<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1996
REGISTRATION NO.: 2-70421
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. ____ / /
POST-EFFECTIVE AMENDMENT NO. 18 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 19 /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 29, 1996, WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MARCH 26, 1996.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
-------------------------------------------------------
-------------------------------------------------------
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<S> <C>
ITEM CAPTION
- ---------------------------------------------- ---------------------------------------------------------------------
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
APRIL 23, 1996 Prospectus Summary/2
Dean Witter Natural Resource Development Summary of Fund Expenses/3
Securities Inc. (the "Fund") is an open-end diversified Financial Highlights/4
management investment company whose investment objective The Fund and its Management/4
is capital growth. The Fund invests primarily in common Investment Objective and Policies/5
stock of companies in the natural resources and related Risk Considerations and Investment Practices/6
areas, including companies engaged in the exploration for Investment Restrictions/10
and development, production and distribution of natural Purchase of Fund Shares/10
resources or in the development of energy-efficient Shareholder Services/13
technologies or other natural resource related supplies Redemptions and Repurchases/15
or products. (See "Investment Objective and Policies.") Dividends, Distributions and Taxes/17
Shares of the Fund are continuously Performance Information/18
offered at net asset value. However, redemptions and/or Additional Information/19
repurchases are subject in most circumstances to a SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
contingent deferred sales charge, scaled down from 5% to GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES ARE
1% of the amount redeemed, if made within six years of NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
purchase, which charge will be paid to the Fund's CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
Distributor, Dean Witter Distributors Inc. (See AGENCY.
"Redemptions and Repurchases--Contingent Deferred Sales THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
Charge.") In addition, the Fund pays the Distributor a THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
distribution fee pursuant to a Plan of Distribution at SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
the annual rate of 1% of the lesser of the (i) average COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
daily aggregate net sales since inception of the Plan of THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
Distribution or (ii) average daily net assets of the Fund REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
attributable to shares issued since the inception of the Dean Witter
Plan of Distribution. (See "Purchase of Fund Shares--Plan Natural Resource Development
of Distribution.") Securities Inc.
This Prospectus sets forth concisely the Two World Trade Center
information you should know before investing in the Fund. New York, New York 10048
It should be read and retained for future reference. (212) 392-2550 or
Additional information about the Fund is contained in the (800) 869-NEWS (toll-free)
Statement of Additional Information, dated April 23,
1996, which has been filed with the Securities and
Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone
numbers listed on this page. The Statement of Additional
Information is incorporated herein by reference.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
</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 19).
Offering At net asset value. (see page 10). Shares redeemed within six years of purchase
Price are subject to a contingent deferred sales charge under most circumstances (see
page 16).
Minimum Purchase Minimum initial investment $1,000; ($100 if the account is opened through
EasyInvest -SM-); minimum subsequent investment $100 (see page 10).
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 ninety-six investment companies and other portfolios with assets
of approximately $82.5 billion at February 29, 1996 (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 17).
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 (see pages 11 and 15). The Distributor also receives the
proceeds of any contingent deferred sales charges.
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, or,
Sales Charge if the account was opened through EasyInvest -SM-, if after twelve months the
shareholder has invested less than $1,000 in the account. 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 15).
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
13).
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 6). 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 pages
5 through 9). 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 7 through 8). In addition, the investor is directed to
the discussions of foreign securities on page 6.
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
- --------------------------------------------------------------------------------
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 29, 1996, 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*.............................................................................. 0.97%
Other Expenses........................................................................... 0.30%
Total Fund Operating Expenses............................................................ 1.90%
<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
(see "Purchase of Fund Shares").
</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 $222
You would pay the following expenses on the same investment, assuming
no redemption........................................................ $ 19 $ 60 $103 $222
</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 LLP,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, 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 YEAR ENDED FEBRUARY 28
----------------------------------------------------------------------------------------
1996* 1995 1994 1993 1992* 1991 1990 1989 1988* 1987
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset
value,
beginning of
period........ $10.77 $11.82 $11.36 $10.20 $11.03 $11.33 $ 9.93 $ 9.46 $ 9.10 $ 7.43
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment
income........ 0.06 0.09 0.09 0.16 0.20 0.25 0.30 0.23 0.20 0.14
Net realized
and unrealized
gain (loss)... 2.53 (0.24) 1.25 1.18 (0.44) 0.02 1.80 0.72 0.44 1.75
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from
investment
operations.... 2.59 (0.15) 1.34 1.34 (0.24) 0.27 2.10 0.95 0.64 1.89
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less dividends
and
distributions
from:
Net
investment
income...... (0.04) (0.12) (0.09) (0.18) (0.20) (0.28) (0.32) (0.21) (0.28) (0.22)
Net realized
gain........ (0.62) (0.78) (0.79) -- (0.39) (0.29) (0.38) (0.27) -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total dividends
and
distributions... (0.66) (0.90) (0.88) (0.18) (0.59) (0.57) (0.70) (0.48) (0.28) (0.22)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset
value,
end of
period........ $12.70 $10.77 $11.82 $11.36 $10.20 $11.03 $11.33 $ 9.93 $ 9.46 $ 9.10
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL INVESTMENT
RETURN+......... 24.32% (1.26)% 12.16% 13.31% (1.91)% 2.87% 21.11% 10.29% 7.32% 26.21%
RATIOS TO AVERAGE
NET ASSETS:
Expenses....... 1.90% 1.90% 1.91% 1.96% 1.93% 1.80% 1.81% 1.92% 1.81% 1.74%
Net investment
income........ 0.52% 0.77% 0.73% 1.46% 1.67% 2.28% 2.57% 2.09% 2.14% 2.61%
SUPPLEMENTAL
DATA:
Net assets, end
of period, in
thousands..... $152,661 $132,812 $139,459 $118,496 $113,145 $150,636 $154,741 $136,911 $171,725 $82,985
Portfolio
turnover
rate.......... 49% 59% 69% 52% 31% 29% 22% 7% 26% 14%
</TABLE>
- ---------------
* YEAR ENDED FEBRUARY 29.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE.
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 ninety-six investment companies, thirty of which
are listed on
4
<PAGE>
the New York Stock Exchange, with combined total assets of approximately $79.9
billion as of February 29, 1996. The Investment Manager also manages and advises
portfolios of pension plans, other institutions and individuals which aggregated
approximately $2.6 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained 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 29, 1996, the Fund
accrued total compensation to the Investment Manager amounting to 0.63% of the
Fund's average daily net assets and the Fund's total expenses amounted to 1.90%
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.
5
<PAGE>
The Fund may purchase securities on a when issued or delayed delivery basis,
may purchase or sell securities on a forward commitment basis and may purchase
securities on a "when, as and if issued" basis, may enter into repurchase
agreements and may invest in options and futures transactions all as described
below.
RISK CONSIDERATIONS AND INVESTMENT PRACTICES
FOREIGN SECURITIES. Foreign securities investments may be affected by
changes in currency rates or exchange control regulations, changes in
governmental administration or economic or monetary policy (in the United States
and abroad) or changed circumstances in dealings between nations. Fluctuations
in the relative rates of exchange between the currencies of different nations
will affect the value of the Fund's investments denominated in foreign currency.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of the Fund's trades effected in such markets. As such, the
inability to dispose of portfolio securities due to settlement delays could
result in losses to the Fund due to subsequent declines in value of such
securities and the inability of the Fund to make intended security purchases due
to settlement problems could result in a failure of the Fund to make potentially
advantageous investments. To the extent the Fund purchases Eurodollar
certificates of deposit issued by foreign branches of domestic Unites States
banks, consideration will be given to their domestic marketability, the lower
reserve requirements normally mandated for overseas banking operations, the
possible impact of interruptions in the flow of international currency
transactions and future international political and economic developments which
might adversely affect the payment of principal or interest.
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
6
<PAGE>
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. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize those risks. See the Statement of Additional Information for a further
discussion of such investments.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive their
full value at maturity. The interest earned on such securities is, implicitly,
automatically compounded and paid out at maturity. While such compounding at a
constant rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received on interest-paying securities if prevailing interest rates
rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.
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
7
<PAGE>
"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 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.
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
8
<PAGE>
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 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 is managed within
InterCapital's Growth Group, which manages 26 equity funds and fund portfolios,
with approximately $10.1 billion in assets as of February 29, 1996. Konrad
Krill, Vice President of InterCapital and a member of the Growth Group, is the
primary portfolio manager of the Fund. Mr. Krill has been a portfolio manager of
the Fund since May, 1994 and has been the sole portfolio manager of the Fund
since April 1995. He 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.
9
<PAGE>
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.
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. The minimum initial
purchase in the case of investments through EasyInvest -SM-, an automatic
purchase plan (see "Shareholder Services"), is $100, provided that the schedule
of automatic investments will result in investments totalling at least $1,000
within the first twelve months. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including
10
<PAGE>
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 three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Shares of the
Fund purchased through the Distributor are entitled to dividends beginning on
the next business day following settlement date. Since DWR and other Selected
Broker-Dealers forward investors' funds on settlement date, they will benefit
from the temporary use of the funds if payment is made prior thereto. Shares
purchased 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 various types of
non-cash compensation as special sales incentives including trips, educational
and/or business seminars and merchandise. The Fund and the Distributor reserve
the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution, pursuant to Rule 12b-1 under
the Act (the "Plan"), under which the Fund will pay the Distributor a fee, which
is accrued daily and payable monthly, at an annual rate of 1.0% of the lesser
of: (a) the average daily aggregate gross sales of the Fund's shares since the
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 29, 1996, the Fund accrued payments under
the Plan amounting to $1,369,150, which amount is equal to 0.97% of the Fund's
average daily net assets for the fiscal year. The payments accrued under the
Plan were calculated pursuant to clause (a) 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. The service fee is a payment
11
<PAGE>
made for personal service and/or maintenance of shareholder accounts.
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
$5,194,326 at February 29, 1996, which was equal to 3.40% 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 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
(or, on days when the New York Stock Exchange closes prior to 4:00 p.m., at such
earlier time), on each day that the New York Stock Exchange is open. The net
asset value per share will not be determined on Good Friday and on such other
federal and non-federal holidays as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange or quoted by NASDAQ is valued at its latest sale price on that
exchange or quotation service; if there were no sales that day, the security is
valued at the latest bid price (in cases where a security is traded on more than
one exchange, the security is valued on the exchange designated as the primary
market pursuant to procedures adopted by the 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 may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
12
<PAGE>
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 quarterly basis, to the Transfer Agent for investment in shares of
the Fund (see "Purchase of Fund Shares" and "Redemptions and Repurchases --
Involuntary Redemption").
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any 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 Intermediate Term U.S. Treasury Trust, Dean Witter
Short-Term Bond Fund, Dean Witter Balanced Income Fund, Dean Witter Balanced
Growth Fund and five Dean Witter Funds which are money market funds (the
foregoing eleven non-CDSC funds are hereinafter collectively referred to in this
section as the "Exchange Funds"). Exchanges may be made after the shares of the
Fund acquired by purchase (not by exchange or dividend reinvestment) have been
held for thirty days. There is no waiting period for
13
<PAGE>
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, 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.
14
<PAGE>
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) 869-NEWS (toll free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such 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, New Jersey 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.
15
<PAGE>
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>
<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>
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 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:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (b) held in
a qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (a) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age
59 1/2); distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of the
Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which Dean Witter Trust Company,
an affiliate of the Investment Manager, serves as recordkeeper or Trustee
("Eligible 401(k) Plan"), provided that either: (a) the plan continues to be an
Eligible 401(k) Plan after the redemption; or (b) the redemption is in
connection with the complete termination of the plan involving the distribution
of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the
16
<PAGE>
inability to engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a 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
Section 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 or, in the case of an account opened through EasyInvest, if after
twelve months the shareholder has invested less than $1,000 in the account.
However, before the Fund redeems such shares and sends the proceeds to the
shareholder, it will notify the shareholder that the value of the shares is less
than the applicable amount and allow the shareholder to make an additional
investment in an amount which will increase the value of the account to at least
the applicable amount before the redemption is processed. No CDSC will be
imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay 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
17
<PAGE>
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
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
18
<PAGE>
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.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure that
the interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within 60 days of a
sale or a sale within 60 days of a purchase) of a security. In addition,
investment personnel may not purchase or sell a security for their personal
account within 30 days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to sanctions,
including reprimand, demotion or suspension or termination of employment. The
Code of Ethics comports with regulatory requirements and the recommendations in
the 1994 report by the Investment Company Institute Advisory Group on Personal
Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
19
<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 Strategist Fund
Inc. Dean Witter Global Asset Allocation
Dean Witter Developing Growth Fund
Securities Trust ACTIVE ASSETS ACCOUNT PROGRAM
Dean Witter World Wide Investment Trust Active Assets Money Trust
Dean Witter Value-Added Market Series Active Assets Tax-Free Trust
Dean Witter Utilities Fund Active Assets California Tax-Free Trust
Dean Witter Precious Metals and Active Assets Government Securities
Minerals Trust 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
Dean Witter International SmallCap Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
Dean Witter Japan 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
Dean Witter National Municipal Trust
Dean Witter High Income Securities
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
Dean Witter Intermediate Term U.S.
Treasury Trust
<PAGE>
Dean Witter
Natural Resource Development
Securities Inc.
DEAN WITTER
Two World Trade Center
New York, New York 10048
BOARD OF DIRECTORS NATURAL RESOURCE
Michael Bozic DEVELOPMENT
Charles A. Fiumefreddo SECURITIES
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Konrad Krill
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
4/23/96 PROSPECTUS -- APRIL 23, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION Dean Witter
APRIL 23, 1996 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 April 23, 1996, 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 numbers listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc., at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
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 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management................................................................. 3
Directors and Officers...................................................................... 6
Investment Practices and Policies........................................................... 11
Investment Restrictions..................................................................... 22
Portfolio Transactions and Brokerage........................................................ 24
The Distributor............................................................................. 25
Shareholder Services........................................................................ 29
Redemptions and Repurchases................................................................. 33
Dividends, Distributions and Taxes.......................................................... 35
Performance Information..................................................................... 36
Shares of the Fund.......................................................................... 37
Custodian and Transfer Agent................................................................ 37
Independent Accountants..................................................................... 38
Reports to Shareholders..................................................................... 38
Legal Counsel............................................................................... 38
Experts..................................................................................... 38
Registration Statement...................................................................... 38
Report of Independent Accountants........................................................... 39
Financial Statements--February 29, 1996..................................................... 40
</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, Dean Witter National
Municipal Trust, Dean Witter High Income Securities, Dean Witter International
SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter Select Dimensions
Series, Dean Witter Global Asset Allocation Fund, Dean Witter Balanced Income
Fund, Dean Witter Balanced Growth Fund, Dean Witter Hawaii Municipal Trust, Dean
Witter Capital Appreciation Fund, Dean Witter Information Fund, Dean Witter
Intermediate Term U.S. Treasury Trust, Dean Witter Japan 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
3
<PAGE>
Company Inc. ("DWSC"), a wholly-owned subsidiary of InterCapital, serves as
manager for the following investment companies, for which TCW Funds Management
Inc. is the investment adviser: TCW/DW Core Equity Trust, TCW/DW North American
Government Income Trust, TCW/DW Latin American Growth Fund, TCW/DW Income and
Growth Fund, TCW/DW Small Cap Growth Fund, TCW/DW Balanced Fund, TCW/DW Total
Return Trust, TCW/DW Mid-Cap Equity 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. On April 17,
1995, DWSC was reorganized in the State of Delaware, necessitating the entry
into a new Services Agreement between InterCapital and DWSC on that date. 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 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
4
<PAGE>
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.
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 28, 1994, February
28, 1995 and February 29, 1996, the Fund accrued to the Investment Manager total
compensation under the Agreement in the amounts of $819,273, $886,340 and
$883,804, 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 28, 1994, February 28,
1995 and February 29, 1996, 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 had an initial term ending April 30, 1994 and
provides that it 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, 1997, was approved by the Directors of the Fund,
including a majority of the Independent Directors, at their meeting held on
April 17, 1996.
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 80 Dean Witter Funds and the 12 TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -----------------------------------------------------------------------------
<S> <C>
Michael Bozic (55) Chairman and Chief Executive Officer of Levitz Furniture Corporation (since
Director November, 1995); Director or Trustee of the Dean Witter Funds; formerly
c/o Levitz Furniture Corporation President and Chief Executive Officer of Hills Department Stores (since May,
6111 Broken Sound Parkway, N.W. 1991); formerly Chairman and Chief Executive Officer (January, 1987-August,
Boca Raton, Florida 1990) and President and Chief Operating Officer (August, 1990-February, 1991)
of the Sears Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services, Inc., the United Negro College Fund, Weirton
Steel Corporation and Domain Inc. (home decor retailer).
Charles A. Fiumefreddo* (62) Chairman, Chief Executive Officer and Director of InterCapital, Dean Witter
Chairman, Director, Distributors Inc. ("Distributors") and DWSC; Executive Vice President and
President and Chief Director of DWR; Chairman, Trustee or Director, President and Chief Executive
Executive Officer Officer of the Dean Witter Funds; Chairman, Chief Executive Officer and
Two World Trade Center Trustee of the TCW/DW Funds; formerly Executive Vice President and Director
New York, New York of DWDC (until 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 (63) Director or Trustee of the Dean Witter Funds; formerly United States Senator
Director (R-Utah) (1974-1992) and Chairman, Senate Banking Committee (1980-1986);
c/o Huntsman Chemical Corporation formerly Mayor of Salt Lake City, Utah (1971-1974); formerly Astronaut, Space
500 Huntsman Way Shuttle Discovery (April 12-19, 1985); Vice Chairman, Huntsman Chemical
Salt Lake City, Utah Corporation (since January, 1993); Director of Franklin Quest (time
management systems) and John Alden Financial Corp.; member of the board of
various civic and charitable organizations.
John R. Haire (71) Chairman of the Audit Committee and Chairman of the Committee of the
Director Independent Directors or Trustees and Director or Trustee of the Dean Witter
Two World Trade Center Funds; Trustee of the TCW/DW Funds; formerly President, Council for Aid to
New York, New York Education (1978-1989) and formerly Chairman and Chief Executive Officer of
Anchor Corporation, an Investment Adviser (1964-1978); Director of Washington
National Corporation (insurance).
Dr. Manuel H. Johnson (47) Senior Partner, Johnson Smick International, Inc., a consulting firm; Koch
Director Professor of International Economics and Director of the Center for Global
c/o Johnson Smick International, Inc. Market Studies at George Mason University; Co-Chairman and a founder of the
1133 Connecticut Avenue, N.W. Group of Seven Council (G7C), an international economic commission; Director
Washington, D.C. or Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds; Director of
NASDAQ (since June, 1995); Director of Greenwich Capital Markets Inc.
