<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 27, 1997
REGISTRATION NOS. 2-86966
811-3870
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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. 14 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 16 /X/
------------------
(CHECK APPROPRIATE BOX OR BOXES)
----------------
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
-------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
___ immediately upon filing pursuant to paragraph (b)
_X_ on March 31, 1997 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 DECEMBER 31, 1996 WITH THE SECURITIES AND EXCHANGE
COMMISSION ON FEBRUARY 3, 1997.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
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<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- ---------------------------------------------- ---------------------------------------------------------------------
<S> <C>
PART A PROSPECTUS
1. ......................................... Cover Page
2. ......................................... Prospectus Summary; Summary of Fund Expenses
3. ......................................... Financial Highlights; Report of Independent Accountants; Financial
Statements; Performance Information
4. ......................................... Investment Objective and Policies; The Fund and Its Management, Cover
Page; Investment Restrictions; Prospectus Summary; Financial
Highlights
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; Prospectus Summary
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; Trustees and Officers
15. ......................................... The Fund and Its Management; Trustees and Officers
16. ......................................... The Fund and Its Management; The Distributor; Shareholder Services;
Custodian and Transfer Agent; Independent Accountants
17. ......................................... Portfolio Transactions and Brokerage
18. ......................................... Shares of the Fund
19. ......................................... The Distributor; Redemptions and Repurchases; Financial Statements;
Determination of Net Asset Value; Shareholder Services
20. ......................................... Dividends, Distributions and Taxes; Financial Statements
21. ......................................... The Distributor
22. ......................................... Performance Information
23. ......................................... Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
MARCH 31, 1997
Dean Witter U.S. Government Securities Trust (the "Fund") is an
open-end diversified management investment company whose investment objective is
high current income consistent with safety of principal. The Fund offers a
convenient and economical way for persons to invest in a professionally managed
diversified portfolio of obligations issued or guaranteed by the U.S. Government
or its instrumentalities. All such obligations are backed by the full faith and
credit of the United States. No assurance can be given that the Fund's objective
will be realized. Shares of the Fund are not sponsored, guaranteed, endorsed or
insured by the U.S. Government or any agency thereof.
Shares of the Fund are continuously offered at net asset value.
However, redemptions and/or repurchases are subject in most cases to a
contingent deferred sales charge, scaled down from 5% to 1% of the amount
redeemed, if made within six years of purchase, which charge will be paid to the
Fund's Distributor, Dean Witter Distributors Inc. See "Redemptions and
Repurchases--Contingent Deferred Sales Charge." In addition, the Fund pays the
Distributor a Rule 12b-1 distribution fee pursuant to a Plan of Distribution at
the annual rate of 0.75% (0.65% on amounts over $10 billion) of the lesser of
the (i) average daily aggregate net sales or (ii) average daily net assets of
the Fund. See "Purchase of Fund Shares--Plan of Distribution."
This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated March 31, 1997, 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 OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/3
Financial Highlights/4
The Fund and its Management/5
Investment Objective and Policies/5
Risk Considerations/9
Purchase of Fund Shares/11
Shareholder Services/13
Redemptions and Repurchases/16
Dividends, Distributions and Taxes/18
Performance Information/19
Additional Information/20
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Dean Witter
U.S. Government Securities Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS
<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
Fund open-end diversified management investment company investing in obligations issued or guaranteed by
the U.S. Government.
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Shares Offered Shares of beneficial interest with $0.01 par value (see page 20).
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Offering At net asset value without sales charge (see page 11). Shares redeemed within six years of purchase
Price are subject to a contingent deferred sales charge under most circumstances (see page 16).
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Minimum Minimum initial investment, $1,000 ($100 if the account is opened through EasyInvest-SM-); minimum
Purchase subsequent investment, $100 (see page 11).
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Investment The investment objective of the Fund is high current income consistent with safety of principal.
Objective
- ----------------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned subsidiary,
Manager Dean Witter Services Company Inc., serve in various investment management, advisory, management and
administrative capacities to 102 investment companies and other portfolios with assets of
approximately $93 billion at February 28, 1997 (see page 5).
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Management The Investment Manager receives a monthly fee at the annual rate of 0.50% ( 1/2 of 1%) of daily net
Fee assets, scaled down on assets over $1 billion. The fee should not be compared with fees paid by
other investment companies without also considering applicable sales loads and distribution fees,
including those noted below (see page 5).
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Dividends Dividends are declared daily, and paid monthly either in additional shares of the Fund or, at the
shareholder's option, in cash (see page 18).
