18. Dean Witter European Growth Fund Inc.
19. Dean Witter Pacific Growth Fund Inc.
20. Dean Witter Equity Income Trust
21. Dean Witter Utilities Fund
22. Dean Witter Health Sciences Trust
23. Dean Witter Global Dividend Growth Securities
24. Dean Witter Global Utilities Fund
ASSET ALLOCATION FUNDS
25. Dean Witter Managed Assets Trust
26. Dean Witter Strategist Fund
FIXED-INCOME FUNDS
27. Dean Witter High Yield Securities Inc.
28. Dean Witter Convertible Securities Trust
29. Dean Witter Intermediate Income Securities
30. Dean Witter World Wide Income Trust
31. Dean Witter Global Short-Term Income Fund Inc.
32. Dean Witter Diversified Income Trust
33. Dean Witter Premier Income Trust
34. Dean Witter U.S. Government Securities Trust
35. Dean Witter Federal Securities Trust
<PAGE>
36. Dean Witter Short-Term U.S. Treasury Trust
37. Dean Witter Tax-Exempt Securities Trust
38. Dean Witter California Tax-Free Income Fund
39. Dean Witter New York Tax-Free Income Fund
40. Dean Witter Multi-State Municipal Series Trust
Arizona Series
California Series
Florida Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
Ohio Series
Pennsylvania Series
41. Dean Witter Select Municipal Reinvestment Fund
42. Dean Witter Limited Term Municipal Trust
43. Dean Witter Short-Term Bond Fund
SPECIAL PURPOSE FUNDS
44. Dean Witter Variable Investment Series
Money Market Portfolio
Quality Income Plus Portfolio
High Yield Portfolio
Utilities Portfolio
Dividend Growth Portfolio
Capital Growth Portfolio
European Growth Portfolio
Equity Portfolio
Managed Assets Portfolio
45. 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
<PAGE>
CLOSED-END FUNDS
46. High Income Advantage Trust
47. High Income Advantage Trust II
48. High Income Advantage Trust III
49. InterCapital Income Securities Inc.
50. Dean Witter Government Income Trust
51. InterCapital Insured Municipal Bond Trust
52. InterCapital Insured Municipal Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. Municipal Income Trust
56. Municipal Income Trust II
57. Municipal Income Trust III
58. Municipal Income Opportunities Trust
59. Municipal Income Opportunities Trust II
60. Municipal Income Opportunities Trust III
61. Municipal Premium Income Trust
62. Prime Income Trust
63. InterCapital Insured Municipal Income Trust
64. InterCapital California Insured Municipal Income Trust
65. InterCapital Quality Municipal Securities
66. InterCapital California Quality Municipal Securities
67. InterCapital New York Quality Municipal Securities
68. InterCapital California Insured Municipal Securities
69. InterCapital Insured Municipal Securities
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that John L. Schroeder, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald Feiman and
Stuart Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of any of the
Dean Witter Funds set forth on Schedule A attached hereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
Dated: April 13, 1994
John L. Schroeder
- --------------------
John L. Schroeder
<PAGE>
DEAN WITTER FUNDS
MONEY MARKET
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Active Assets Tax-Free Trust
4. Active Assets California Tax-Free Trust
5. Active Assets Government Securities Trust
6. Dean Witter Tax-Free Daily Income Trust
7. Dean Witter U.S. Government Money Market Trust
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Dividend Growth Securities Inc.