(broker-dealer); formerly Vice Chairman of the Board of Governors of the
Federal Reserve System (1986-1990) and Assistant Secretary of the U.S.
Treasury (1982-1986).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -----------------------------------------------------------------------------
<S> <C>
Paul Kolton (72) 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
c/o Gordon Altman Butowsky TCW/DW Funds; formerly Chairman of the Financial Accounting Standards
Weitzen Shalov & Wein Advisory Council and Chairman and Chief Executive Officer of the American
Counsel to the Independent Directors Stock Exchange; Director of UCC Investors Holding Inc. (Uniroyal Chemical
114 West 47th Street Company, Inc.); director or trustee of various not-for-profit organizations.
New York, New York
Michael E. Nugent (59) General Partner, Triumph Capital, L.P., a private investment partnership;
Director Director or Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds;
c/o Triumph Capital, L.P. formerly Vice President, Bankers Trust Company and BT Capital Corporation
237 Park Avenue (September, 1984-March, 1988); Director of various business organizations.
New York, New York
Philip J. Purcell* (52) 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 (65) Retired; Director or Trustee of the Dean Witter Funds; Director of Citizens
Director Utilities Company; formerly Executive Vice President and Chief Investment
c/o Gordon Altman Butowsky Officer of the Home Insurance Company (since August, 1991-September, 1995);
Weitzen Shalov & Wein formerly Chairman and Chief Investment Officer of Axe-Houghton Management and
Counsel to the Independent Trustees the Axe- Houghton Funds and President of USF&G Financial Services, Inc. (June
114 West 47th Street 1990-June, 1991).
New York, New York
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel 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 DWR; Vice President, Secretary and
New York, New York General Counsel of the Dean Witter Funds and the TCW/DW Funds.
Konrad Krill (36) 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
Thomas F. Caloia (50) First Vice President (since May, 1991) and Assistant Treasurer (since
Treasurer January, 1993) of InterCapital; First Vice President and Assistant Treasurer
Two World Trade Center of DWSC and Treasurer of the Dean Witter Funds and the TCW/DW Funds;
New York, New York previously Vice President of InterCapital.
<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 Chief
Operating Officer of InterCapital and DWSC, Executive Vice President of
Distributors and DWTC and Director of DWTC, David A. Hughey, Executive Vice
President and Chief Administrative Officer of InterCapital, DWSC, Distributors
and DWTC and Director of DWTC, Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and DWTC and Director of DWTC and Joseph J.
McAlinden, Executive Vice President of InterCapital, and Paul Vance, Senior
7
<PAGE>
Vice President of InterCapital, and Ira Ross, Vice President of InterCapital,
are Vice Presidents of the Fund. In addition, Marilyn K. Cranney and Barry Fink,
First Vice Presidents and Assistant General Counsels of InterCapital and DWSC
and LouAnne D. McInnis and Ruth Rossi, Vice Presidents and Assistant General
Counsels of InterCapital and DWSC, and Carsten Otto, a staff attorney with
InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF DIRECTORS, THE INDEPENDENT DIRECTORS, AND THE COMMITTEES
The Board of Trustees consists of nine (9) directors. These same individuals
also serve as directors or trustees for all of the Dean Witter Funds, and are
referred to in this section as Directors. As of the date of this Statement of
Additional Information, there are a total of 80 Dean Witter Funds, comprised of
120 portfolios. As of February 29, 1996, the Dean Witter Funds had total net
assets of approximately $74.3 billion and more than five million shareholders.
Seven Directors (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own any
stock or other securities issued by InterCapital's parent company, DWDC. These
are the "disinterested" or "independent" Directors. The other two Directors (the
"management Directors") are affiliated with InterCapital. Five of the seven
independent Directors are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Directors. The Dean Witter Funds seek as Independent Directors
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Directors who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the Independent Directors serve as members of the Audit Committee and
the Committee of the Independent Directors. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1995,
the three Committees held a combined total of fifteen meetings. The Committees
hold some meetings at InterCapital's offices and some outside InterCapital.
Management Directors or officers do not attend these meetings unless they are
invited for purposes of furnishing information or making a report.
The Committee of the Independent Directors is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to time.
The Independent Directors are required to select and nominate individuals to
fill any Independent Director vacancy on the Board of any Fund that has a Rule
12b-1 plan of distribution. Most of the Dean Witter Funds have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
8
<PAGE>
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He screens
and/or prepares written materials and identifies critical issues for the
Independent Directors to consider, develops agendas for Committee meetings,
determines the type and amount of information that the Committees will need to
form a judgment on various issues, and arranges to have that information
furnished to Committee members. He also arranges for the services of independent
experts and consults with them in advance of meetings to help refine reports and
to focus on critical issues. Members of the Committees believe that the person
who serves as Chairman of all three Committees and guides their efforts is
pivotal to the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Directors and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service providers.
In effect, the Chairman of the Committees serves as a combination of chief
executive and support staff of the Independent Directors.
The Chairman of the Committees is not employed by any other organization and
devotes his time primarily to the services he performs as Committee Chairman and
Independent Director of the Dean Witter Funds and as an Independent Trustee of
the TCW/DW Funds. The current Committee Chairman has had more than 35 years
experience as a senior executive in the investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Directors and the Funds' management believe that having the
same Independent Directors for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Directors for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Directors of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Directors arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Directors serve on all Fund Boards
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of Independent Directors, and a Chairman of their Committees,
of the caliber, experience and business acumen of the individuals who serve as
Independent Directors of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT DIRECTORS
The Fund pays each Independent Director an annual fee of $1,000 ($1,200
prior to September 30, 1995) plus a per meeting fee of $50 for meetings of the
Board of Directors or committees of the Board of Directors attended by the
Director (the Fund pays the Chairman of the Audit Committee an annual fee of
$750 and pays the Chairman of the Committee of the Independent Directors an
additional annual fee of $2,400, in each case inclusive of the Committee meeting
fees). The Fund also reimburses such 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 an Independent
Director who retires after serving for at least five years (or such lesser
period as may be determined by the Board) as an Independent Director or Trustee
of any Dean Witter Fund that has adopted the retirement program (each such Fund
referred to as an "Adopting Fund" and each such Director referred to as an
"Eligible Director") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Director
is entitled to receive from the Fund, commencing as of his or her retirement
date and continuing for the remainder of his or
9
<PAGE>
her life, an annual retirement benefit (the "Regular Benefit") equal to 25.0% of
his or her Eligible Compensation plus 0.4166666% of such Eligible Compensation
for each full month of service as an Independent Director or Trustee of any
Adopting Fund in excess of five years up to a maximum of 50.0% after ten years
of service. The foregoing percentages may be changed by the Board.(1) "Eligible
Compensation" is one-fifth of the total compensation earned by such Eligible
Director for service to the Fund in the five year period prior to the date of
the Eligible Director's retirement. Benefits under the retirement program are
not secured or funded by the Fund. As of the date of this Statement of
Additional Information, 57 Dean Witter Funds have adopted the retirement
program.
The following table illustrates the compensation paid and the retirement
benefits accrued to the Fund's Independent Directors by the Fund for the fiscal
year ended February 29, 1996 and the estimated retirement benefits for the
Fund's Independent Directors as of February 29, 1996.
<TABLE>
<CAPTION>
FUND COMPENSATION ESTIMATED RETIREMENT BENEFITS
------------------------------- --------------------------------------------------------------------
ESTIMATED ESTIMATED
RETIREMENT CREDIT YEARS ESTIMATED ANNUAL
AGGREGATE BENEFITS OF SERVICE AT PERCENTAGE OF ESTIMATED BENEFITS
NAME OF INDEPENDENT COMPENSATION ACCRUED AS RETIREMENT ELIGIBLE ELIGIBLE UPON
DIRECTOR FROM THE FUND FUND EXPENSES (MAXIMUM 10) COMPENSATION COMPENSATION(2) RETIREMENT(3)
- -------------------- -------------- -------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic....... $ 1,700 $ 442 10 50.0% $1,900 $ 950
Edwin J. Garn....... 1,900 672 10 50.0% 1,900 950
John R. Haire....... 4,488(4) 3,008 10 50.0% 4,727 2,363
Dr. Manuel H.
Johnson............ 1,900 273 10 50.0% 1,900 950
Paul Kolton......... 1,850 1,130 10 49.6% 2,260 1,121
Michael E. Nugent... 1,650 480 10 50.0% 1,900 950
John L. Schroeder... 1,850 867 8 41.7% 1,900 792
</TABLE>
- ------------------------
(1) An Eligible Director may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Director
and his or her spouse on the date of such Eligible Director's retirement.
The amount estimated to be payable under this method, through the remainder
of the later of the lives of such Eligible Director and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Director may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
(2) Based on current levels of compensation.
(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Director's elections described in Footnote (1)
above.
(4) Of Mr. Haire's compensation from the Fund, $3,150 is paid to him as
Chairman of the Committee of the Independent Directors ($2,400) and as
Chairman of the Audit Committee ($750).
10
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Directors for the calendar year ended December 31, 1995 for services
to the 79 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Kolton
and Nugent, the 11 TCW/DW Funds that were in operation at December 31, 1995.
With respect to Messrs. Haire, Johnson, Kolton and Nugent, the TCW/DW Funds are
included solely because of a limited exchange privilege between those Funds and
five Dean Witter Money Market Funds. Mr. Schroeder was elected as a Trustee of
the TCW/DW Funds on April 20, 1995.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS TOTAL CASH
FOR SERVICE CHAIRMAN OF COMPENSATION
AS DIRECTOR OR COMMITTEES OF FOR SERVICES
TRUSTEE AND FOR SERVICE AS INDEPENDENT TO
COMMITTEE MEMBER TRUSTEE AND DIRECTORS/ 79 DEAN
OF 79 DEAN COMMITTEE MEMBER TRUSTEES AND WITTER
NAME OF INDEPENDENT WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
DIRECTOR FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- --------------------------- ---------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Michael Bozic.............. $126,050 -- -- $126,050
Edwin J. Garn.............. 136,450 -- -- 136,450
John R. Haire.............. 98,450 $82,038 $217,350(5) 397,838
Dr. Manuel H. Johnson...... 136,450 82,038 -- 218,488
Paul Kolton................ 136,450 54,788 36,900(6) 228,138
Michael E. Nugent.......... 124,200 75,038 -- 199,238
John L. Schroeder.......... 136,450 46,964 -- 183,414
</TABLE>
- ------------------------
(5) For the 79 Dean Witter Funds in operation at December 31, 1995.
(6) For the 11 TCW/DW Funds in operation at December 31, 1995.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Directors as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
FOREIGN SECURITIES
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 29, 1996 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 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
11
<PAGE>
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 29, 1996, 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 29,
1996 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 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
12
<PAGE>
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.
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.
13
<PAGE>
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
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
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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.
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.
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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 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
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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 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
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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 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
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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.
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.
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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.
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.
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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 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 29, 1996, the Fund did not purchase securities on a
when-issued, delayed delivery or forward commitment basis.
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<PAGE>
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 29, 1996, the
Fund did not purchase securities on a "when, as and if issued" basis. The Fund
may also sell securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of sale.
PRIVATE PLACEMENTS
The Fund may invest up to 5% of its total assets in securities which are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933, as amended, 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 29, 1996, the Fund did not purchase any restricted securities.
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.
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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.
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.
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<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
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 28, 1994, February
28, 1995 and February 29, 1996, the Fund paid a total of $439,781, $373,465 and
$270,398, 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 various factors may be considered, including the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held and the opinions of the persons responsible for
managing the portfolios of the Fund and other client accounts. In the case of
certain initial and secondary public offerings, the Investment Manager may
utilize a pro-rata allocation based on the size of the Dean Witter Funds
involved and the number of shares available from the public offering.
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 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 29, 1996, the Fund directed the payment of $165,793
in brokerage commissions in connection with transactions in the aggregate amount
of $27,798,999 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
24
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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 28, 1994, February 28, 1995 and February 29, 1996,
the Fund paid a total of $52,240, $84,230 and $88,566, 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 29, 1996, the brokerage commissions
paid to DWR represented approximately 32.75% 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 42.45% 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 29, 1996, 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, 1997. 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, 1995 and February 29, 1996, the Fund's portfolio turnover rates were 59% and
49%, respectively.
THE DISTRIBUTOR
- --------------------------------------------------------------------------------
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 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. At their meeting held on April 17, 1996, the Directors, including a
majority of the Independent Directors, approved the continuation of the
Distribution Agreement until April 30, 1997.
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<PAGE>
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 $143,000, $177,000 and $184,694 in contingent
deferred sales charges for the fiscal years ended February 28, 1994, February
28, 1995 and February 29, 1996, 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. At their meeting held on October 26, 1995, the Directors of the Fund,
including all of the Independent 12b-1 Directors, approved an amendment to the
Plan to permit payments to be made under the Plan with respect to certain
distribution expenses incurred in connection with the distribution of shares,
including personal services to shareholders with respect to holdings of such
shares, of an investment company whose assets are acquired by the Fund in a
tax-free reorganization.
The 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
26
<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 $1,369,150
to the Distributor, pursuant to the Plan, for the fiscal year ended February 29,
1996. This is an accrual at an annual rate of 1% of the average daily aggregate
gross sales of the Fund's 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 $1,369,150 accrued under the Plan for the fiscal
year ended February 29, 1996 to the Distributor and DWR. The Distributor and DWR
estimate that they have spent, pursuant to the Plan, $21,460,579 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) 12.38% ($2,657,640) --
advertising and promotional expenses; (ii) 1.46% ($312,369) -- printing of
prospectuses for distribution to other than current shareholders; and (iii)
86.16% ($18,490,570) -- other expenses, including the gross sales credit and the
carrying charge, of which 12.93% ($2,390,067) represents carrying charges,
35.13% ($6,496,553) represents commission credits to DWR branch offices for
payments of commissions to account executives and 51.94% ($9,603,950) 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 $5,194,326 as of February 29,
1996, which amount constitutes 3.40% of the Fund's net assets on such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all its expenses or any requirement that the Plan be continued
from year to year, this excess amount does not constitute a liability of the
Fund. Although there is no legal obligation for the Fund to pay expenses
incurred by the Distributor in excess of payments made to the Distributor under
the Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
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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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,
1997, 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 17, 1996.
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 (or, on days when the New York Stock Exchange closes prior
to 4 p.m., at such earlier time), on each day that the New York Stock Exchange
is open by taking the value of all assets of the Fund, subtracting its
liabilities, dividing by the number of shares outstanding and adjusting to the
nearest cent. The New York Stock Exchange currently observes the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
As stated in the Prospectus, short-term 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
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<PAGE>
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.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
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.
29
<PAGE>
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,
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 Intermediate Term U.S. Treasury Trust, Dean Witter Limited
Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter Balanced
Income Fund, Dean Witter Balanced Growth Fund, and
30
<PAGE>
for five Dean Witter Funds which are money market funds (the foregoing eleven
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 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
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<PAGE>
Fund will be considered Free Shares. If the exchanged amount exceeds the value
of such Free Shares, an exchange is made, on a block-by-block basis, of non-Free
Shares held for the longest period of time (except that if shares held for
identical periods of time but subject to different CDSC schedules are held in
the same Exchange Privilege account, the shares of that block that are subject
to a lower CDSC rate will be exchanged prior to the shares of that block that
are subject to a higher CDSC rate). Shares equal to any appreciation in the
value of non-Free Shares exchanged will be treated as Free Shares, and the
amount of the purchase payments for the non-Free Shares of the fund exchanged
into will be equal to the lesser of (a) the purchase payments for, or (b) the
current net asset value of, the exchanged non-Free Shares. If an exchange
between funds would result in exchange of only part of a particular block of
non-Free Shares, then shares equal to any appreciation in the value of the block
(up to the amount of the 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.
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
32
<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
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<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
34
<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.
35
<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.
36
<PAGE>
The average annual total returns of the Fund for the year ended February 29,
1996, the five years ended February 29, 1996, and for the ten years ended
February 29, 1996, were 19.32%, 8.59% and 11.03%, respectively.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types 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 29, 1996, for the five years ended February 29, 1996, and for the
ten years ended February 29, 1996 were 24.32%, 8.88% and 11.03%, 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 29, 1996 was
24.32%, the total return for the five years ended February 29, 1996 was 53.02%,
and the total return for the ten years ended February 29, 1996 was 184.79%.
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 $26,749, $133,745 and $267,490, respectively at
February 29, 1996.
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, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager, and 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, including
providing sub-account
37
<PAGE>
and recordkeeping services for certain retirement accounts; disbursing cash
dividends and reinvesting dividends; processing account registration changes;
handling purchase and redemption transactions; mailing prospectuses and reports;
mailing and tabulating proxies; processing share certificate transactions; and
maintaining shareholder records and lists. For these services, Dean Witter Trust
Company receives a per shareholder account fee from the Fund.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
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 for the fiscal year ended February 29,
1996 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 LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
38
<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 29, 1996, 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 29, 1996 by correspondence with the
custodian and brokers, and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
APRIL 12, 1996
- --------------------------------------------------------------------------------
1996 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended February 29, 1996, the Fund paid to its
shareholders $0.46 per share from long-term capital gains. For
such period, 86.38% of the income paid qualified for the dividends
received deduction available to corporations.