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Distributor and Dean Witter Distributors Inc. (the "Distributor"). The Distributor receives from the Fund a
Distribution distribution fee accrued daily and payable monthly at the rate of 0.75% per annum (0.65% on amounts
Fee over $10 billion) of the lesser of (i) the Fund's average daily aggregate net sales or (ii) the
Fund's average daily net assets. The fee compensates the Distributor for the services provided in
distributing shares of the Fund and for sales-related expenses. The Distributor also receives the
proceeds of any contingent deferred sales charges (see pages 11-12 and 16-18).
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Redemption-- Shares are redeemable by the shareholder at net asset value. An account may be involuntarily
Contingent redeemed if the total value of the account is less than $100 or, if the account was opened through
Deferred Sales EasyInvest, if after twelve months the shareholder has invested less than $1,000 in the account.
Charge Although no commission or sales charge is imposed upon the purchase of shares, a contingent deferred
sales charge (scaled down from 5% to 1%) is imposed on any redemption of shares if after such
redemption the aggregate current value of an account with the Fund falls below the aggregate amount
of the investor's purchase payments made during the six years preceding the redemption. However,
there is no charge imposed on redemption of shares purchased through reinvestment of dividends or
distributions (see pages 16-18).
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Risks The Fund invests only in obligations issued or guaranteed by the U.S. Government which are subject
to minimal risk of loss of income and principal. It may engage in the purchase of such securities on
a when-issued basis. The value of the Fund's portfolio securities, and therefore the Fund's net
asset value per share, may increase or decrease due to various factors, principally changes in
prevailing interest rates. Generally, a rise in interest rates will result in a decrease in the
Fund's net asset value per share, while a drop in interest rates will result in an increase in the
Fund's net asset value per share. In addition, the average life of certain of the securities held in
the Fund's portfolio (i.e., GNMA Certificates) may be shortened by prepayments or refinancings of
the mortgage pools underlying such securities. Such prepayments may have an impact on dividends paid
by the Fund (see pages 9-10).
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</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE
IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL INFORMATION
2
<PAGE>
SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended December 31, 1996.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
- ---------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases.................................. None
Maximum Sales Charge Imposed on Reinvested Dividends....................... None
Contingent 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
PAYMENT MADE PERCENTAGE
- ---------------------------------------------------------------------- -----------
<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>
Redemption Fees............................................................ None
Exchange Fee............................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
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Management Fees............................................................ 0.42%
12b-1 Fees*................................................................ 0.75%
Other Expenses............................................................. 0.08%
Total Fund Operating Expenses.............................................. 1.25%
<FN>
- ------------
* A PORTION OF THE 12b-1 FEE EQUAL TO 0.20% OF THE FUND'S AVERAGE DAILY NET
ASSETS IS CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD") GUIDELINES (SEE "PURCHASE OF
FUND SHARES").
</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........................................ $ 63 $ 70 $ 89 $ 151
You would pay the following expenses on the same investment,
assuming no redemption..................................... $ 13 $ 40 $ 69 $ 151
</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
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The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, the 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 DECEMBER 31,
-------------------------------------------------------------------------------------------------
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... $ 9.21 $ 8.41 $ 9.31 $ 9.30 $ 9.52 $ 9.37 $ 9.51 $ 9.42 $ 9.75 $10.33
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment
income................ 0.56 0.57 0.58 0.64 0.74 0.87 0.90 0.91 0.97 0.96
Net realized and
unrealized gain
(loss)................ (0.29) 0.80 (0.90) 0.01 (0.22) 0.15 (0.14) 0.09 (0.33) (0.58)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations............ 0.27 1.37 (0.32) 0.65 0.52 1.02 0.76 1.00 0.64 0.38
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less dividends from net
investment income..... (0.56) (0.57) (0.58) (0.64) (0.74) (0.87) (0.90) (0.91) (0.97) (0.96)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period................ $ 8.92 $ 9.21 $ 8.41 $ 9.31 $ 9.30 $ 9.52 $ 9.37 $ 9.51 $ 9.42 $ 9.75
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL INVESTMENT
RETURN+................. 3.16% 16.74% (3.51)% 7.13% 5.76% 11.43% 8.49% 11.10% 6.74% 3.92%
Ratios to average net
assets:
Expenses............. 1.25% 1.24% 1.22% 1.18% 1.20% 1.17% 1.23% 1.19% 1.21% 1.18%
Net investment
income.............. 6.28% 6.44% 6.57% 6.78% 7.91% 9.23% 9.60% 9.62% 10.01% 9.63%
SUPPLEMENTAL DATA:
Net assets, end of
period, in millions... $6,450 $7,955 $8,211 $12,235 $12,484 $11,736 $9,829 $10,167 $10,366 $10,418
Portfolio turnover
rate.................. 8% 14% 26% 32% 40% 104% 54% 44% 15% 51%
</TABLE>
- -------------
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
4
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter U.S. Government Securities Trust (the "Fund") is an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended (the "Act"). The Fund is a Trust of the type
commonly known as a "Massachusetts business trust" and was organized under the
laws of The Commonwealth of Massachusetts on September 29, 1983.