12. Dean Witter Capital Growth Securities
13. Dean Witter Natural Resource Development Securities Inc.
14. Dean Witter Precious Metals & Minerals Trust
15. Dean Witter Developing Growth Securities Trust
16. Dean Witter World Wide Investment Trust
17. Dean Witter Value-Added Market Series
18. Dean Witter European Growth Fund Inc.
19. Dean Witter Pacific Growth Fund Inc.
20. Dean Witter Equity Income Trust
21. Dean Witter Utilities Fund
22. Dean Witter Health Sciences Trust
23. Dean Witter Global Dividend Growth Securities
24. Dean Witter Global Utilities Fund
ASSET ALLOCATION FUNDS
25. Dean Witter Managed Assets Trust
26. Dean Witter Strategist Fund
FIXED-INCOME FUNDS
27. Dean Witter High Yield Securities Inc.
28. Dean Witter Convertible Securities Trust
29. Dean Witter Intermediate Income Securities
30. Dean Witter World Wide Income Trust
31. Dean Witter Global Short-Term Income Fund Inc.
32. Dean Witter Diversified Income Trust
33. Dean Witter Premier Income Trust
34. Dean Witter U.S. Government Securities Trust
35. Dean Witter Federal Securities Trust
<PAGE>
36. Dean Witter Short-Term U.S. Treasury Trust
37. Dean Witter Tax-Exempt Securities Trust
38. Dean Witter California Tax-Free Income Fund
39. Dean Witter New York Tax-Free Income Fund
40. Dean Witter Multi-State Municipal Series Trust
Arizona Series
California Series
Florida Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
Ohio Series
Pennsylvania Series
41. Dean Witter Select Municipal Reinvestment Fund
42. Dean Witter Limited Term Municipal Trust
43. Dean Witter Short-Term Bond Fund
SPECIAL PURPOSE FUNDS
44. Dean Witter Variable Investment Series
Money Market Portfolio
Quality Income Plus Portfolio
High Yield Portfolio
Utilities Portfolio
Dividend Growth Portfolio
Capital Growth Portfolio
European Growth Portfolio
Equity Portfolio
Managed Assets Portfolio
45. 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
<PAGE>
CLOSED-END FUNDS
46. High Income Advantage Trust
47. High Income Advantage Trust II
48. High Income Advantage Trust III
49. InterCapital Income Securities Inc.
50. Dean Witter Government Income Trust
51. InterCapital Insured Municipal Bond Trust
52. InterCapital Insured Municipal Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. Municipal Income Trust
56. Municipal Income Trust II
57. Municipal Income Trust III
58. Municipal Income Opportunities Trust
59. Municipal Income Opportunities Trust II
60. Municipal Income Opportunities Trust III
61. Municipal Premium Income Trust
62. Prime Income Trust
63. InterCapital Insured Municipal Income Trust
64. InterCapital California Insured Municipal Income Trust
65. InterCapital Quality Municipal Securities
66. InterCapital California Quality Municipal Securities
67. InterCapital New York Quality Municipal Securities
68. InterCapital California Insured Municipal Securities
69. InterCapital Insured Municipal Securities
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Michael Bozic, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald Feiman and
Stuart Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of any of the
Dean Witter Funds set forth on Schedule A attached hereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
Dated: April 15, 1994
Michael Bozic
- --------------------
Michael Bozic
<PAGE>
DEAN WITTER FUNDS
MONEY MARKET
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Active Assets Tax-Free Trust
4. Active Assets California Tax-Free Trust
5. Active Assets Government Securities Trust
6. Dean Witter Tax-Free Daily Income Trust
7. Dean Witter U.S. Government Money Market Trust
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Dividend Growth Securities Inc.
12. Dean Witter Capital Growth Securities
13. Dean Witter Natural Resource Development Securities Inc.
14. Dean Witter Precious Metals & Minerals Trust
15. Dean Witter Developing Growth Securities Trust
16. Dean Witter World Wide Investment Trust
17. Dean Witter Value-Added Market Series
18. Dean Witter European Growth Fund Inc.
19. Dean Witter Pacific Growth Fund Inc.
20. Dean Witter Equity Income Trust
21. Dean Witter Utilities Fund
22. Dean Witter Health Sciences Trust
23. Dean Witter Global Dividend Growth Securities
24. Dean Witter Global Utilities Fund
ASSET ALLOCATION FUNDS
25. Dean Witter Managed Assets Trust
26. Dean Witter Strategist Fund
FIXED-INCOME FUNDS
27. Dean Witter High Yield Securities Inc.
28. Dean Witter Convertible Securities Trust
29. Dean Witter Intermediate Income Securities
30. Dean Witter World Wide Income Trust
31. Dean Witter Global Short-Term Income Fund Inc.
32. Dean Witter Diversified Income Trust
33. Dean Witter Premier Income Trust
34. Dean Witter U.S. Government Securities Trust
35. Dean Witter Federal Securities Trust
<PAGE>
36. Dean Witter Short-Term U.S. Treasury Trust
37. Dean Witter Tax-Exempt Securities Trust
38. Dean Witter California Tax-Free Income Fund
39. Dean Witter New York Tax-Free Income Fund
40. Dean Witter Multi-State Municipal Series Trust
Arizona Series
California Series
Florida Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
Ohio Series
Pennsylvania Series
41. Dean Witter Select Municipal Reinvestment Fund
42. Dean Witter Limited Term Municipal Trust
43. Dean Witter Short-Term Bond Fund
SPECIAL PURPOSE FUNDS
44. Dean Witter Variable Investment Series
Money Market Portfolio
Quality Income Plus Portfolio
High Yield Portfolio
Utilities Portfolio
Dividend Growth Portfolio
Capital Growth Portfolio
European Growth Portfolio
Equity Portfolio
Managed Assets Portfolio
45. 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
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CLOSED-END FUNDS
46. High Income Advantage Trust
47. High Income Advantage Trust II
48. High Income Advantage Trust III
49. InterCapital Income Securities Inc.
50. Dean Witter Government Income Trust
51. InterCapital Insured Municipal Bond Trust
52. InterCapital Insured Municipal Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. Municipal Income Trust
56. Municipal Income Trust II
57. Municipal Income Trust III
58. Municipal Income Opportunities Trust
59. Municipal Income Opportunities Trust II
60. Municipal Income Opportunities Trust III
61. Municipal Premium Income Trust
62. Prime Income Trust
63. InterCapital Insured Municipal Income Trust
64. InterCapital California Insured Municipal Income Trust
65. InterCapital Quality Municipal Securities
66. InterCapital California Quality Municipal Securities
67. InterCapital New York Quality Municipal Securities
68. InterCapital California Insured Municipal Securities
69. InterCapital Insured Municipal Securities