39
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (92.5%)
BASIC ENERGY (39.2%)
NATURAL GAS - DIVERSIFIED (2.8%)
30,000 Enron Corp.......................... $ 1,098,750
30,000 Sonat, Inc.......................... 1,005,000
25,000 Tenneco Inc......................... 1,396,875
17,000 Williams Companies, Inc............. 807,500
---------------
4,308,125
---------------
NATURAL GAS - EXPLORATION & PRODUCTION (5.1%)
30,000 Anardarko Petroleum Corp............ 1,635,000
55,000 Apache Corp......................... 1,430,000
50,000 Enron Oil & Gas Co.................. 1,250,000
65,000 Enserch Exploration, Inc.*.......... 617,500
20,000 Newfield Exploration Co.*........... 585,000
25,000 Triton Energy Corp. (Canada)*....... 1,240,625
40,000 Union Pacific Resources Group
Inc................................. 1,030,000
---------------
7,788,125
---------------
OIL INTEGRATED - DOMESTIC (7.7%)
30,000 Amerada Hess Corp................... 1,545,000
48,000 Amoco Corp.......................... 3,336,000
30,000 Kerr-McGee Corp..................... 1,788,750
35,000 Phillips Petroleum Co............... 1,225,000
40,000 Unocal Corp......................... 1,200,000
75,000 USX-Marathon Group.................. 1,387,500
60,000 Vintage Petroleum, Inc.............. 1,230,000
---------------
11,712,250
---------------
OIL INTEGRATED - INTERNATIONAL (19.4%)
25,000 British Petroleum Co. PLC (ADR)
(United Kingdom).................... 2,509,375
45,000 Chevron Corp........................ 2,503,125
35,000 Ente Nazionale Idrocarburi SpA (ADR)
Italy*.............................. 1,316,875
85,000 Exxon Corp.......................... 6,757,500
40,000 Imperial Oil Ltd. (F Shares)
(Canada)............................ 1,460,000
50,000 Mobil Corp.......................... 5,481,250
25,000 Royal Dutch Petroleum Co. (ADR)
(Netherlands)....................... 3,443,750
50,000 Texaco, Inc......................... 3,987,500
30,000 Total S.A. (ADR) (France)........... 986,250
60,000 Yacimentos Petroliferos Fiscales
S.A. (ADR) (Argentina).............. 1,162,500
---------------
29,608,125
---------------
OIL INTERNATIONAL - EXPLORATION & PRODUCTION (1.2%)
90,000 Union Texas Petroleum Holdings,
Inc................................. 1,777,500
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
OIL PRODUCTION - DOMESTIC (2.8%)
35,000 Louisiana Land &
Exploration Co...................... $ 1,461,250
40,000 Murphy Oil Corp..................... 1,670,000
30,000 Oryx Energy Co.*.................... 386,250
35,000 Parker & Parsley
Petroleum Co........................ 752,500
---------------
4,270,000
---------------
OIL REFINERIES (0.2%)
10,000 Repsol S.A. (ADR) (Spain)........... 362,500
---------------
TOTAL BASIC ENERGY.................. 59,826,625
---------------
ENERGY DEVELOPMENT & TECHNOLOGY (11.8%)
OIL DRILLING (2.7%)
20,000 Diamond Offshore
Drilling, Inc.*..................... 732,500
35,000 Ensco International Inc.*........... 844,375
25,000 Helmerich & Payne, Inc.............. 837,500
75,000 Rowan Companies, Inc.*.............. 815,625
20,000 Sonat Offshore Drilling, Inc........ 870,000
---------------
4,100,000
---------------
OIL EQUIPMENT & SERVICES (9.1%)
35,000 BJ Services Co.*.................... 966,875
30,000 Baker Hughes Inc.................... 791,250
25,000 Camco International, Inc............ 709,375
25,000 Coflexip S.A. (ADR) (France)........ 437,500
60,000 Core Laboratories NV
(Netherlands)*...................... 600,000
30,000 Dresser Industries, Inc............. 843,750
35,000 Falcon Drilling Company, Inc.*...... 704,375
25,000 Input/Output, Inc.*................. 743,750
35,000 McDermott International, Inc........ 673,750
35,000 Schlumberger Ltd. (Netherlands
Antilles)........................... 2,550,625
25,000 SEACOR Holdings, Inc.*.............. 831,250
25,000 Seitel, Inc.*....................... 646,875
60,000 Smith International, Inc.*.......... 1,222,500
30,000 Weatherford Enterra, Inc............ 918,750
23,000 Western Atlas Inc.*................. 1,210,375
---------------
13,851,000
---------------
TOTAL ENERGY DEVELOPMENT &
TECHNOLOGY.......................... 17,951,000
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
METALS & BASIC MATERIALS (41.5%)
ALUMINUM (2.8%)
25,000 Alumax Inc.*........................ $ 903,125
40,000 Aluminum Co. of America............. 2,270,000
20,000 Reynolds Metals Co.................. 1,032,500
---------------
4,205,625
---------------
BUILDING MATERIALS (0.8%)
40,000 Masco Corp.......................... 1,140,000
---------------
CHEMICALS - DIVERSIFIED (11.2%)
25,000 Air Products &
Chemicals, Inc...................... 1,331,250
35,000 Dow Chemical Co..................... 2,808,750
65,000 Du Pont (E.I.) de Nemours & Co.,
Inc................................. 4,972,500
25,000 Engelhard Corp...................... 509,375
30,000 First Mississippi Corp.............. 783,750
50,000 Georgia Gulf Corp................... 1,593,750
18,000 Grace (W.R.) & Co................... 1,242,000
22,000 Monsanto Co......................... 2,961,750
25,000 Praxair, Inc........................ 862,500
---------------
17,065,625
---------------
CHEMICALS - SPECIALTY (4.5%)
65,000 Agrium Inc. (Canada)................ 1,002,061
60,000 Calgon Carbon Corp.................. 675,000
40,000 Corning, Inc........................ 1,300,000
15,000 Cytec Industries Inc.*.............. 1,155,000
50,000 Ethyl Corp.......................... 537,500
25,000 IMC Global, Inc..................... 1,031,250
30,000 Morton International, Inc........... 1,136,250
---------------
6,837,061
---------------
COAL (0.6%)
60,000 Hanson PLC (ADR)
(United Kingdom).................... 885,000
---------------
COPPER (1.5%)
40,687 Freeport-McMoran Copper & Gold, Inc.
(Series A).......................... 1,301,984
15,000 Phelps Dodge Corp................... 916,875
---------------
2,218,859
---------------
GOLD MINING (5.9%)
60,000 Barrick Gold Corp. (Canada)......... 1,815,000
45,954 Newmont Mining Corp................. 2,613,634
25,000 Pegasus Gold, Inc.*................. 393,750
60,000 Placer Dome Inc. (Canada)........... 1,695,000
105,000 Santa Fe Pacific Gold Corp.......... 1,640,625
90,000 TVX Gold, Inc. (Canada)*............ 888,750
---------------
9,046,759
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
MACHINERY - CONSTRUCTION & MATERIALS (3.1%)
15,000 Caterpillar, Inc.................... $ 1,003,125
30,000 Deere & Co.......................... 1,173,750
25,000 Fluor Corp.......................... 1,678,125
40,000 Global Industrial
Technologies, Inc.*................. 935,000
---------------
4,790,000
---------------
METALS & MINING (1.2%)
25,000 Inco Ltd. (Canada).................. 796,875
50,000 Stillwater Mining Co.*.............. 1,075,000
---------------
1,871,875
---------------
PAPER & FOREST PRODUCTS (3.8%)
40,000 International Paper Co.............. 1,425,000
50,000 Jefferson Smurfit Corp.*............ 568,750
40,000 Longview Fibre Co................... 650,000
50,000 Louisiana-Pacific Corp.............. 1,156,250
25,000 Temple-Inland Inc................... 1,006,250
25,000 Weyerhaeuser Co..................... 1,059,375
---------------
5,865,625
---------------
RAILROADS (3.6%)
20,000 Burlington Northern Sante Fe
Corp................................ 1,600,000
10,000 Conrail, Inc........................ 721,250
25,000 CSX Corp............................ 1,121,875
30,000 Union Pacific Corp.................. 1,980,000
---------------
5,423,125
---------------
STEEL (0.7%)
10,000 Nucor Corp.......................... 538,750
45,000 Oregon Steel Mills, Inc............. 590,625
---------------
1,129,375
---------------
WASTE DISPOSAL (1.8%)
80,000 Allwaste, Inc.*..................... 350,000
25,000 Browning-Ferris
Industries, Inc..................... 740,625
60,000 WMX Technologies, Inc............... 1,710,000
---------------
2,800,625
---------------
TOTAL METALS & BASIC MATERIALS...... 63,279,554
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $114,540,877)...... 141,057,179
---------------
CONVERTIBLE PREFERRED STOCK (0.6%)
STEEL
20,000 USX Corp. $6.50
(Identified Cost $1,004,910)........ 975,000
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (2.2%)
REPURCHASE AGREEMENT
$ 3,418 The Bank of New York 5.75% due
03/01/96 (dated 02/29/96; proceeds
$3,418,142; collateralized by
$647,042 Federal Home Loan Mortgage
Corp. 9.50% due 06/01/25 valued at
$678,300, and $2,951,567 Federal
National Mortgage Assoc. 6.36% due
11/01/22 valued at $2,807,648)
(Identified Cost $3,417,596)........ $ 3,417,596
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST $118,963,383)
(A)........................... 95.3% 145,449,775
OTHER ASSETS IN EXCESS OF
LIABILITIES................... 4.7 7,211,667
----- ------------
NET ASSETS.................... 100.0% $152,661,442
----- ------------
----- ------------
<FN>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates identified
cost.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $118,963,383)............................ $145,449,775
Receivable for:
Capital stock sold...................................... 6,752,653
Investments sold........................................ 2,471,708
Dividends............................................... 433,387
Foreign withholding taxes reclaimed..................... 22,945
Prepaid expenses............................................ 29,138
------------
TOTAL ASSETS........................................... 155,159,606
------------
LIABILITIES:
Payable for:
Investments purchased................................... 2,095,261
Plan of distribution fee................................ 116,437
Capital stock repurchased............................... 96,912
Investment management fee............................... 74,960
Accrued expenses............................................ 114,594
------------
TOTAL LIABILITIES...................................... 2,498,164
------------
NET ASSETS:
Paid-in-capital............................................. 122,965,473
Net unrealized appreciation................................. 26,486,392
Accumulated undistributed net investment income............. 235,202
Accumulated undistributed net realized gain................. 2,974,375
------------
NET ASSETS............................................. $152,661,442
------------
------------
NET ASSET VALUE PER SHARE,
12,017,301 SHARES OUTSTANDING (500,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$12.70
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 29, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $60,390 foreign withholding tax).......... $ 3,172,448
Interest.................................................... 254,278
-----------
TOTAL INCOME........................................... 3,426,726
-----------
EXPENSES
Plan of distribution fee.................................... 1,369,150
Investment management fee................................... 883,804
Transfer agent fees and expenses............................ 222,760
Shareholder reports and notices............................. 67,979
Professional fees........................................... 43,463
Registration fees........................................... 38,845
Custodian fees.............................................. 28,491
Directors' fees and expenses................................ 22,030
Other....................................................... 6,530
-----------
TOTAL EXPENSES......................................... 2,683,052
-----------
NET INVESTMENT INCOME.................................. 743,674
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 9,657,602
Net change in unrealized appreciation....................... 20,867,725
-----------
NET GAIN............................................... 30,525,327
-----------
NET INCREASE................................................ $31,269,001
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 29, 1996 FEBRUARY 28, 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 743,674 $ 1,091,182
Net realized gain........................................... 9,657,602 4,977,602
Net change in unrealized appreciation....................... 20,867,725 (7,920,860)
----------------- -----------------
NET INCREASE (DECREASE)................................ 31,269,001 (1,852,076)
----------------- -----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (476,340) (1,433,023)
Net realized gain........................................... (7,165,637) (9,652,919)
----------------- -----------------
TOTAL.................................................. (7,641,977) (11,085,942)
----------------- -----------------
Net increase (decrease) from capital stock transactions..... (3,777,196) 6,290,710
----------------- -----------------
TOTAL INCREASE (DECREASE).............................. 19,849,828 (6,647,308)
NET ASSETS:
Beginning of period......................................... 132,811,614 139,458,922
----------------- -----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$235,202 AND DISTRIBUTIONS IN EXCESS OF NET INVESTMENT
INCOME OF $32,132, RESPECTIVELY)........................ $152,661,442 $132,811,614
----------------- -----------------
----------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 1996
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. The Fund's investment
objective is capital growth. The Fund invests primarily in common stock of
companies in the natural resources and related areas. The Fund was incorporated
in Maryland on December 22, 1980.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American Stock Exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued; if there were no sales that
day, the security is valued at the latest bid price; (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation; (3)
when market quotations are not readily available, including circumstances under
which it is determined by the Investment Manager that sale or bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the 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); and (4) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
46
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 1996, CONTINUED
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays a management fee, accrued daily
and payable monthly, by applying the following annual rates to the net assets of
the Fund determined at the close of each business day: 0.625% to the portion of
daily net assets not exceeding $250 million and 0.50% to the portion of daily
net assets exceeding $250 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued
47
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 1996, CONTINUED
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 reinvestment of
dividend or capital gain distributions) less the average daily aggregate net
asset value of the Fund's shares redeemed since the implementation of the Plan
upon which a contingent deferred sales charge has been imposed or upon which
such charge has been waived; or (b) the Fund's average daily net assets
attributable to shares issued, net of related shares redeemed, since the
implementation of the Plan. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services provided and the expenses borne by
it and others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to, and
expenses of, the account executives of Dean Witter Reynolds Inc. ("DWR"), an
affiliate of the Investment Manager and Distributor, and other employees or
selected broker-dealers who engage in or support distribution of the Fund's
shares or who service shareholder accounts, including overhead and telephone
expenses, printing and distribution of prospectuses and reports used in
connection with the offering of the Fund's shares to other than current
shareholders and preparation, printing and distribution of sales literature and
advertising materials. In addition, the Distributor may be compensated under the
Plan for its opportunity costs in advancing such amounts, which compensation
would be in the form of a carrying charge on any unreimbursed expenses incurred
by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the year ended February 29, 1996,
it received approximately $185,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended February 29, 1996 aggregated
$66,474,179 and $87,368,509, respectively.
For the year ended February 29, 1996, the Fund incurred brokerage commissions of
$88,566 with DWR for portfolio transactions executed on behalf of the Fund.
48
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 1996, CONTINUED
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At February 29, 1996, the Fund had
transfer agent fees and expenses payable of approximately $18,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors/Trustees for at least five years at the time of retirement. Benefits
under this plan are based on years of service and compensation during the last
five years of service. Aggregate pension costs for the year ended February 29,
1996 included in Directors' fees and expenses in the Statement of Operations
amounted to $5,556. At February 29, 1996, the Fund had an accrued pension
liability of $51,995 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 29, 1996 FEBRUARY 28, 1995
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 17,740,630 $ 213,549,836 8,003,288 $ 91,308,700
Reinvestment of dividends and distributions...................... 587,535 7,130,881 943,312 10,339,857
----------- -------------- ----------- ------------
18,328,165 220,680,717 8,946,600 101,648,557
Repurchased...................................................... (18,637,754) (224,457,913) (8,419,961) (95,357,847)
----------- -------------- ----------- ------------
Net increase (decrease).......................................... (309,589) $ (3,777,196) 526,639 $ 6,290,710
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
49
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of capital stock outstanding
throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FEBRUARY 28
----------------------------------------------------------------------------------------
1996* 1995 1994 1993 1992* 1991 1990 1989 1988* 1987
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 10.77 $ 11.82 $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93 $ 9.46 $ 9.10 $ 7.43
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment
income.......... 0.06 0.09 0.09 0.16 0.20 0.25 0.30 0.23 0.20 0.14
Net realized and
unrealized gain
(loss).......... 2.53 (0.24) 1.25 1.18 (0.44) 0.02 1.80 0.72 0.44 1.75
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from
investment
operations...... 2.59 (0.15) 1.34 1.34 (0.24) 0.27 2.10 0.95 0.64 1.89
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less dividends
and
distributions
from:
Net investment
income........ (0.04) (0.12) (0.09) (0.18) (0.20) (0.28) (0.32) (0.21) (0.28) (0.22)
Net realized
gain.......... (0.62) (0.78) (0.79) -- (0.39) (0.29) (0.38) (0.27) -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total dividends
and
distributions... (0.66) (0.90) (0.88) (0.18) (0.59) (0.57) (0.70) (0.48) (0.28) (0.22)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value,
end of period... $ 12.70 $ 10.77 $ 11.82 $ 11.36 $ 10.20 $ 11.03 $ 11.33 $ 9.93 $ 9.46 $ 9.10
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL INVESTMENT
RETURN+.......... 24.32% (1.26)% 12.16% 13.31% (1.91)% 2.87% 21.11% 10.29% 7.32% 26.21%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 1.90% 1.90% 1.91% 1.96% 1.93% 1.80% 1.81% 1.92% 1.81% 1.74%
Net investment
income.......... 0.52% 0.77% 0.73% 1.46% 1.67% 2.28% 2.57% 2.09% 2.14% 2.61%
SUPPLEMENTAL DATA:
Net assets, end
of period, in
thousands....... $152,661 $132,812 $139,459 $118,496 $113,145 $150,636 $154,741 $136,911 $171,725 $82,985
Portfolio
turnover rate... 49% 59% 69% 52% 31% 29% 22% 7% 26% 14%
<FN>
- ---------------------
* Year ended February 29.
+ Does not reflect the deduction of sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
50
<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
the last day of February 1987, 1988, 1989, 1990,
1991, 1992, 1993, 1994, 1995 and 1996. . . . . . . . . . . . 04
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
---
Portfolio of Investments at February 29, 1996. . . . . . . . 40
Statement of assets and liabilities at
February 29, 1996. . . . . . . . . . . . . . . . . . . . . . 43
Statement of operations for the year
ended February 29, 1996. . . . . . . . . . . . . . . . . . . 44
Statement of changes in net assets for the years
ended February 28, 1995 and February 29, 1996. . . . . . . . 45
Notes to Financial Statements. . . . . . . . . . . . . . . . 46
Financial highlights for the fiscal years ended
the last day of February 1987, 1988, 1989, 1990,
1991, 1992, 1993, 1994, 1995 and 1996. . . . . . . . . . . . 50
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
1. (a) -- Articles of Incorporation of the Registrant*
(b) -- Amendment to the Articles of Incorporation*
6. -- Form of Selected Dealer Agreement
1
<PAGE>
8. (a) -- Form of Custody Agreement between Registrant and
The Bank of New York.*
(b) -- Form of Amendment to the Custody Agreement between
Registrant and The Bank of New York.
9. -- Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services Company
Inc.
11. -- Consent of Independent Accountants
15. -- Amended and Restated Plan of Distribution pursuant
to Rule 12b-1
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
- ----------------------
* Previously filed; re-filed via EDGAR with this Amendment to the Registration
Statement. All other exhibits previously filed and incorporated by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at March 31, 1996
-------------- ------------------------
Shares of Common Stock 16,780
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 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
2
<PAGE>
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment adviser. The following information is given regarding
officers of Dean Witter InterCapital Inc. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. The principal address of the Dean
Witter Funds is Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(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
3
<PAGE>
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
OPEN-END INVESTMENT COMPANIES:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Premier Income Trust
(32) Dean Witter Short-Term U.S. Treasury Trust
(33) Dean Witter Diversified Income Trust
(34) Dean Witter U.S. Government Money Market Trust
(35) Dean Witter Global Dividend Growth Securities
(36) Active Assets California Tax-Free Trust
(37) Dean Witter Natural Resource Development Securities Inc.
(38) Active Assets Government Securities Trust
(39) Active Assets Money Trust
(40) Active Assets Tax-Free Trust
(41) Dean Witter Limited Term Municipal Trust
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
4
<PAGE>
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(56) Dean Witter Japan Fund
The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee, President
and Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co. ("DWDC"); Director and/or officer
of various DWDC subsidiaries.