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., a balanced
financial services organization providing a broad range of nationally marketed
credit and investment products.
On February 5, 1997, DWDC and Morgan Stanley Group Inc. announced that they
had entered into an Agreement and Plan of Merger, with the combined company to
be named Morgan Stanley, Dean Witter, Discover & Co. The business of Morgan
Stanley Group Inc. and its affiliated companies is providing a wide range of
financial services for sovereign governments, corporations, institutions and
individuals throughout the world. DWDC is the direct parent of InterCapital and
Dean Witter Distributors Inc., the Fund's distributor. It is currently
anticipated that the transaction will close in mid-1997. Thereafter,
InterCapital and Dean Witter Distributors Inc. will be direct subsidiaries of
Morgan Stanley, Dean Witter, Discover & Co.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 102 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined total assets of
approximately $89.8 billion at February 28, 1997. The Investment Manager also
manages portfolios of pension plans, other institutions and individuals which
aggregated approximately $3.2 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by or under the
direction of the Investment Manager to ensure that the Fund's general investment
policies and programs are being properly carried out and that administrative
services are being provided to the Fund in a satisfactory manner.
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 at an annual rate of
0.50% of the daily net assets of the Fund up to $1 billion, scaled down at
various asset levels to 0.30% on assets over $12.5 billion. For the fiscal year
ended December 31, 1996, the Fund accrued total compensation to the Investment
Manager amounting to 0.42% of the Fund's average daily net assets and the Fund's
total expenses amounted to 1.25% of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is high current income consistent with
safety of principal. This investment objective may not be changed without
approval of the Fund's shareholders. The Fund seeks to achieve its objective by
investing in obligations issued or guaranteed by the U.S. Government or its
instrumentalities ("U.S. Government securities"). All such obligations are
backed by the "full
5
<PAGE>
faith and credit" of the United States. Investments may be made in obligations
of instrumentalities of the U.S. Government only where such obligations are
guaranteed by the U.S. Government.
U.S. Government securities include U.S. Treasury securities consisting of
Treasury bills, Treasury notes and Treasury bonds. Some of the other U.S.
Government securities in which the Fund may invest include securities of the
Federal Housing Administration, the Government National Mortgage Association,
the Department of Housing and Urban Development, the Export-Import Bank, the
Farmers Home Administration, the General Services Administration, the Maritime
Administration, Resolution Funding Corporation and the Small Business
Administration. The maturities of such securities usually range from three
months to thirty years.
The Fund is not limited as to the maturities of the U.S. Government
securities in which it may invest, except that the Fund will not purchase zero
coupon securities with remaining maturities of longer than ten years. For a
discussion of the risks of investing in U.S. Government securities (including
such securities purchased on a when-issued, delayed delivery or firm commitment
basis and zero coupon securities), see "Risk Considerations" below.
While the Fund has the ability to invest in any securities backed by the
full faith and credit of the United States, it is currently anticipated that a
substantial portion of the Fund's assets will be invested in Certificates of the
Government National Mortgage Association (GNMA). Should market or economic
conditions warrant, this policy is subject to change at any time at the
discretion of the Investment Manager.
DESCRIPTION OF GNMA CERTIFICATES GNMA Certificates are mortgage-backed
securities. Each Certificate evidences an interest in a specific pool of
mortgages insured by the Federal Housing Administration or the Farmers Home
Administration (FHA) or guaranteed by the Veterans Administration (VA).
Scheduled payments of principal and interest are made to the registered holders
of GNMA Certificates. The GNMA Certificates that the Fund will invest in are of
the modified pass-through type. GNMA guarantees the timely payment of monthly
installments of principal and interest on modified pass-through certificates at
the time such payments are due, whether or not such amounts are collected by the
issuer on the underlying mortgages. The National Housing Act provides that the
full faith and credit of the United States is pledged to the timely payment of
principal and interest by GNMA of amounts due on these GNMA Certificates.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgage instruments with maximum maturities of 30 years. The average
life is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as the result of prepayments or
refinancing of such mortgages or foreclosure. Such prepayments are passed
through to the registered holder with the regular monthly payments of principal
and interest, which has the effect of reducing future payments. Due to the GNMA
guarantee, foreclosures impose no risk to investment principal. The occurrence
of mortgage prepayments is affected by factors including the level of interest
rates, general economic conditions, the location and age of the mortgage and
other social and demographic conditions. As prepayment rates vary widely, it is
not possible to accurately predict the average life of a particular pool.