5
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds; Member (since
January, 1993) and Chairman (since January,
1995) of the Board of Directors of NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
David A. Hughey Executive Vice President and Chief Administrative
Executive Vice Officer of DWSC, Distributors and DWTC; Director
President and Chief of DWTC; Vice President of the Dean Witter Funds
Administrative Officer and the TCW/DW Funds.
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Joseph J. McAlinden
Executive Vice Vice President of the Dean Witter Funds.
President
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone
Senior Vice President Senior Vice President of DWSC, Distributors and
DWTC; Director of DWTC; Vice President of the Dean
Witter Funds and the TCW/DW Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira Ross
Senior Vice President Vice President of various Dean Witter Funds.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Kirk Balzer
Vice President Vice President of Dean Witter Mid-Cap Growth Fund.
Douglas Brown
Vice President
Philip Casparius
Vice President
Thomas Chronert
Vice President
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Peter W. Gurman
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of various Dean Witter Funds
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
Stanley Kapica
Vice President
Michael Knox Vice President of Dean Witter Convertible
Vice President Securities Trust.
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Hugh Rose
Vice President
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Marianne Zalys
Vice President
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
11
<PAGE>
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan 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 Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
- ---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
12
<PAGE>
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
stockholders, 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 22nd day of April, 1996.
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. 18 has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Director and Chairman
By /s/ Charles A. Fiumefreddo 04/22/96
---------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 04/22/96
---------------------------
Thomas F. Caloia
(3) Majority of the Directors
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 04/22/96
---------------------------
Sheldon Curtis
Attorney-in-Fact
Michael Bozic Paul Kolton
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Manuel H. Johnson
By /s/ Stuart Strauss 04/22/96
---------------------------
Stuart Strauss
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
1. (a) -- Articles of Incorporation of the Registrant*
(b) -- Amendment to the Articles of Incorporation*
6. -- Form of Selected Dealer Agreement
8. (a) -- Form of Custody Agreement between Registrant and
The Bank of New York.*
(b) -- Form of Amendment to the Custody Agreement between
Registrant and The Bank of New York.
9. -- Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services
Company Inc.
11. -- Consent of Independent Accountants
15. -- Amended and Restated Plan of Distribution pursuant
to Rule 12b-1.
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
- ----------------------
* Previously filed; re-filed via EDGAR with this Amendment to the Registration
Statement. All other exhibits previously filed and incorporated by reference.
<PAGE>
ARTICLES OF INCORPORATION
OF
INTERCAPITAL NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
---------
ARTICLE I
The undersigned, Dennis H. Greenwald, whose post office address is Five
World Trade Center, New York, New York 10048, and who is of full legal age, does
hereby declare that he is an incorporator intending to form a corporation under
and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations.
ARTICLE II
The name of the Corporation is InterCapital Natural Resource Development
Securities Inc.
ARTICLE III
PURPOSES AND POWERS
The purposes for which the Corporation is formed, and its objects, rights,
powers and privileges are:
(1) To conduct and carry on the business of an investment company of the
open-end management type;
(2) To purchase, sell and generally deal in all forms of securities,
including, but not by way of limitation, stocks (preferred and common), notes,
bonds, debentures, scrip, warrants, participation certificates, mortgages,
commercial paper, choses in action, evidences of indebtedness and other
obligations of every kind and description, in connection therewith to hold part
or all of its assets in cash or cash equivalents or money market instruments;
(3) To issue and sell shares of its own capital stock in such amount and
on such terms and conditions, for such purposes and for such amount or kind of
consideration now or hereafter permitted by the General Laws of the State of
Maryland by these Articles of Incorporation, as its Board of Directors may
determine;
(4) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue, retire or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by the laws of Maryland and the
Articles of Incorporation and by-laws of the Corporation;
(5) To borrow or raise money for any purpose of the Corporation and from
time to time draw, make, accept, endorse, execute and issue promissory notes,
drafts, bills of exchange, warrants, bonds, debentures and other negotiable and
nonnegotiable instruments and evidences of indebtedness, and to pledge,
hypothecate and borrow upon the credit of the assets of the Corporation;
(6) To take such action as shall be desirable and necessary to cause its
shares to be licensed or registered for sale under the laws of the United States
and in any state, county, city or other municipality of the United States, the
territories thereof, the District of Columbia or in any foreign country and in
any town, city or subdivision thereof;
(7) To make contracts and generally to do any and all acts and things
necessary or desirable in furtherance of any of the corporate purposes or
designed to protect, preserve and/or enhance the value of the corporate assets,
or to the extent permitted to business corporations authorized under the laws of
the State of Maryland, as now or may in the future be authorized by said laws;
(8) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes, objects or powers hereinbefore set forth
to the same extent and as fully as a natural person might or could do, in any
part of the world and either alone or in association or partnership with other
corporations, firms or individuals;
<PAGE>
(9) To have all the rights, powers and privileges now or hereafter
conferred by the laws of the State of Maryland upon a corporation organized
under the General Laws of the State of Maryland, or under any act amendatory
thereof, supplemental thereto or in substitution therefor;
(10) To do any and all such further acts or things and to exercise any and
all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
it is hereby expressly provided that the enumeration herein of any specific
objects and powers shall not be held to limit or restrict in any way the
general powers of the Corporation, nor shall such objects and powers, except
when otherwise expressly provided, be in any way limited or restricted by
reference to, or inference from the terms of any other clause of the Articles
of Incorporation of the Corporation but the objects and powers specified in
each of the foregoing clauses of this Article shall be regarded as
independent objects and powers.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post-office address of the principal office of the Corporation in the
State of Maryland is c/o The Prentice-Hall Corporation System, Maryland, 929
North Howard Street, Baltimore, Maryland 21201. The resident agent of the
Corporation in the State of Maryland is The Prentice-Hall Corporation System,
Maryland, a corporation of the State of Maryland, whose post-office address is
929 North Howard Street, Baltimore, Maryland 21201.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of stock which the Corporation shall
have authority to issue is Five Hundred Million (500,000,000) shares, all of
one class to be designated "Common Stock" of the par value of one cent ($.01)
each, and of the aggregate par value of Five Million dollars ($5,000,000).
(2) The Corporation may issue, sell, redeem, repurchase and otherwise deal
in and with shares of its stock in fractional denominations and such fractional
denominations shall, for all purposes, be shares of common stock having
proportionately to the respective fractions represented thereby all the rights
of whole shares, including without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the Corporation; provided that the issue of shares in fractional
denominations shall be limited to such transactions and be made upon such terms
as may be fixed by or under authority of the by-laws.
ARTICLE VI
PREEMPTIVE RIGHTS
No stockholder of the Corporation of any class, whether now or hereafter
authorized, shall have any preemptive or preferential or other right of purchase
of or subscription to any shares of any class of stock, or securities
convertible into, exchangeable for or evidencing the right to purchase stock of
any class whatsoever, whether or not the stock in question be of the same class
as may be held by such stockholders, and whether now or hereafter authorized and
whether issued for cash, property, services or otherwise, other than such, if
any, as the Board of Directors in its discretion may from time to time fix.
ARTICLE VII
NUMBER AND POWERS OF DIRECTORS
(1) The number of directors of the Corporation shall be three (3) or such
other number not less than three (3) as may from time to time be specified in or
fixed in the manner prescribed by the by-laws of the Corporation. The by-laws
of the Corporation shall also specify the number of directors which shall be
2
<PAGE>
necessary to and shall constitute a quorum; provided, however that in no case
shall a quorum be less than one-third (1/3) of the total number of directors or
less than two (2) directors. Unless otherwise provided by the by-laws of the
corporation, directors need not be stockholders thereof.
(2) The names of the directors who shall act until the first annual
meeting or until their successors are duly chosen and qualify are:
CHARLES A. FIUMEFREDDO
DENNIS H. GREENWALD
ANDREW J. MELTON, JR.
(3) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether now
or hereafter authorized, for such consideration as the Board of Directors may
deem advisable, subject to such limitations as may be set forth in these
Articles of Incorporation or in the by-laws of the Corporation or in the General
Laws of the State of Maryland.
(4) Each Director and each officer of the Corporation shall be indemnified
by the Corporation to the full extent permitted by the General Laws of the State
of Maryland and the by-laws of the Corporation.
(5) The Board of Directors of the Corporation may make, alter or repeal
from time to time any of the by-laws of the Corporation except any particular
by-law which is specified as not subject to alteration or repeal by the Board of
Directors.
ARTICLE VIII
STOCKHOLDER VOTE
Notwithstanding any provisions of law requiring a greater proportion than a
majority of the votes of all classes or of any class of stock entitled to be
cast, to take or authorize any action, the Corporation may take or authorize any
such action upon the concurrence of a majority of the aggregate number of the
votes entitled to be cast thereon.
ARTICLE IX
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
ARTICLE X
AMENDMENT
The Corporation reserves the right from time to time to make any amendment
of its Articles of Incorporation now or hereafter authorized by law, including
any amendment which alters the contract rights, as expressly set forth in its
Articles of Incorporation, of any outstanding stock.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation on this
19th day of December, 1980.
/S/ DENNIS H. GREENWALD
-----------------------------------
DENNIS H. GREENWALD
WITNESS:
/S/ ROSALIE SHARIN
- ---------------------------
ROSALIE SHARIN
3
<PAGE>
State of New York
ss.:
County of New York
I hereby certify that on December 19, 1980, before me, the subscriber, a
notary public of the State of New York, in and for the County of New York,
personally appeared Dennis H. Greenwald, who acknowledged the foregoing Articles
of Incorporation to be his act.
WITNESS my hand and notarial seal the day and year last above written.
/S/ BARBARA COFFEY
-----------------------------------
NOTARY PUBLIC
4
<PAGE>
INTERCAPITAL NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
*************************
INTERCAPITAL NATURAL RESOURCE DEVELOPMENT SECURITIES INC., a Maryland
Corporation having its principal office at 929 North Howard Street. Baltimore,
Maryland 21201, c/o The Prentice-Hall Corporation System, Maryland (hereinafter
called the Corporation), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by striking
out Article SECOND of the Articles of Incorporation and inserting in lieu
thereof the following:
"SECOND: The name of the Corporation is DEAN WITTER NATURAL
RESOURCE DEVELOPMENT SECURITIES INC."
SECOND: The Board of Directors of the Corporation, at a meeting duly
convened and held on January 18, 1983, adopted a resolution in which was set
forth the foregoing amendment to the charter, declaring that the said amendment
of the charter was advisable and directing that it be submitted for action
thereon by the stockholders of the Corporation at a special meeting to be held
on March 16, 1983.
THIRD: Notice of said amendment of the charter and stating that a
purpose of the meeting of the stockholders would be to take action thereon, was
given, as required by law, to all stockholders entitled to vote thereon. The
amendment of the charter of the Corporation as hereinabove set forth was
approved by the stockholders of the Corporation at said meeting by the
affirmative vote of a majority of all the votes entitled to be cast thereon.
Such a majority vote was sufficient to authorize said amendment pursuant to
Article EIGHTH of the Charter of the Corporation which authorizes the
Corporation to
<PAGE>
take any action upon the concurrence of a majority of the aggregate number of
the votes entitled to be cast thereon, notwithstanding any provision of Article
23 of the General Corporation Law to the contrary.
IN WITNESS WHEREOF, INTERCAPITAL NATURAL RESOURCE DEVELOPMENT
SECURITIES INC. has caused these presents to be signed in its name and on its
behalf by its President and its corporate seal to be hereunto affixed and
attested by its Secretary on March 13, 1983.
INTERCAPITAL NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
By /s/ Charles A. Fiumefreddo
-------------------------------------------
Charles A. Fiumefreddo, President
(CORPORATE
SEAL)
ATTEST:
/s/ Sheldon Curtis
- ------------------------------
Sheldon Curtis, Secretary
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
I HEREBY CERTIFY that on March 18, 1983, before me the subscriber, a
notary public of the State of New York in and for the County of New York,
personally appeared Charles A. Fiumefreddo, President of InterCapital Natural
Resource Development Securities Inc., a Maryland Corporation, and in the name
and on behalf of said corporation acknowledged the foregoing Articles of
Amendment to be the corporate act of said corporation and further made oath in
due form of law that the matters and facts set forth in said Articles of
Amendment with respect to the approval thereof are true to the best of his
knowledge, information and belief.
WITNESS my hand and notarial seal, the day and year last above
written.
/s/ Mary Early-Brosnan
----------------------
Notary Public
(NOTARIAL
SEAL)
<PAGE>
CONSENT TO USE OF NAME
InterCapital Liquid Asset Fund Inc., InterCapital High Yield
Securities Inc., InterCapital Tax-Exempt Securities Inc., InterCapital Industry-
Valued Securities Inc., InterCapital Tax-Free Daily Income Fund Inc., and
InterCapital Dividend Growth Securities Inc., all of which are corporations
organized under the laws of the State of Maryland, and which are filing herewith
Articles of Amendment to their respective Articles of Incorporation to change
the names of said corporations to Dean Witter/Sears Liquid Asset Fund Inc., Dean
Witter High Yield Securities Inc., Dean Witter Tax-Exempt Securities Inc., Dean
Witter Industry-Valued Securities Inc., Dean Witter/Sears Tax-Free Daily Income
Fund Inc., and Dean Witter Dividend Growth Securities Inc., respectively, each
hereby consents to the simultaneous change of name by InterCapital Natural
Resource Development Securities Inc., another corporation organized under the
laws of the State of Maryland, to Dean Witter Natural Resource Development
Securities Inc.
IN WITNESS WHEREOF, each of the said InterCapital Liquid Asset Fund
Inc., InterCapital High Yield Securities Inc., InterCapital Tax-Exempt
Securities Inc., InterCapital Industry-Valued Securities Inc., InterCapital Tax-
Free Daily Income Fund Inc., and InterCapital Dividend Growth Securities Inc.,
has caused this consent to be executed by its President and attested under its
corporate seal by its Secretary, all on this 18th day of March, 1983.
INTERCAPITAL LIQUID ASSET FUND INC.
By /s/ Charles A. Fiumefreddo
-------------------------------------------
Charles A. Fiumefreddo, President
(CORPORATE
SEAL)
ATTEST:
/s/ Sheldon Curtis
- ------------------------------
Sheldon Curtis, Secretary
<PAGE>
INTERCAPITAL HIGH YIELD SECURITIES INC.
By /s/ Charles A. Fiumefreddo
-------------------------------------------
Charles A. Fiumefreddo, President
(CORPORATE
SEAL)
ATTEST:
/s/ Sheldon Curtis
- ------------------------------
Sheldon Curtis, Secretary
INTERCAPITAL TAX-EXEMPT SECURITIES INC.
By /s/ Charles A. Fiumefreddo
-------------------------------------------
Charles A. Fiumefreddo, President
(CORPORATE
SEAL)
ATTEST:
/s/ Sheldon Curtis
- ------------------------------
Sheldon Curtis, Secretary
INTERCAPITAL INDUSTRY-VALUED SECURITIES INC.
By /s/ Charles A. Fiumefreddo
-------------------------------------------
Charles A. Fiumefreddo, President
(CORPORATE
SEAL)
ATTEST:
/s/ Sheldon Curtis
- ------------------------------
Sheldon Curtis, Secretary
<PAGE>
INTERCAPITAL TAX-EXEMPT DAILY INCOME FUND INC.
By /s/ Charles A. Fiumefreddo
-------------------------------------------
Charles A. Fiumefreddo, President
(CORPORATE
SEAL)
ATTEST:
/s/ Sheldon Curtis
- ------------------------------
Sheldon Curtis, Secretary
INTERCAPITAL DIVIDEND GROWTH SECURITIES INC.
By /s/ Charles A. Fiumefreddo
-------------------------------------------
Charles A. Fiumefreddo, President
(CORPORATE
SEAL)
ATTEST:
/s/ Sheldon Curtis
- ------------------------------
Sheldon Curtis, Secretary
<PAGE>
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
SELECTED DEALERS AGREEMENT
Gentlemen:
DW 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 you, as
a Selected Dealer, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act as dealer for your
own account, and in no transaction shall you have any authority to act as agent
for the Fund, for us or for any other Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order, as set forth in the
current Prospectus. The procedure relating to the handling of orders shall be
subject to instructions which we or the Fund shall forward from time to time to
you. All orders are subject to acceptance or rejection by the Distributor or
the Fund in the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable net asset values and
subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares except
under circumstances that will result in compliance with the applicable Federal
and state securities laws and that in connection with sales and offers to sell
Shares you will furnish to each person to whom any such sale or offer is made a
copy of the Prospectus (as then amended or supplemented) and will not furnish to
any person any information relating to the Shares, which is inconsistent in any
respect with the information contained in the Prospectus (as then amended or
supplemented) or cause any advertisement to be published by radio or television
or in any newspaper or posted in any public place or use any sales promotional
material without our consent and the consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund
and personal services to Fund shareholders by paying you a sales charge and/or
other commissions, which may be in the form of a gross sales credit and/or an
annual residual commission and/or service fee, under the terms and in the
percentage amounts as may be in effect from time to time by the Distributor.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding; e.g., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
6. If any Shares sold to you under the terms of this Agreement are
repurchased by us for the account of the Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and refund
to us, any commission received by you with respect to such Shares.
7. No person is authorized to make any representations concerning the
Shares or the Fund except those contained in the current Prospectus and in such
printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus. In purchasing Shares through us you
1
<PAGE>
shall rely solely on the representations contained in the Prospectus and
supplemental information above mentioned. Any printed information which we
furnish you other than the Prospectus and the Fund's periodic reports and proxy
solicitation material are our sole responsibility and not the responsibility of
the Fund, and you agree that the Fund shall have no liability or responsibility
to you in these respects unless expressly assumed in connection therewith.
8. You agree to deliver to each of the purchasers making purchases
from you a copy of the then current Prospectus at or prior to the time of
offering or sale and you agree thereafter to deliver to such purchasers
copies of the annual and interim reports and proxy solicitation materials of
the Fund. You further agree to endeavor to obtain proxies from such
purchasers. Additional copies of the Prospectus, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
9. You are hereby authorized (i) to place orders directly with the Fund
or its agent for shares of the Fund to be sold by us to you subject to the
applicable terms and conditions governing the placement of orders for the
purchase of Fund shares, as set forth in the Distribution Agreement, and (ii) to
tender shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in the Distribution Agreement.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Shares entirely. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Fund shares. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us herein. Nothing
contained in this paragraph is intended to operate as, and the provisions of
this paragraph shall not in any way whatsoever constitute, a waiver by you of
compliance with any provision of the Securities Act of 1933, as amended, or of
the rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. All communications to us should be sent to the address shown below.
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
15. This Agreement shall become effective as of the date of your
acceptance hereof, provided that you return to us promptly a signed and dated
copy.
DW DISTRIBUTORS INC.
By
--------------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
DW Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: DEAN WITTER REYNOLDS INC.
-------------------------
By:
---------------------------------
Address: 2 WTC
----------------------------
New York, New York 10048
- ------------------------------------
Date: January 4, 1993
-------------------------------
2
<PAGE>
CUSTODY AGREEMENT
Agreement made as of this 20th day of September, 1991, between DEAN
WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC., a corporation organized
and existing under the laws of the State of Maryland, having its principal
office and place of business at 2 World Trade Center, New York, New York
10048 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal office
and place of business at 48 Wall Street, New York, New York 10286
(hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, shall
have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices and
Certifications described in the Exhibits delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether or not such
person is an Officer or employee of the Fund, duly authorized by the Board of
Directors of the Fund to give Oral Instructions and Written Instructions on
behalf of the Fund and listed in the Certificate annexed hereto as Appendix A
or such other Certificate as may be received by the Custodian from time to
time, provided that each person who is designated in any such Certificate as
an "Officer of DWTC" shall be an Authorized Person only for purposes of
Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
<PAGE>
4. "Call Option" shall mean an exchange traded option with respect to
Securities other than Index, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received (irrespective of constructive receipt) by
the Custodian and signed on behalf of the Fund by any two Officers. The term
Certificate shall also include instructions by the Fund to the Custodian
communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
10. "Financial Futures Contract" shall mean the firm commitment to buy or
sell financial instruments on a U.S. commodities exchange or board of trade at a
specified future time at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures Contract and/or
Index Futures Contracts.
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<PAGE>
12. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
13. "Investment Company Act of 1940" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
14. "Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
index at the close of the last business day of the contract and the price at
which the futures contract is originally struck.
15. "Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or a Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's effecting an
appropriate entry in its books and records.
17. "Money Market Security" shall mean all instruments and obligations
commonly known as a money market instruments, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale, including, without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest and/or
principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to Securities and bank time deposits.
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<PAGE>
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934,
its successor or successors, and its nominee or nominees.
19. "Officers" shall mean the President, any Vice President, the
Secretary, the Clerk, the Treasurer, the Controller, any Assistant Secretary,
any Assistant Clerk, any Assistant Treasurer, and any other person or persons,
whether or not any such other person is an officer or employee of the Fund, but
in each case only if duly authorized by the Board of Trustees of the Fund to
execute any Certificate, instruction, notice or other instrument on behalf of
the Fund and listed in the Certificate annexed hereto as Appendix B or such
other Certificate as may be received by the Custodian from time to time;
provided that each person who is designated in any such Certificate as holding
the position of "Officer of DWTC" shall be an Officer only for purposes of
Articles XII and XIII hereof.
20. "Option" shall mean a Call Option, Covered Call Option, Index Option
and/or a Put Option.
21. "Oral Instructions" shall mean verbal instructions actually received
(irrespective of constructive receipt) by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an Authorized
Person.
22. "Put Option" shall mean an exchange traded option with respect to
instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the writer
thereof for the exercise price.
23. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
24. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Index Options, Index Futures
Contracts, Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, over the
counter options on Securities, common stocks and other securities having
characteristics similar to common stocks, preferred stocks, debt obligations
issued by state or municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds, industrial bonds
and industrial development bonds), bonds,
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<PAGE>
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase, sell or subscribe for the same, or evidencing or representing any
other rights or interest therein, or rights to any property or assets.
25. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
26. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund, except that if the Fund does not have more than one portfolio, "Series"
shall mean the Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only one portfolio.
27. "Shares" shall mean the shares of beneficial interest of the Fund and
its Series.
28. "Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each use of the
Terminal Link the use of an authorization code provided by the Custodian and at
least two access codes established by the Fund, provided, that the Fund shall
have delivered to the Custodian a Certificate substantially in the form of
Appendix C.
29. "Transfer Agent" shall mean Dean Witter Trust Company, a New Jersey
limited purpose trust company, its successors and assigns.
30. "Transfer Agent Account" shall mean any account in the name of the
Transfer Agent maintained with The Bank of New York pursuant to a Cash
Management and Related Services Agreement between The Bank of New York and the
Transfer Agent.
31. "Written Instructions" shall mean written communications actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an
Authorized Person by telex or any other such system whereby the receiver of such
communications is able to verify by codes or otherwise with a reasonable degree
of certainty the identity of the sender of such communication.
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<PAGE>
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated, and the Custodian shall not
be responsible for any Securities or money not so delivered. The Custodian shall
physically segregate, keep and maintain the Securities of the Series separate
and apart from each other Series and from other assets held by the Custodian.
Except as otherwise expressly provided in this Agreement, the Custodian will not
be responsible for any Securities and moneys not actually received by it, unless
the Custodian has been negligent or has engaged in willful misconduct with
respect thereto. The Custodian will be entitled to reverse any credits of money
made on the Fund's behalf where such credits have been previously made and
moneys are not finally collected, unless the Custodian has been negligent or has
engaged in willful misconduct with respect thereto. The Fund shall deliver to
the Custodian a certified resolution of the Board of Directors of the Fund,
substantially in the form of Exhibit A hereto, approving, authorizing and
instructing the Custodian on a continuous and on-going basis to deposit in the
Book-Entry System all Securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated and to utilize the
Book-Entry System to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities and deliveries and
returns of Securities collateral. Prior to a deposit of Securities specifically
allocated to a Series in any Depository, the Fund shall deliver to the Custodian
a certified resolution of the Board of Trustees of the Fund, substantially in
the form of Exhibit B hereto, approving,
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<PAGE>
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate to deposit in such Depository
all Securities specifically allocated to such Series eligible for deposit
therein, and to utilize such Depository to the extent possible with respect to
such Securities in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities collateral.
Securities and moneys deposited in either the Book-Entry System or a Depository
will be represented in accounts which include only assets held by the Custodian
for customers, including, but not limited to, accounts in which the Custodian
acts in a fiduciary or representative capacity and will be specifically
allocated on the Custodian's books to the separate account for the applicable
Series. Prior to the Custodian's accepting, utilizing and acting with respect to
Clearing Member confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have received a
certified resolution of the Fund's Board of Directors, substantially in the form
of Exhibit C hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by a
Certificate, to accept, utilize and act in accordance with such confirmations as
provided in this Agreement with respect to such Series. All securities are to be
held or disposed of by the Custodian for, and subject at all times to the
instructions of, the Fund pursuant to the terms of this Agreement. The Custodian
shall have no power or authority to assign, hypothecate, pledge or otherwise
dispose of any Securities except as provided by the terms of this Agreement, and
shall have the sole power to release and deliver Securities held pursuant to
this Agreement.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Such moneys will be held in such manner and account as the Fund and the
Custodian shall agree upon in writing from time to time. Money credited to a
separate account for a Series shall be subject only to drafts, orders, or
charges of the Custodian pursuant to this Agreement and shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Resolutions of the Fund's Board of Directors
certified by an Officer and by the Secretary or Assistant Secretary of the Fund
setting forth the name and address of the person to whom the payment is to be
made, the Series account from which payment is to be made, the purpose for
which payment is to be made, and declaring such purpose to be a proper
corporate purpose; provided, however, that amounts
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<PAGE>
representing dividends, distributions, or redemptions proceeds with respect
to Shares shall be paid only to the Transfer Agent Account;
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series and authorized by this
Agreement; or
(d) Pursuant to Certificates to pay interest, taxes, management fees
or operating expenses (including, without limitation thereto, Board of Trustees'
fees and expenses, and fees for legal accounting and auditing services), which
Certificates set forth the name and address of the person to whom payment is to
be made, state the purpose of such payment and designate the Series for whose
account the payment is to be made.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series but held in a Depository, the Custodian shall upon such
transfer also by book-entry or otherwise identify such Securities as belonging
to such Series in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or a
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in a Depository in a separate
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<PAGE>
account in the name of such Series physically segregated at all times from
those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income and dividends due or payable;
(b) Promptly give notice to the Fund and promptly present for payment
and collect the amount of money or other consideration payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix D annexed hereto, which may be amended at
any time by the Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for the Fund's account
the amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in exchange for
definitive Securities;
(e) Promptly execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series, all
rights and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered holder (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
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<PAGE>
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Promptly execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held hereunder for
the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
right, warrant or conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series in exchange
therefor such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount payable upon
Securities which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940 in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates in connection with any such purchase, sale, writing, settlement or
closing out upon its receipt from a broker, dealer, or futures commission
merchant of a statement or confirmation reasonably believed by the Custodian to
be in the form customarily used by brokers, dealers, or future
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<PAGE>
commission merchants with respect to such Futures Contracts, Options, or Futures
Contract Options, as the case may be, confirming that such Security is held by
such broker, dealer or futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstanding the foregoing,
payments to or deliveries from the Margin Account and payments with respect to
Securities to which a Margin Account relates, shall be made in accordance with
the terms and conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall, notwithstanding
any provision in this Agreement to the contrary, make payment for any Futures
Contract, Option, or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the provisions of this
Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each execution of a purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, or a Futures Contract
Option, the Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each purchase of Money Market Securities, a Certificate,
Oral Instructions or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of such Securities purchased by or for
the Fund, pay to the broker specified in
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<PAGE>
the Certificate out of the moneys held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate, Oral Instructions or Written
Instructions.
2. Promptly after each execution of a sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures Contract Option, or
any Reverse Repurchase Agreement, the Fund shall deliver such to the Custodian
(i) with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate, Oral Instructions or Written Instructions, specifying
with respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale and settlement; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series to the broker in
accordance with generally accepted street practices and as specified in the
Certificate upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by the Fund
other than a closing purchase transaction the Fund shall deliver to the
Custodian a Certificate specifying with respect to each Option purchased: (a)
the Series to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or Security underlying such
Option and the number of Options, or the name of the in the case of an Index
Option, the index to which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in connection
with such purchase; and (h) the name of the Clearing Member through whom such
Option was purchased. The Custodian shall pay, upon receipt of a Clearing
Member's statement confirming the purchase of such Option held by such Clearing
Member for the account of the Custodian (or any duly appointed and registered
nominee of the
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<PAGE>
Custodian) as custodian for the Fund, out of moneys held for the account of the
Series to which such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Certificate.
2. Promptly after the execution of a sale of any Option purchased by the
Fund, other than a closing sale transaction, pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the instrument, currency, or Security
underlying such Option and the number of Options, or the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Index
Option, the index to which such Option relates and the number of Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which previously supplied
the confirmation described in preceding paragraph 1 of this Article with respect
to such Option against payment to the Custodian of the total amount payable to
the Fund, provided that the same conforms to the total amount payable as set
forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise
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<PAGE>
and settlement; (e) the exercise price per share; (f) the total amount to be
paid to the Fund upon such exercise; and (g) the name of the Clearing Member
through whom such Put Option was exercised. The Custodian shall, upon receipt of
the amount payable upon the exercise of the Put Option, deliver or direct a
Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Index Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Index Option: (a) the
Series to which such Index Option was specifically allocated; (b) the type of
Index Option (put or call); (c) the number of Options being exercised; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct a
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
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<PAGE>
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct a Depository to deliver, the underlying Securities as specified in the
Certificate against payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate, against delivery of such
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<PAGE>
Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) whether such
Index Option is a put or a call; (c) the number of options written; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the Clearing Member through whom such Option was written; (h) the
premium to be received by the Fund; (i) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian shall, upon
receipt of the premium specified in the Certificate, make the deposits, if any,
into the Senior Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian has specifically agreed to
issue, which are in accordance with the customs prevailing among Clearing
Members in Index Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever an Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option being exercised;
(c) the Clearing Member through whom such Index Option is being exercised; (d)
the total amount payable upon such exercise, and whether such amount is to be
paid by or to the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f) the amount
of cash and/or amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
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12. Promptly after the execution of a purchase or sale by the Fund of any
Option identical to a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was written; (c)
the instrument, currency, or Security subject to the Option, or, in the case of
an Index Option, the index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g) the type of Option
(put or call); (h) the date of such purchase or sale; (i) the name of the
Clearing Member to whom the premium is to be paid or from whom the amount is to
be received; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium or receipt of the amount, as the case may be,
specified in the Certificate and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the
Option being liquidated through the Closing Purchase Transaction or the Closing
Sale Transaction, the Custodian shall remove, or direct a Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an Option
described in this Article shall be subject to Article IV hereof.
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<PAGE>
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e) the
date the Futures Contract(s) was (were) entered into and the maturity date;
(f) whether the Fund is buying (going long) or selling (going short) such
Futures Contract(s); (g) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series; (h) the name of the broker, dealer, or futures commission merchant
through whom the Futures Contract was entered into; and (i) the amount of fee
or commission, if any, to be paid and the name of the broker, dealer, or
futures commission merchant to whom such amount is to be paid. The Custodian
shall make the deposits, if any, to the Margin Account in accordance with the
terms and conditions of the Margin Account Agreement. The Custodian shall
make payment out of the moneys specifically allocated to such Series of the
fee or commission, if any, specified in the Certificate and deposit in the
Senior Security Account for such Series the amount of cash and/or the amount
and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian prior to the delivery or
settlement date a Certificate specifying: (a) the Futures Contract and the
Series to which the same relates; (b) with respect to an Index Futures Contract,
the total cash settlement amount to be paid
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<PAGE>
or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made
or received; and (d) the amount of cash and/or Securities to be withdrawn
from the Senior Security Account for such Series. The Custodian shall make
the payment or delivery specified in the Certificate, and delete such Futures
Contract from the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically allocated to such Series the total
amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
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<PAGE>
2. Promptly after the execution of a sale of any Futures Contract
Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to each such
sale: (a) Series to which such Futures Contract Option was specifically
allocated; (b) the type of Future Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option; (d) the
date of sale; (e) the sale price; (f) the date of settlement; (g) the total
amount payable to the Fund upon such sale; and (h) the name of the broker of
futures commission merchant through whom the sale was made. The Custodian
shall consent to the cancellation of the Futures Contract Option being closed
against payment to the Custodian of the total amount payable to the Fund,
provided the same conforms to the total amount payable as set forth in such
Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in
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<PAGE>
the Certificate, make out of the moneys and Securities specifically allocated
to such Series the deposits into the Senior Security Account, if any, as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Promptly after the execution by the Fund of a purchase of any Futures
Contract Option identical to a previously written Futures Contract Option
described in this
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<PAGE>
Article in order to liquidate its position as a writer of such Futures
Contract Option, the Fund shall deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a)
the Series to which such Option is specifically allocated; (b) that the
transaction is a closing transaction; (c) the type of Future Contract and
such other information as may be necessary to identify the Futures Contract
underlying the Futures Option Contract; (d) the exercise price; (e) the
premium to be paid by the Fund; (f) the expiration date; (g) the name of the
broker or futures commission merchant to whom the premium is to be paid; and
(h) the amount of cash and/or the amount and kind of Securities, if any, to
be withdrawn from the Senior Security Account for such Series. The Custodian
shall effect the withdrawals from the Senior Security Account specified in
the Certificate. The withdrawals, if any, to be made from the Margin Account
shall be made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of Securities by any
Series of the Fund, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b) the name of
the issuer and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has
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been or is to be established; (h) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in a Senior Security Account, and
(i) the name of the broker through whom such short sale was made. The
Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if
any, as specified in the Certificate is held by such broker for the account
of the Custodian (or any nominee of the Custodian) as custodian of the Fund,
issue a receipt or make the deposits into the Margin Account and the Senior
Security Account specified in the Certificate.
2. Promptly after the execution of a purchase to close-out any short sale
of Securities, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or the principal amount, and accrued interest
or dividends, if any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase price per
unit; (f) the net total amount payable to the Fund upon such closing-out; (g)
the net total amount payable to the broker upon such closing-out; (h) the amount
of cash and the amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The Custodian
shall, upon receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/or cancellation of the receipts, if any, issued
by the Custodian with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral Instructions, or
Written Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker, dealer, or financial institution with whom the Reverse
Repurchase Agreement is entered; (d) the
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<PAGE>
amount and kind of Securities to be delivered by the Fund to such broker,
dealer, or financial institution; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in
a Senior Security Account for such Series in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon receipt of the total amount
payable to the Fund specified in the Certificate, Oral Instructions, or
Written Instructions make the delivery to the broker, dealer, or financial
institution and the deposits, if any, to the Senior Security Account,
specified in such Certificate, Oral Instructions, or Written Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate, Oral Instructions, or Written Instructions to the
Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and
the Series for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in connection
with such termination; (d) the date of termination; (e) the name of the broker,
dealer, or financial institution with whom the Reverse Repurchase Agreement is
to be terminated; and (f) the amount of cash and/or the amount and kind of
Securities to be withdrawn from the Senior Securities Account for such Series.
The Custodian shall, upon receipt of the amount and kind of Securities to be
received by the Fund specified in the Certificate, Oral Instructions, or Written
Instructions, make the payment to the broker, dealer, or financial institution
and the withdrawals, if any, from the Senior Security Account, specified in such
Certificate, Oral Instructions, or Written Instructions.
3. The Certificates, Oral Instructions, or Written Instructions described
in paragraphs 1 and 2 of this Article may with respect to any particular Reverse
Repurchase Agreement be combined and delivered to the Custodian at the time of
entering into such Reverse Repurchase Agreement.
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<PAGE>
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver
or cause to be delivered to the Custodian a Certificate specifying with
respect to each such loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title of the
Securities, (c) the number of shares or the principal amount loaned, (d) the
date of loan and delivery, (e) the total amount to be delivered to the
Custodian against the loan of the Securities, including the amount of cash
collateral and the premium, if any, separately identified, and (f) the name
of the broker, dealer, or financial institution to which the loan was made.
The Custodian shall deliver the Securities thus designated to the broker,
dealer or financial institution to which the loan was made upon receipt of
the total amount designated in the Certificate as to be delivered against the
loan of Securities. The Custodian may accept payment in connection with a
delivery otherwise than through the Book-Entry System or a Depository only in
the form of a certified or bank cashier's check payable to the order of the
Fund or the Custodian drawn on New York Clearing House funds.
2. In connection with each termination of a loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
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<PAGE>
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from time
to time make such deposits thereto, or withdrawals therefrom, as specified in a
Certificate. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from, a Senior
Securities Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such deposit
has been made.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The
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Custodian shall make available upon request to any broker, dealer, or futures
commission merchant specified in the name of a Margin Account a copy of the
statement furnished the Fund with respect to such Margin Account.
6. The Custodian shall establish a Collateral Account and from time to
time shall make such deposits thereto as may be specified in a Certificate.
Promptly after the close of business on each business day in which cash
and/or Securities are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind
of Securities held therein. No later than the close of business next
succeeding the delivery to the Fund of such statement, the Fund shall furnish
to the Custodian a Certificate or Written Instructions specifying the then
market value of the Securities described in such statement. In the event such
then market value is indicated to be less than the Custodian's obligation
with respect to any outstanding Put Option guarantee letter or similar
document, the Fund shall promptly specify in a Certificate the additional
cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein and the declaration of dividends and
distributions thereon the Custodian to rely on Oral Instructions, Written
Instructions, or a Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.
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2. Upon the payment date specified in such resolution, Oral Instructions,
Written Instructions, or Certificate, as the case may be, the Custodian shall
pay to the Transfer Agent Account out of the moneys held for the account of the
Series specified therein the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause to
be delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall pay, out
of the money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish, or cause to be
furnished, to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person setting forth
the Series and number of Shares received by the Transfer Agent for redemption
and that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent Account out of the moneys held in the separate
account in the name of the Series the total amount specified in the Certificate
issued pursuant to the foregoing paragraph 4 of this Article.
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ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient
to pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate, Oral Instructions,
or Written Instructions or which results in an overdraft in the separate
account of such Series for some other reason, or if the Fund is for any other
reason indebted to the Custodian with respect to a Series, (except a
borrowing for investment or for temporary or emergency purposes using
Securities as collateral pursuant to a separate agreement and subject to the
provisions of paragraph 2 of this Article), such overdraft or indebtedness
shall be deemed to be a loan made by the Custodian to the Fund for such
Series payable on demand and shall bear interest from the date incurred at a
rate per annum (based on a 360-day year for the actual number of days
involved) equal to the Federal Funds Rate plus 1/2%, such rate to be adjusted
on the effective date of any change in such Federal Funds Rate but in no
event to be less than 6% per annum. In addition, the Fund hereby agrees that
the Custodian shall have a continuing lien and security interest in the
aggregate amount of such overdrafts and indebtedness as may from time to time
exist in and to any property specifically allocated to such Series at any
time held by it for the benefit of such Series or in which the Fund may have
an interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's behalf.
The Fund authorizes the Custodian, in its sole discretion, at any time to
charge any such overdraft or indebtedness together with interest due thereon
against any money balance of account standing to such Series' credit on the
Custodian's books. In addition, the Fund hereby covenants that on each
Business Day on which either it intends to enter a Reverse Repurchase
Agreement and/or otherwise borrow from a third party, or which next succeeds
a Business Day on which at the close of business the Fund had outstanding a
Reverse Repurchase Agreement or such a borrowing, it shall prior to 9 a.m.,
New York City time, advise the Custodian, in writing, of each such borrowing,
shall specify the Series to which the same relates, and shall not incur any
indebtedness, including pursuant to any Reverse Repurchase Agreement, not so
specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using
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Securities held by the Custodian hereunder as collateral for such borrowings,
a notice or undertaking in the form currently employed by any such bank
setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing:
(a) the Series to which such borrowing relates; (b) the name of the bank, (c)
the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Fund, or other loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan becomes due and
payable, (f) the total amount payable to the Fund on the borrowing date, (g)
the market value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the Investment Company Act
of 1940 and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the
total amount payable as set forth in the Certificate. The Custodian may, at
the option of the lending bank, keep such collateral in its possession, but
such collateral shall be subject to all rights therein given the lending bank
by virtue of any promissory note or loan agreement. The Custodian shall
deliver such Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in this
paragraph. The Fund shall cause all Securities released from collateral
status to be returned directly to the Custodian, and the Custodian shall
receive from time to time such return of collateral as may be tendered to it.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as collateral by the Custodian, to
any such bank, the Custodian shall not be under any obligation to deliver any
Securities.
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ARTICLE XV
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of its
duties hereunder, and, except as hereinafter provided, neither the Custodian nor
its nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence, bad faith, or willful misconduct or that of its
officers, employees, or agents. The Custodian may, with respect to questions of
law arising hereunder or under any Margin Account Agreement, apply for and
obtain the advice and opinion of counsel to the Fund, at the expense of the
Fund, or of its own counsel, at its own expense, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the Fund for any loss
or damage resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the part of the
Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall be under no
obligation to inquire into, and shall not be liable for:
(a) The validity (but not the authenticity) of the issue of any
Securities purchased, sold, or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount paid or
received therefor, as specified in a Certificate, Oral Instructions, or Written
Instructions;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor, as specified in a
Certificate;
(c) The legality of the declaration or payment of any dividend by the
Fund, as specified in a resolution, Certificate, Oral Instructions, or Written
Instructions;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that the cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the
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Fund is adequate collateral for the Fund against any loss it might sustain as
a result of such loan, except that this subparagraph shall not excuse any
liability the Custodian may have for failing to act in accordance with
Article X hereof or any Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement. The Custodian
specifically, but not by way of limitation, shall not be under any duty or
obligation periodically to check or notify the Fund that the amount of such
cash collateral held by it for the Fund is sufficient collateral for the
Fund, but such duty or obligation shall be the sole responsibility of the
Fund. In addition, the Custodian shall be under no duty or obligation to see
that any broker, dealer or financial institution to which portfolio
Securities of the Fund are lent pursuant to Article X of this Agreement makes
payment to it of any dividends or interest which are payable to or for the
account of the Fund during the period of such loan or at the termination of
such loan, provided, however, that the Custodian shall promptly notify the
Fund in the event that such dividends or interest are not paid and received
when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund, except that this
sub-paragraph shall not excuse any liability the Custodian may have for failing
to establish, maintain, make deposits to or withdrawals from such accounts in
accordance with this Agreement. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer, futures commission merchant
or Clearing Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. With respect to Securities held in a Depository, except as otherwise
provided in paragraph 5(b) of Article III hereof, the Custodian shall have no
responsibility and shall not be liable for ascertaining or acting upon any
calls, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to such Securities, unless the Custodian shall have actually
received timely notice from the
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Depository in which such Securities are held. In no event shall the Custodian
have any responsibility or liability for the failure of a Depository to
collect, or for the late collection or late crediting by a Depository of any
amount payable upon Securities deposited in a Depository which may mature or
be redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on Securities
held in a Depository the Custodian shall make a claim against the Depository
on behalf of the Fund, except that the Custodian shall not be under any
obligation to appear in, prosecute or defend any action suit or proceeding in
respect to any Securities held by a Depository which in its opinion may
involve it in expense or liability, unless indemnity satisfactory to it
against all expense and liability be furnished as often as may be required,
or alternatively, the Fund shall be subrogated to the rights of the Custodian
with respect to such claim against the Depository should it so request in a
Certificate. This paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral Instructions, or
Written Instructions given in accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after the Custodian has timely
and properly, in accordance with this Agreement, made due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action, but the Custodian
shall have such a duty if the Securities were not in default on the payable date
and the Custodian failed to timely and properly make such demand for payment and
such failure is the reason for the non-receipt of payment.
7. The Custodian may appoint one or more banking institutions as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians including,
but not limited to, banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed institution.
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8. The Custodian agrees to indemnify the Fund against and save the Fund
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of the negligence, bad
faith or willful misconduct of any Sub-Custodian of the Securities and moneys
owned by the Fund, provided such Sub-Custodian is a banking institution located
in a foreign country and appointed by the Custodian pursuant to paragraph 7 of
this Article.
9. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it, for
the account of the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the provisions of its then
current prospectus, or (b) to ascertain whether any transactions by the Fund,
whether or not involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all reasonable out-of-pocket expenses and such
compensation as may be agreed upon from time to time between the Custodian
and the Fund. The Custodian may charge such compensation, and any such
expenses with respect to a Series incurred by the Custodian in the
performance of its duties under this Agreement against any money specifically
allocated to such Series. The Custodian shall also be entitled to charge
against any money held by it for the account of a Series the amount of any
loss, damage, liability or expense, including counsel fees, for which it
shall be entitled to reimbursement under the provisions of this Agreement
attributable to, or arising out of, its serving as Custodian for such Series.
The expenses for which the Custodian shall be entitled to reimbursement
hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund. Notwithstanding the foregoing or anything else
contained in this Agreement to the contrary, the Custodian shall, prior to
effecting any charge for compensation, expenses, or any overdraft or
indebtedness or interest thereon, submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing, Oral Instructions, or Written Instructions
received by the Custodian and reasonably believed by the Custodian to be
genuine. The Fund agrees to forward to the Custodian a Certificate or facsimile
thereof confirming Oral Instructions or Written Instructions in such manner so
that such Certificate or facsimile thereof is received by the Custodian, whether
by hand delivery, telecopier or other similar device,
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or otherwise, by the close of business of the same day that such Oral
Instructions or Written Instructions are given to the Custodian. The Fund
agrees that the fact that such confirming instructions are not received by
the Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions thereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions or Written Instructions given to the Custodian hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member. This paragraph shall not excuse any failure by the Custodian to
have acted in accordance with any Margin Agreement it has executed or any
Certificate, Oral Instructions, or Written Instructions given in accordance with
this Agreement.
13. The books and records pertaining to the Fund, as described in
Appendix E hereto, which are in the possession of the Custodian shall be the
property of the Fund. Such books and records shall be prepared and maintained
by the Custodian as required by the Investment Company Act of 1940, as
amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access to such
books and records during the Custodian's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian
shall provide in hard copy or on micro-film, whichever the Custodian elects,
any records included in any such delivery which are maintained by the
Custodian on a computer disc, or are similarly maintained, and the Fund shall
reimburse the Custodian for its expenses of providing such hard copy or
micro-film.
14. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
each Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
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15. The Custodian shall furnish upon request annually to the Fund a letter
prepared by the Custodian's accountants with respect to the Custodian's internal
systems and controls in the form generally provided by the Custodian to other
investment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising out of, or related to, the
Custodian's performance of its obligations under this Agreement, except for
any such liability, claim, loss and demand arising out of the Custodian's own
negligence, bad faith, or willful misconduct or that of its officers,
employees, or agents.
17. Subject to the foregoing provisions of this Agreement, the Custodian
shall deliver and receive Securities, and receipts with respect to such
Securities, and shall make and receive payments only in accordance with the
customs prevailing from time to time among brokers or dealers in such Securities
and, except as may otherwise be provided by this Agreement or as may be in
accordance with such customs, shall make payment for Securities only against
delivery thereof and deliveries of Securities only against payment therefor.
18. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XVI
TERMINATION
1. Except as provided in paragraph 3 of this Article, this Agreement
shall continue until terminated by either the Custodian giving to the Fund, or
the Fund giving to the Custodian, a notice in writing specifying the date of
such termination, which date shall be not less than 60 days after the date of
the giving of such notice. In the event such notice or a notice pursuant to
paragraph 3 of this Article is given by the Fund, it shall be accompanied by a
copy of a resolution of the Board of Directors of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be eligible to serve as a custodian for the securities of a
management investment company under the Investment Company Act of 1940. In the
event such notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to
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the Custodian a copy of a resolution of the Board of Directors of the Fund,
certified by the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, designating a successor custodian or custodians. In the
absence of such designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust company having not less
than $2,000,000 aggregate capital, surplus and undivided profits. Upon the
date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and moneys then owned by the Fund and held by it as Custodian,
after deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this
Agreement upon the date specified in a written notice in the event of the
"Bankruptcy" of The Bank of New York. As used in this sub-paragraph, the term
"Bankruptcy" shall mean The Bank of New York's making a general assignment,
arrangement or composition with or for the benefit of its creditors, or
instituting or having instituted against it a proceeding seeking a judgment
of insolvency or bankruptcy or the entry of a order for relief under any
applicable bankruptcy law or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights, or if a
petition is presented for the winding up or liquidation of the party or a
resolution is passed for its winding up or liquidation, or it seeks, or
becomes subject to, the appointment of an administrator, receiver, trustee,
custodian or other similar official for it or for all or substantially all of
its assets or its taking any action in furtherance or, or indicating its
consent to approval of, or acquiescence in, any of the foregoing.
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ARTICLE XVII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to
have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to and to receive notices
from the Custodian.
2. The parties hereto shall utilize the Terminal Link only for the
purpose of the Fund providing Certificates to the Custodian and the Custodian
providing notices to the Fund and only after the Fund and the Custodian shall
have established access codes and internal safekeeping procedures to safeguard
and protect the confidentiality and availability of such access codes. Each use
of the Terminal Link by the Fund shall constitute a representation and warranty
that at least two such access codes have been utilized and that such procedures
have been established.
3. Each party shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the other party shall not be
responsible for the reliability or availability of any such equipment or
services, except that the Custodian shall not pay any communications costs of
any line leased by the Fund, even if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made available as part of,
or through the Terminal and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, each Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its control, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
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6. The Custodian reserves the right to modify the Terminal Link from time
to time without notice to the Fund, except that the Custodian shall give the
Fund notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees not to
modify or attempt to modify the Terminal Link without the Bank's prior written
consent. The Fund acknowledges that the Terminal Link is the property of the
Custodian and, accordingly, the Fund agrees that any modifications to the
Terminal Link, whether by the Fund or the Custodian and whether with or without
the Custodian's consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes
or the Fund utilizes in connection with the Terminal Link makes any warranties
or representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. Each party will, and will cause its officers and employees to, treat
the user and authorization codes, passwords and authentication keys applicable
to Terminal Link with extreme care. Each party hereby irrevocably authorizes the
other to act in accordance with and rely on Certificates and notices received by
it through the Terminal Link. Each party acknowledges that it is its
responsibility to assure that only its authorized persons use the Terminal Link
on its behalf, and that a party shall not be responsible nor liable for use of
the Terminal Link on its behalf of the other party by unauthorized persons
except that the other party shall be liable for such use thereof by unauthorized
persons who have obtained access thereto as a result of the bad faith or willful
misconduct of such party or any of its officers or employees.
9. Notwithstanding anything else in this Agreement to the contrary,
neither party shall have any liability to the other for any losses, damages,
injuries, claims, costs or expenses arising as a result of a delay, omission or
error in the transmission of a Certificate or notice by use of the Terminal Link
except for money damages for those suffered as the result of the negligence, bad
faith or willful misconduct of such party or its officers, employees or agents
in an amount not exceeding for any incident $100,000, provided, however, that a
party shall have no liability under this Section 9 if the other party fails to
comply with the provisions of Section 11.
10. Without limiting the generality of the foregoing, it is hereby agreed
that in no event shall either party or any manufacturer or supplier of its
computer equipment, software or services relating to the Terminal Link be
responsible for any special, indirect, incidental or consequential damages
- 39 -
<PAGE>
which the other party may incur or experience by reason of its use of the
Terminal Link even if such party, manufacturer or supplier has been advised
of the possibility of such damages, nor with respect to the use of the
Terminal Link shall either party or any such manufacturer or supplier be
liable for acts of God, or with respect to the following to the extent beyond
such person's reasonable control: machine or computer breakdown or
malfunction, interruption or malfunction of communication facilities, labor
difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the business day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the Custodian learns
of any errors, omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. Each party shall, as soon as practicable after its receipt of a
Certificate or of any notice transmitted by the Terminal Link, verify to the
other party by use of the Terminal Link its receipt of such Certificate or
notice, and in the absence of such verification a party to whom a Certificate or
notice is sent shall not be liable for any failure to act in accordance with
such Certificate or notice, and the sending party may not claim that such
Certificate or notice was received by the other.
ARTICLE XVIII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be entitled to rely and to
act upon Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in the last delivered Certificate to the extent
provided by this Agreement.
- 40 -
<PAGE>
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
Officer ceases to be an Officer of the Fund, or in the event that other or
additional Officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be entitled to rely and to act upon the
signatures of the Officers as set forth in the last delivered Certificate to the
extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, other than any Certificate or
Written Instructions, shall be sufficiently given if addressed to the Custodian
and mailed or delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from time to time
designate in writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund,
except that Appendices A and B may be amended unilaterally by the Fund without
such an approving resolution.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian or The Bank of New York without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Trustees. For purposes of this paragraph, no merger,
consolidation, or amalgamation of the Custodian, The Bank of New York, or the
Fund shall be deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
- 41 -
<PAGE>
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
- 42 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DEAN WITTER NATURAL RESOURCE
DEVELOPMENT SECURITIES INC.
[SEAL] By:_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
_______________________
- 43 -
<PAGE>
APPENDIX A
I, , President and I, ,
of , a Maryland corporation (the "Fund"), do
hereby certify that:
The following individuals have been duly authorized by the Board of
Directors of the Fund in conformity with the Fund's Articles of Incorporation
By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund, except that those persons designated as being an "Officer of DWTC" shall
be an Authorized Person only for purposes of Articles XII and XIII. The
signatures set forth opposite their respective names are their true and correct
signatures:
Name Position Signature
_________________ ________________ _________________
<PAGE>
APPENDIX B
I, , President and I, ,
of , a Maryland corporation (the "Fund"), do
hereby certify that:
The following individuals for whom a position other than "Officer of
DWTC" is specified serve in the following positions with the Fund and each
has been duly elected or appointed by the Board of Directors of the Fund to
each such position and qualified therefor in conformity with the Fund's
Articles of Incorporation and By-Laws. With respect to the following
individuals for whom a position of "Officer of DWTC" is specified, each such
individual has been designated by a resolution of the Board of Directors of
the Fund to be an Officer for purposes of the Fund's Custody Agreement with
The Bank of New York, but only for purposes of Articles XII and XIII thereof
and a certified copy of such resolution is attached hereto. The signatures of
each individual below set forth opposite their respective names are their
true and correct signatures:
Name Position Signature
____________________ ___________________ _________________
<PAGE>
APPENDIX C
The undersigned, hereby certifies that he or she is the
duly elected and acting of (the "Fund"),
further certifies that the following resolutions were adopted by the Board of
Directors of the Fund at a meeting duly held on , 1991, at which a
quorum at all times present and that such resolutions have not been modified or
rescinded and are in full force an effect as of the date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of , 1991
(the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to rely on instructions by the Fund
to the Custodian communicated by a Terminal Link as defined in the Custody
Agreement.
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to officers of the Fund as defined in the Custody Agreement,
and shall establish internal safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes.
RESOLVED, that Officers of the Fund as defined in the Custody Agreement
shall, following the establishment of such access codes and such internal
safekeeping procedures, advise the Custodian that the same have been established
by delivering a Certificate, as defined in the Custody Agreement, and the
Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of
, as of the day of , 1991.
---------------
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of , a Maryland
corporation (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Directors of the Fund at a meeting duly held on
, 1991, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect as
of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 1991.
--------------------------
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of , a
Maryland corporation (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Directors of the Fund at a meeting duly
held on , 1991, at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in The Depository Trust Company ("DTC"), as a "Depository" as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize DTC to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 1991.
--------------------------
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of , a
Maryland corporation (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Directors of the Fund at a meeting duly
held on , 1991, at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991 (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Participants Trust Company as a Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 1991.
--------------------------
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he
or she is the duly elected and acting of , a
Maryland corporation (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Directors of the Fund at a meeting duly
held on , 1991, at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary, to
accept, utilize and act with respect to Clearing Member confirmations for
Options and transaction in Options, regardless of the Series to which the
same are specifically allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 1991.
--------------------------
[SEAL]
<PAGE>
APPENDIX D
I, Richard P. Lando, an Assistant Vice President with THE BANK OF NEW YORK
do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be prepared and
maintained by the Custodian and shall be the property of the Fund:
<PAGE>
AMENDMENT TO CUSTODY AGREEMENT
Amendment made as of this 17th day of April, 1996 by and between Dean
Witter Natural Resource Development Securities Inc. Fund (the "Fund") and
The Bank of New York (the "Custodian") to the Custody Agreement between the
Fund and the Custodian dated September 20, 1991 (the "Custody Agreement").
The Custody Agreement is hereby amended as follows:
Article XV Section 8 of the Custody Agreement shall be deleted and be
replaced by Sections 8.(a), 8.(b) and 8.(c) as set forth below:
"8. (a) The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Securities and moneys
owned by the Fund. The Custodian shall indemnify the Fund against and save the
Fund harmless from all liability, claims, losses and demands whatsoever,
including attorneys' fees, howsoever arising or incurred as the result of the
failure of a subcustodian which is a banking institution located in a foreign
country and identified on Schedule A attached hereto and as amended from time
to time upon mutual agreement of the parties (each, a "Subcustodian") to
exercise reasonable care with respect to the safekeeping of such Securities and
moneys to the same extent that the Custodian would be liable to the Fund if the
Custodian were holding such securities and moneys in New York. In the event of
any loss to the Fund by reason of the failure of the Custodian or a Subcustodian
to utilize reasonable care, the Custodian shall be liable to the Fund only to
the extent of the Fund's direct damages, to be determined based on the market
value of the Securities and moneys which are the subject of the loss at the date
of discovery of such loss and without reference to any special conditions or
circumstances.
8. (b) The Custodian shall not be liable for any loss which results from
(i) the general risk of investing, or (ii) investing or holding Securities and
moneys in a particular country including, but not limited to, losses resulting
from nationalization, expropriation or other governmental actions; regulation of
the banking or securities industry; currency restrictions, devaluations or
fluctuations; or market conditions which prevent the orderly execution of
securities transactions or affect the value of Securities or moneys.
8. (c) Neither party shall be liable to the other for any loss due to
forces beyond its control including, but not limited to, strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed; as of the day and year first above
written.
DEAN WITTER
NATURAL RESOURCE DEVELOPMENT
SECURITIES INC.
[SEAL] By:
-----------------
Attest:
- --------------------
THE BANK OF NEW YORK
[SEAL] By:
-----------------
Attest:
- --------------------
<PAGE>
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Argentina The Bank of Boston
Australia ANZ Banking Group Limited
Austria Girocredit Bank AG
Bangladesh* Standard Chartered Bank
Belgium Banque Bruxelles Lambert
Botswana* Stanbic Bank Botswana Ltd.
Brazil The Bank of Boston
Canada Royal Trust/Royal Bank of Canada
Chile The Bank of Boston/Banco de Chile
China Standard Chartered Bank
Columbia Citibank, N.A.
Denmark Den Danske Bank
Euromarket CEDEL
Euroclear
First Chicago Clearing Centre
Finland Union Bank of Finland
France Banque Paribas/Credit Commercial de France
Germany Dresdner Bank A.G.
Ghana* Merchant Bank Ghana Ltd.
Greece Alpha Credit Bank
Hong Kong Hong Kong and Shanghai Banking Corp.
Indonesia Hong Kong and Shanghai Banking Corp.
Ireland Allied Irish Bans
Israel Israel Discount Bank
Italy Banca Commerciale Italiana
Japan Yasuda Trust & Banking Co., Ltd.
Korea Bank of Seoul
Luxembourg Kredietbank S.A.
Malaysia Hong Kong Bank Malaysia Berhad
Mexico Banco Nacional de Mexico (Banamex)
Netherlands Mees Pierson
New Zealand ANZ Banking Group Limited
Norway Den Norske Bank
<PAGE>
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Pakistan Standard Chartered Bank
Peru Citibank, N.A.
Philippines Hong Kong and Shanghai Banking Corp.
Poland Bank Handlowy w Warsawie
Portugal Banco Comercial Portugues
Singapore United Overseas Bank
South Africa Standard Bank of South Africa Limited
Spain Banco Bilbao Vizcaya
Sri Lanka Standard Chartered Bank
Sweden Skandinaviska Enskilda Banken
Switzerland Union Bank of Switzerland
Taiwan Hong Kong and Shanghai Banking Corp.
Thailand Siam Commercial Bank
Turkey Citibank, N.A.
United Kingdom The Bank of New York
United States The Bank of New York
Uruguay The Bank of Boston
Venezuela Citibank N.A.
Zimbabwe* Stanbic Bank Zimbabwe Ltd.
*Not yet 17(f)5 compliant
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a Delaware
corporation (herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement")
with certain investment companies as set forth on Schedule A (each such
investment company being herein referred to as a "Fund" and, collectively, as
the "Funds") pursuant to which InterCapital is to perform, or supervise the
performance of, among other services, administrative services for the Funds
(and, in the case of Funds with multiple portfolios, the Series or Portfolios
of the Funds (such Series and Portfolio being herein individually referred to
as "a Series" and, collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice);
(ii) provide the Fund with full administrative services, including the
maintenance of certain books and records, such as journals, ledger accounts
and other records required under the Investment Company Act of 1940, as
amended (the "Act"), the notification to the Fund and InterCapital of
available funds for investment, the reconciliation of account information and
balances among the Fund's custodian, transfer agent and dividend disbursing
agent and InterCapital, and the calculation of the net asset value of the
Fund's shares; (iii) provide the Fund with the services of persons competent
to perform such supervisory, administrative and clerical functions as are
necessary to provide effective operation of the Fund; (iv) oversee the
performance of administrative and professional services rendered to the Fund
by others, including its custodian, transfer agent and dividend disbursing
agent, as well as accounting, auditing and other services; (v) provide the
Fund with adequate general office space and facilities; (vi) assist in the
preparation and the printing of the periodic updating of the Fund's
registration statement and prospectus (and, in the case of an open-end Fund,
the statement of additional information), tax returns, proxy statements, and
reports to its shareholders and the Securities and Exchange Commission; and
(vii) monitor the compliance of the Fund's investment policies and
restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to
perform administrative services hereunder, it shall notify DWS in writing. If
DWS is willing to render such services, it shall notify InterCapital in
writing, whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to
time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of DWS shall be deemed to include officers
of DWS and persons employed or otherwise retained by DWS (including officers
and employees of InterCapital, with the consent of InterCapital) to furnish
services, statistical and other factual data, information with respect to
technical and scientific developments, and such other information, advice and
assistance as DWS may desire. DWS shall maintain each Fund's records and
books of account (other than those maintained by the Fund's transfer agent,
registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, DWS
shall surrender to InterCapital or to the Fund such of the books and records
so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as DWS may
reasonably require in order to discharge its duties and obligations to the
Fund under this Agreement or to comply with any applicable law and regulation
or request of the Board of Directors/Trustees of the Fund.
1
<PAGE>
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of
a closed-end Fund) by applying the annual rate or rates set forth on Schedule
B to the net assets of each Fund. Except as hereinafter set forth, (i) in the
case of an open-end Fund, compensation under this Agreement shall be
calculated by applying 1/365th of the annual rate or rates to the Fund's or
the Series' daily net assets determined as of the close of business on that
day or the last previous business day and (ii) in the case of a closed-end
Fund, compensation under this Agreement shall be calculated by applying the
annual rate or rates to the Fund's average weekly net assets determined as of
the close of the last business day of each week. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before
the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth on Schedule B. Subject to the provisions
of paragraph 5 hereof, payment of DWS' compensation for the preceding month
shall be made as promptly as possible after completion of the computations
contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof
imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, or, in the case of
InterCapital Income Securities Inc. or Dean Witter Variable Investment Series
or any Series thereof, the expense limitation specified in the Fund's
Investment Management Agreement, the fee payable hereunder shall be reduced
on a pro rata basis in the same proportion as the fee payable by the Fund
under the Investment Management Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by
DWS, and such clerical help and bookkeeping services as DWS shall reasonably
require in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, DWS shall not be liable to the Fund or any of its
investors for any error of judgment or mistake of law or for any act or
omission by DWS or for any losses sustained by the Fund or its investors. It
is understood that, subject to the terms and conditions of the Investment
Management Agreement between each Fund and InterCapital, InterCapital shall
retain ultimate responsibility for all services to be performed hereunder by
DWS. DWS shall indemnify InterCapital and hold it harmless from any liability
that InterCapital may incur arising out of any act or failure to act by DWS
in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person
controlling, controlled by or under common control with DWS, and that DWS and
any person controlling, controlled by or under common control with DWS may
have an interest in the Fund. It is also understood that DWS and any
affiliated persons thereof or any persons controlling, controlled by or under
common control with DWS have and may have advisory, management,
administration service or other contracts with other organizations and
persons, and may have other interests and businesses, and further may
purchase, sell or trade any securities or commodities for their own accounts
or for the account of others for whom they may be acting.
9. This Agreement shall continue until April 30, 1995, and thereafter
shall continue automatically for successive periods of one year unless
terminated by either party by written notice delivered to the other party
within 30 days of the expiration of the then-existing period. Notwithstanding
the foregoing, this Agreement may be terminated at any time, by either party
on 30 days' written notice delivered to the other party. In the event that
the Investment Management Agreement between any Fund and InterCapital is
terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
2
<PAGE>
11. This Agreement may be assigned by either party with the written
consent of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By:
-------------------------------
Attest:
- -------------------------------
DEAN WITTER SERVICES COMPANY INC.
By:
-------------------------------
Attest:
- -------------------------------
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
AT APRIL 17, 1995
OPEN-END FUNDS
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter Balanced Growth Fund
7. Dean Witter Balanced Income Fund
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter California Tax-Free Income Fund
10. Dean Witter Capital Growth Securities
11. Dean Witter Convertible Securities Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter Diversified Income Trust
14. Dean Witter Dividend Growth Securities Inc.
15. Dean Witter European Growth Fund Inc.
16. Dean Witter Federal Securities Trust
17. Dean Witter Global Asset Allocation Fund
18. Dean Witter Global Dividend Growth Securities
19. Dean Witter Global Short-Term Income Fund Inc.
20. Dean Witter Global Utilities Fund
21. Dean Witter Health Sciences Trust
22. Dean Witter High Income Securities
23. Dean Witter High Yield Securities Inc.
24. Dean Witter Intermediate Income Securities
25. Dean Witter International Small Cap Fund
26. Dean Witter Limited Term Municipal Trust
27. Dean Witter Liquid Asset Fund Inc.
28. Dean Witter Managed Assets Trust
29. Dean Witter Mid-Cap Growth Fund
30. Dean Witter Multi-State Municipal Series Trust
31. Dean Witter National Municipal Trust
32. Dean Witter Natural Resource Development Securities Inc.
33. Dean Witter New York Municipal Money Market Trust
34. Dean Witter New York Tax-Free Income Fund
35. Dean Witter Pacific Growth Fund Inc.
36. Dean Witter Precious Metals and Minerals Trust
37. Dean Witter Premier Income Trust
38. Dean Witter Retirement Series
39. Dean Witter Select Dimensions Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Short-Term Bond Fund
42. Dean Witter Short-Term U.S. Treasury Trust
43. Dean Witter Strategist Fund
44. Dean Witter Tax-Exempt Securities Trust
45. Dean Witter Tax-Free Daily Income Trust
46. Dean Witter U.S. Government Money Market Trust
47. Dean Witter U.S. Government Securities Trust
48. Dean Witter Utilities Fund
49. Dean Witter Value-Added Market Series
50. Dean Witter Variable Investment Series
51. Dean Witter World Wide Income Trust
52. Dean Witter World Wide Investment Trust
CLOSED-END FUNDS
53. High Income Advantage Trust
54. High Income Advantage Trust II
55. High Income Advantage Trust III
56. InterCapital Income Securities Inc.
57. Dean Witter Government Income Trust
58. InterCapital Insured Municipal Bond Trust
59. InterCapital Insured Municipal Trust
60. InterCapital Insured Municipal Income Trust
61. InterCapital California Insured Municipal Income Trust
62. InterCapital Insured Municipal Securities
63. InterCapital Insured California Municipal Securities
64. InterCapital Quality Municipal Investment Trust
65. InterCapital Quality Municipal Income Trust
66. InterCapital Quality Municipal Securities
67. InterCapital California Quality Municipal Securities
68. InterCapital New York Quality Municipal Securities
4
<PAGE>
SCHEDULE B
DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES--APRIL 17, 1995
Monthly compensation calculated daily by applying the following annual rates
to a fund's net assets:
FIXED INCOME FUNDS
Dean Witter Balanced Income Fund 0.60% to the net assets.
Dean Witter California Tax-Free 0.055% of the portion of daily net
Income Fund assets not exceeding $500 million;
0.0525% of the portion exceeding $500
million but not exceeding $750 million;
0.050% of the portion exceeding $750
million but not exceeding $1 billion;
and 0.0475% of the portion of the daily
net assets exceeding $1 billion.
Dean Witter Convertible Securities 0.060% of the portion of the daily net
Securities Trust assets not exceeding $750 million; .055%
of the portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.050% of the portion of the
daily net assets of the exceeding $1
billion but not exceeding $1.5 billion;
0.0475% of the portion of the daily net
assets exceeding $1.5 billion but not
exceeding $2 billion; 0.045% of the
portion of the daily net assets
exceeding $2 billion but not exceeding
$3 billion; and 0.0425% of the portion
of the daily net assets exceeding $3
billion.
Dean Witter Diversified 0.040% of the net assets.
Income Trust
Dean Witter Federal Securities Trust 0.055% of the portion of the daily net
assets not exceeding $1 billion; 0.0525%
of the portion of the daily net assets
exceeding $1 billion but not exceeding
$1.5 billion; 0.050% of the portion of
the daily net assets exceeding $1.5
billion but not exceeding $2 billion;
0.0475% of the portion of the daily net
assets exceeding $2 billion but not
exceeding $2.5 billion; 0.045% of the
portion of daily net assets exceeding
$2.5 billion but not exceeding $5
billion; 0.0425% of the portion of the
daily net assets exceeding $5 billion
but not exceeding $7.5 billion; 0.040%
of the portion of the daily net assets
exceeding $7.5 billion but not exceeding
$10 billion; 0.0375% of the portion of
the daily net assets exceeding $10
billion but not exceeding $12.5 billion;
and 0.035% of the portion of the daily
net assets exceeding $12.5 billion.
Dean Witter Global Short-Term 0.055% of the portion of the daily net
Income Fund assets not exceeding $500 million; and
0.050% of the portion of the daily net
assets exceeding $500 million.
Dean Witter High Income 0.050% to the net assets.
Securities
Dean Witter High Yield 0.050% of the portion of the daily net
Securities Inc. assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of
B-1
<PAGE>
the daily net assets exceeding $1
billion but not exceeding $2 billion;
0.0325% of the portion of the daily net
assets exceeding $2 billion but not
exceeding $3 billion; and 0.030% of the
portion of daily net assets exceeding $3
billion.
Dean Witter Intermediate 0.060% of the portion of the daily net
Income Securities assets not exceeding $500 million;
0.050% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.040% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; and 0.030% of the portion of
the daily net assets exceeding $1
billion.
Dean Witter Limited Term 0.050% to the net assets.
Municipal Trust
Dean Witter Multi-State Municipal 0.035% to the net assets.
Series Trust (10)
Dean Witter National 0.035% to the net assets.
Municipal Trust
Dean Witter New York Tax-Free 0.055% to the net assets not exceeding
Income Fund $500 million and 0.0525% of the net
assets exceeding $500 million.
Dean Witter Premier 0.050% to the net assets.
Income Trust
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities Trust
Dean Witter Select Dimensions 0.65% to the net assets.
Series-North American Government
Securities Portfolio
Dean Witter Short-Term 0.070% to the net assets.
Bond Fund
Dean Witter Short-Term U.S. 0.035% to the net assets.
Treasury Trust
Dean Witter Tax-Exempt 0.050% of the portion of the daily net
Securities Trust assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; and 0.035% of the portion of
the daily net assets exceeding $1
billion but not exceeding $1.25 billion;
.0325% of the portion of the daily net
assets exceeding $1.25 billion.
Dean Witter U.S. Government 0.050% of the portion of such daily net
Securities Trust assets not exceeding $1 billion; 0.0475%
of the portion of such daily net assets
exceeding $1 billion but not exceeding
$1.5 billion; 0.045% of the portion of
such daily net assets exceeding $1.5
billion but not exceeding $2 billion;
0.0425% of the portion of such daily net
assets exceeding $2 billion but not
exceeding $2.5 billion; 0.040% of that
portion of such daily net assets
exceeding $2.5 billion but not exceeding
$5 billion; 0.0375% of that portion
B-2
<PAGE>
of such daily net assets exceeding $5
billion but not exceeding $7.5 billion;
0.035% of that portion of such daily net
assets exceeding $7.5 billion but not
exceeding $10 billion; 0.0325% of that
portion of such daily net assets
exceeding $10 billion but not exceeding
$12.5 billion; and 0.030% of that
portion of such daily net assets
exceeding $12.5 billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-High Yield
Dean Witter Variable Investment 0.050% to the net assets.
Series-Quality Income
Dean Witter World Wide Income 0.075% of the daily net assets up to
Trust $250 million; 0.060% of the portion of
the daily net assets exceeding $250
million but not exceeding $500 million;
0.050% of the portion of the daily net
assets of the exceeding $500 million but
not exceeding $750 milliion; 0.040% of
the portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; and 0.030% of the daily net
assets exceeding $1 billion.
Dean Witter Select Municipal 0.050% to the net assets.
Reinvestment Fund
EQUITY FUNDS
Dean Witter American Value 0.0625% of the portion of the daily net
Fund assets not exceeding $250 million and
0.050% of the portion of the daily net
assets exceeding $250 million.
Dean Witter Balanced Growth Fund 0.60% to the net assets.
Dean Witter Capital Growth 0.065% to the portion of daily net
Securities assets not exceeding $500 million;
0.055% of the portion exceeding $500
million but not exceeding $1 billion;
0.050% of the portion exceeding $1
billion but not exceeding $1.5 billion;
and 0.0475% of the net assets exceeding
$1.5 billion.
Dean Witter Developing Growth 0.050% of the portion of daily net
Securities Trust assets not exceeding $500 million; and
0.0475% of the portion of daily net
assets exceeding $500 million.
Dean Witter Dividend Growth 0.0625% of the portion of the daily net
Securities Inc. assets not exceeding $250 million;
0.050% of the portion exceeding $250
million but not exceeding $1 billion;
0.0475% of the portion of daily net
assets exceeding $1 billion but not
exceeding $2 billion; 0.045% of the
portion of daily net assets exceeding $2
billion but not exceeding $3 billion;
0.0425% of the portion of daily net
assets exceeding $3 billion but not
exceeding $4 billion; 0.040% of the
portion of daily net assets exceeding $4
billion but not exceeding $5 billion;
0.0375% of the portion of the daily net
assets exceeding $5 billion but not
exceeding $6 billion; 0.035% of the
portion of the daily net assets
exceeding $6 billion but not exceeding
$8 billion; and 0.0325% of the portion
of the daily net assets exceeding $8
billion.
B-3
<PAGE>
Dean Witter European Growth 0.060% of the portion of daily net
Fund Inc. assets not exceeding $500 million; and
0.057% of the portion of daily net
assets exceeding $500 million.
Dean Witter Global Asset Allocation 1.0% to the net assets.
Fund
Dean Witter Global Dividend 0.075% to the net assets.
Growth Securities
Dean Witter Global Utilities Fund 0.065% to the net assets.
Dean Witter Health Sciences Trust 0.10% to the net assets.
Dean Witter International 0.075% to the net assets.
Small Cap Fund
Dean Witter Managed Assets Trust 0.060% to the daily net assets not
exceeding $500 million and 0.055% to the
daily net assets exceeding $500 million.
Dean Witter Mid-Cap Growth Fund 0.75% to the net assets.
Dean Witter Natural Resource 0.0625% of the portion of the daily net
Development Securities Inc. assets not exceeding $250 million and
0.050% of the portion of the daily net
assets exceeding $250 million.
Dean Witter Pacific Growth 0.060% of the portion of daily net
Fund Inc. assets not exceeding $1 billion; and
0.057% of the portion of daily net
assets exceeding $1 billion.
Dean Witter Precious Metals 0.080% to the net assets.
and Minerals Trust
Dean Witter Retirement Series 0.085% to the net assets.
American Value
Dean Witter Retirement Series 0.085% to the net assets.
Capital Growth
Dean Witter Retirement Series 0.075% to the net assets.
Dividend Growth
Dean Witter Retirement Series 0.10% to the net assets.
Global Equity
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income Securities
Dean Witter Retirement Series 0.050% to the net assets.
Liquid Asset
Dean Witter Retirement Series 0.085% to the net assets.
Strategist
Dean Witter Retirement Series 0.050% to the net assets.
U.S. Government Money Market
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities
Dean Witter Retirement Series 0.075% to the net assets.
Utilities
B-4
<PAGE>
Dean Witter Retirement Series 0.050% to the net assets.
Value Added
Dean Witter Select Dimensions Series-
American Value Portfolio 0.625% to the net assets.
Balanced Portfolio 0.75% to the net assets.
Core Equity Portfolio 0.85% to the net assets.
Developing Growth Portfolio 0.50% to the net assets.
Diversified Income Portfolio 0.40% to the net assets.
Dividend Growth Portfolio 0.625% to the net assets.
Emerging Markets Portfolio 1.25% to the net assets.
Global Equity Portfolio 1.0% to the net assets.
Utilities Portfolio 0.65% to the net assets.
Value-Added Market Portfolio 0.50% to the net assets.
Dean Witter Strategist Fund 0.060% of the portion of daily net
assets not exceeding $500 million;
0.055% of the portion of the daily net
assets exceeding $500 million but not
exceeding $1 billion; and 0.050% of the
portion of the daily net assets
exceeding $1 billion.
Dean Witter Utilities Fund 0.065% of the portion of daily net
assets not exceeding $500 million;
0.055% of the portion exceeding $500
million but not exceeding $1 billion;
0.0525% of the portion exceeding $1
billion but not exceeding $1.5 billion;
0.050% of the portion exceeding $1.5
billion but not exceeding $2.5 billion;
0.0475% of the portion exceeding $2.5
billion but not exceeding $3.5 billion;
0.045% of the portion of the daily net
assets exceeding $3.5 but not exceeding
$5 billion; and 0.0425% of the portion
of daily net assets exceeding $5
billion.
Dean Witter Value-Added Market 0.050% of the portion of daily net
Series assets not exceeding $500 million; and
0.45% of the portion of daily net assets
exceeding $500 million.
Dean Witter Variable Investment 0.065% to the net assets.
Series-Capital Growth
Dean Witter Variable Investment 0.0625% of the portion of daily net
Series-Dividend Growth assets not exceeding $500 million; and
0.050% of the portion of daily net
assets exceeding $500 million.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Equity
Dean Witter Variable Investment 0.060% to the net assets.
Series-European Growth
Dean Witter Variable Investment 0.050% to the net assets.
Series-Managed
Dean Witter Variable Investment 0.065% of the portion of daily net
Series-Utilities assets exceeding $500 million and 0.055%
of the portion of daily net assets
exceeding $500 million.
Dean Witter World Wide 0.055% of the portion of daily net
Investment Trust assets not exceeding $500 million; and
0.05225% of the portion of daily net
assets exceeding $500 million.
B-5
<PAGE>
MONEY MARKET FUNDS
Active Assets Account (4) 0.050% of the portion of the daily net
assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.5 billion but not exceeding
$2 billion; 0.030% of the portion of the
daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding
$3 billion; and 0.025% of the portion of
the daily net assets exceeding $3
billion.
Dean Witter California Tax-Free 0.050% of the portion of the daily net
Daily Income Trust assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.5 billion but not exceeding
$2 billion; 0.030% of the portion of the
daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding
$3 billion; and 0.025% of the portion of
the daily net assets exceeding $3
billion.
Dean Witter Liquid Asset 0.050% of the portion of the daily net
Fund Inc. assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.35 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.35 billion but not
exceeding $1.75 billion; 0.030% of the
portion of the daily net assets
exceeding $1.75 billion but not
exceeding $2.15 billion; 0.0275% of the
portion of the daily net assets
exceeding $2.15 billion but not
exceeding $2.5 billion; 0.025% of the
portion of the daily net assets
exceeding $2.5 billion but not exceeding
$15 billion; 0.0249% of the portion of
the daily net assets exceeding $15
billion but not exceeding $17.5 billion;
and 0.0248% of the portion of the daily
net assets exceeding $17.5 billion.
Dean Witter New York Municipal 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.5 billion but not exceeding
$2 billion; 0.030% of the portion of the
daily net assets exceeding $2 bil-
B-6
<PAGE>
lion but not exceeding $2.5 billion;
0.0275% of the portion of the daily net
assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets
exceeding $3 billion.
Dean Witter Retirement Series 0.050% of the net assets.
Liquid Assets
Dean Witter Retirement Series 0.050% of the net assets.
U.S. Government Money Market
Dean Witter Select Dimensions Series- 0.50% to the net assets.
Money Market Portfolio
Dean Witter Tax-Free Daily 0.050% of the portion of the daily net
Income Trust assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.5 billion but not exceeding
$2 billion; 0.030% of the portion of the
daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding
$3 billion; and 0.025% of the portion of
the daily net assets exceeding $3
billion.
Dean Witter U.S. Government 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.5 billion but not exceeding
$2 billion; 0.030% of the portion of the
daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding
$3 billion; and 0.025% of the portion of
the daily net assets exceeding $3
billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Money Market
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
CLOSED-END FUNDS
Dean Witter Government Income 0.060% to the average weekly net
Trust assets.
High Income Advantage Trust 0.075% of the portion of the average
weekly net assets not exceeding $250
million; 0.060% of the portion of
average weekly net assets exceeding $250
million and not exceeding $500 million;
0.050% of the portion of average weekly
net assets exceeding $500 million and
not exceeding $750 million; 0.040% of
the portion of average weekly net assets
exceeding
B-7
<PAGE>
$750 million and not exceeding $1
billion; and 0.030% of the portion of
average weekly net assets exceeding $1
billion.
High Income Advantage Trust II 0.075% of the portion of the average
weekly net assets not exceeding $250
million; 0.060% of the portion of
average weekly net assets exceeding $250
million and not exceeding $500 million;
0.050% of the portion of average weekly
net assets exceeding $500 million and
not exceeding $750 million; 0.040% of
the portion of average weekly net assets
exceeding $750 million and not exceeding
$1 billion; and 0.030% of the portion of
average weekly net assets exceeding $1
billion.
High Income Advantage Trust III 0.075% of the portion of the average
weekly net assets not exceeding $250
million; 0.060% of the portion of
average weekly net assets exceeding $250
million and not exceeding $500 million;
0.050% of the portion of average weekly
net assets exceeding $500 million and
not exceeding $750 million; 0.040% of
the portion of the average weekly net
assets exceeding $750 million and not
exceeding $1 billion; and 0.030% of the
portion of average weekly net assets
exceeding $1 billion.
InterCapital Income Securities Inc. 0.050% to the average weekly net assets.
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Bond Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital California Insured 0.035% to the average weekly net assets.
Municipal Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Investment Trust
InterCapital New York Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Securities
InterCapital California Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Securities
InterCapital Insured California 0.035% to the average weekly net assets.
Municipal Securities
B-8
<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. 18 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated April
12, 1996, 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 headings
"Independent Accountants" and "Experts" in such Statement of Additional
Information and to the reference to us under the heading "Financial Highlights"
in such Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATEROUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 12, 1996
<PAGE>
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
OF
DEAN WITTER NATURAL RESOURCE DEVELOPMENT SECURITIES INC.
WHEREAS, Dean Witter Natural Resource Development Securities Inc. (the
"Fund") is engaged in business as an open-end management investment company and
is registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, on April 28, 1993, the Fund most recently amended and restated a
Plan of Distribution pursuant to Rule 12b-1 under the Act which had initially
been adopted on July 2, 1984, and the Directors then determined that there was a
reasonable likelihood that adoption of the Plan of Distribution, as then amended
and restated, would benefit the Fund and its shareholders; and
WHEREAS, the Directors believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to continue
to benefit the Fund and its shareholders; and
WHEREAS, on July 2, 1984, the Fund and Dean Witter Reynolds Inc. ("DWR")
amended and restated a Distribution Agreement which had initially been adopted
on November 10, 1984, pursuant to which the Fund employed DWR as distributor of
the Fund's shares; and
WHEREAS, on January 4, 1993 the Fund and DWR substituted Dean Witter
Distributors Inc. (the "Distributor") in the place of DWR as distributor of the
Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will continue to
promote the sale of Fund shares and provide personal services to Fund
shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor entered into a separate Distribution
Agreement dated as of June 30, 1993, pursuant to which the Fund has employed the
Distributor in such capacity during the continuous offering of shares of the
Fund.
NOW, THEREFORE, the Fund hereby amends the Plan of Distribution previously
adopted and amended and restated, and the Distributor hereby agrees to the terms
of said Plan of Distribution (the "Plan"), as amended herein, in accordance with
Rule 12b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of securities
of which the Fund is the issuer, compensation for distribution of its shares at
the rate of the lesser of (i) 1.0% per annum of the average daily aggregate
sales of the shares of the Fund since inception of the Plan (not including
reinvestment of dividends and capital gains distributions from the Fund) less
the average daily aggregate net asset value of the shares of the Fund redeemed
since the inception of the Plan upon which a contingent deferred sales charge
has been imposed or upon which such charge has been waived, or (ii) 1.0% per
annum of the Fund's average daily net assets attributable to shares issued since
the inception of the Plan. Such compensation shall be calculated and accrued
daily and paid monthly or at such other intervals as the Directors shall
determine. The Distributor may direct that all or any part of the amounts
receivable by it under this Plan be paid directly to DWR, its affiliates or
other broker-dealers who provide distribution and shareholder services. All
payments made hereunder pursuant to the Plan shall be in accordance with the
terms and limitations of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc.
2. The amount set forth in paragraph 1 of this Plan shall be paid for
services of the Distributor, DWR, its affiliates and other broker-dealers it may
select, including DWR, in connection with the distribution of the Fund's shares,
including personal services to shareholders with respect to their holdings of
Fund shares, and may be spent by the Distributor, DWR, its affiliates and such
broker-dealers on any activities or expenses related to the distribution of the
Fund's shares or services to shareholders, including, but not limited to:
compensation to, and expenses of, account executives or other employees of the
Distributor, DWR, its affiliates or other broker-dealers; overhead and other
branch office distribution-related expenses and telephone expenses of persons
who engage in or support distribution of shares or who provide personal services
to shareholders; printing of prospectuses and reports for other than existing
shareholders; preparation, printing and distribution of sales literature and
advertising materials and opportunity costs in incurring the foregoing expenses
(which may be calculated as a carrying charge on the excess of the distribution
expenses incurred by the Distributor, DWR, its affiliates or other
1
<PAGE>
broker-dealers over distribution revenues received by them, such excess being
hereinafter referred to as "carryover expenses"). The overhead and other branch
office distribution-related expenses referred to in this paragraph 2 may
include: (a) the expenses of operating the branch offices of the Distributor or
other broker-dealers, including DWR, in connection with the sale of Fund shares,
including lease costs, the salaries and employee benefits of operations and
sales support personnel, utility costs, communications costs and the costs of
stationery and supplies; (b) the costs of client sales seminars; (c) travel
expenses of mutual fund sales coordinators to promote the sale of Fund shares;
and (d) other expenses relating to branch promotion of Fund sales. Payments may
also be made with respect to distribution expenses incurred in connection with
the distribution of shares, including personal services to shareholders with
respect to holdings of such shares, of an investment company whose assets are
acquired by the Fund in a tax-free reorganization, provided that carryover
expenses as a percentage of Fund assets will not be materially increased
thereby.
3. This Plan, as amended and restated, shall not take effect until it has
been approved, together with any related agreements, by votes of a majority of
the Board of Directors of the Fund and of the Directors who are not "interested
persons" of the Fund (as defined in the Act) and have no direct or indirect
financial interest in the operation of this Plan or any agreements related to it
(the "Rule 12b-1 Directors"), cast in person at a meeting (or meetings) called
for the purpose of voting on this Plan and such related agreements.
4. This Plan shall continue in effect until April 30, 1996, and from year
to year thereafter, provided such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 3 hereof.
5. The Distributor shall provide to the Directors of the Fund and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made. In this regard,
the Directors shall request the Distributor to specify such items of expenses as
the Directors deem appropriate. The Directors shall consider such items as they
deem relevant in making the determinations required by paragraph 4 hereof.
6. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding voting
securities of the Fund. In the event of any such termination or in the event of
nonrenewal, the Fund shall have no obligation to pay expenses which have been
incurred by the Distributor, DWR, its affiliates or other broker-dealers in
excess of payments made by the Fund pursuant to this Plan. However, this shall
not preclude consideration by the Directors of the manner in which such excess
expenses shall be treated.
7. This Plan may not be amended to increase materially the amount the Fund
may spend for distribution provided in paragraph 1 hereof unless such amendment
is approved by a vote of at least a majority (as defined in the Act) of the
outstanding voting securities of the Fund, and no material amendment to the Plan
shall be made unless approved in the manner provided for approval in paragraph 3
hereof.
8. While this Plan is in effect, the selection and nomination of Directors
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Directors who are not interested persons.
9. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 5 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible place.
2
<PAGE>
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
amended and restated Plan of Distribution as of the day and year set forth below
in New York, New York.
<TABLE>
<S> <C>
Date: July 2, 1984 DEAN WITTER NATURAL RESOURCE DEVELOPMENT
As amended on April 15, 1987, SECURITIES INC.
January 4, 1993, April 28, 1993
and October 26, 1995
By
..........................................
Attest:
.........................................
DEAN WITTER DISTRIBUTORS INC.
By
..........................................
Attest:
.........................................
DEAN WITTER REYNOLDS INC.
By
..........................................
Attest:
.........................................
</TABLE>
3
<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 29-Feb-96 YEARS - n TOTAL RETURN - T
- ---------- ----------- --------- -------------------
28-Feb-95 $1,193.20 1 19.32%
28-Feb-91 $1,510.20 5 8.59%
28-Feb-86 $2,847.90 10 11.03%
(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)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 29-Feb-96 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ----------- --------- ----------------
28-Feb-95 $1,243.20 24.32% 1 24.32%
28-Feb-91 $1,530.20 53.02% 5 8.88%
28-Feb-86 $2,847.90 184.79% 10 11.03%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ ----------- ---------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
30-Mar-81 167.49 $26,749 $133,745 $267,490
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 118,963,383
<INVESTMENTS-AT-VALUE> 145,449,775
<RECEIVABLES> 9,680,693
<ASSETS-OTHER> 29,138
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 155,159,606
<PAYABLE-FOR-SECURITIES> 2,095,261
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 402,903
<TOTAL-LIABILITIES> 2,498,164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 122,965,473
<SHARES-COMMON-STOCK> 12,017,301
<SHARES-COMMON-PRIOR> 12,326,890
<ACCUMULATED-NII-CURRENT> 235,202
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,974,375
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,486,392
<NET-ASSETS> 152,661,442
<DIVIDEND-INCOME> 3,172,448
<INTEREST-INCOME> 254,278
<OTHER-INCOME> 0
<EXPENSES-NET> 2,683,052
<NET-INVESTMENT-INCOME> 743,674
<REALIZED-GAINS-CURRENT> 9,657,602
<APPREC-INCREASE-CURRENT> 20,867,725
<NET-CHANGE-FROM-OPS> 31,269,001
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (476,340)
<DISTRIBUTIONS-OF-GAINS> (7,165,637)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17,740,630
<NUMBER-OF-SHARES-REDEEMED> (18,637,754)
<SHARES-REINVESTED> 587,535
<NET-CHANGE-IN-ASSETS> 19,849,828
<ACCUMULATED-NII-PRIOR> (32,132)
<ACCUMULATED-GAINS-PRIOR> 482,410
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 883,804
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,683,052
<AVERAGE-NET-ASSETS> 141,408,643
<PER-SHARE-NAV-BEGIN> 10.77
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 2.53
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> (0.62)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.70
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