However, statistics indicate that the average life of the type of mortgages
backing the majority of GNMA Certificates is approximately twelve years. For
this reason, it is standard practice to treat GNMA Certificates as 30-year
mortgage-backed securities which prepay fully in the twelfth year. Pools of
mortgages with other maturities or different characteristics will have varying
assumptions for average life. The assumed average life of pools of mortgages
having terms of less than 30 years is less than twelve years, but typically not
less than five years.
The coupon rate of interest of GNMA Certificates is lower than the interest
rate paid on the VA-
6
<PAGE>
guaranteed or FHA-insured mortgages underlying the Certificates, but only by the
amount of the fees paid to GNMA and the issuer.
Yields on pass-through securities are typically quoted by investment dealers
and vendors based on the maturity of the underlying instruments and the
associated average life assumption. In periods of falling interest rates the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising rates
the rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. Reinvestment by the Fund of prepayments may occur at higher or
lower interest rates than the original investment. Historically, actual average
life has been consistent with the twelve-year assumption referred to above. The
actual yield of each GNMA Certificate is influenced by the prepayment experience
of the mortgage pool underlying the Certificates. Interest on GNMA Certificates
is paid monthly rather than semi-annually as for traditional bonds.
The Fund will invest in mortgage pass-through securities representing
participation interests in pools of residential mortgage loans originated by
United States governmental or private lenders such as banks, broker-dealers and
financing corporations and guaranteed, to the extent provided in such
securities, by the United States Government or one of its agencies or
instrumentalities. Such securities, which are ownership interests in the
underlying mortgage loans, differ from conventional debt securities, which
provide for periodic payment of interest in fixed amounts (usually
semi-annually) and principal payments at maturity or on specified call dates.
Mortgage pass-through securities provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans, net
of any fees paid to the guarantor of such securities and the servicer of the
underlying mortgage loans. The guaranteed mortgage pass-through securities in
which the Fund may invest include those issued or guaranteed by GNMA or other
entities which securities are backed by the full faith and credit of the United
States.
Certificates for mortgage-backed securities evidence an interest in a
specific pool of mortgages. These certificates are, in most cases, "modified
pass-through" instruments, wherein the issuing agency guarantees the payment of
principal and interest on mortgages underlying the certificates, whether or not
such amounts are collected by the issuer on the underlying mortgages.
ADJUSTABLE RATE MORTGAGE SECURITIES. The Fund may also invest in adjustable
rate mortgage securities ("ARMs"), which are pass-through mortgage securities
collateralized by mortgages with adjustable rather than fixed rates. ARMs
eligible for inclusion in a mortgage pool generally provide for a fixed initial
mortgage interest rate for either the first three, six, twelve or thirteen
scheduled monthly payments. Thereafter, the interest rates are subject to
periodic adjustment based on changes to a designated benchmark index.
ARMs contain maximum and minimum rates beyond which the mortgage interest
rate may not vary over the lifetime of the security. In addition, certain ARMs
provide for additional limitations on the maximum amount by which the mortgage
interest rate may adjust for any single adjustment period. Alternatively,
certain ARMs contain limitations on changes in the required monthly payment. In
the event that a monthly payment is not sufficient to pay the interest accruing
on an ARM, any such excess interest is added to the principal balance of the
mortgage loan, which is repaid through future monthly payments. If the monthly
payment for such an instrument exceeds the sum of the interest accrued at the
applicable mortgage interest rate and the principal payment required at such
point to amortize the outstanding principal balance over the remaining term of
the loan, the excess is utilized to reduce the then outstanding principal
balance of the ARM.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH
SECURITIES. Collateralized
7
<PAGE>
mortgage obligations or "CMOs" are debt obligations collateralized by mortgage
loans or mortgage pass-through securities. Typically, CMOs are collateralized by
GNMA, FNMA or FHLMC Certificates, but also may be collateralized by whole loans
or private mortgage pass-through securities (such collateral collectively
hereinafter referred to as "Mortgage Assets"). Multiclass pass-through
securities are equity interests in a trust composed of Mortgage Assets. Payments
of principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multiclass pass-through securities. CMOs may be issued by
agencies or instrumentalities of the United States government, or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing. However, the Fund will only invest in
CMOs which are backed by the full faith and credit of the United States.
The issuer of a series of CMOs may elect to be treated as a Real Estate
Mortgage Investment Conduit ("REMIC"). REMICs include governmental and/ or
private entities that issue a fixed pool of mortgages secured by an interest in
real property. REMICs are similar to CMOs in that they issue multiple classes of
securities, but unlike CMOs, which are required to be structured as debt
securities, REMICs may be structured as indirect ownership interests in the
underlying assets of the REMICs themselves. However, there are no effects on the
Fund from investing in CMOs issued by entities that have elected to be treated
as REMICs, and all future references to CMOs shall also be deemed to include
REMICs. The Fund may invest without limitation in CMOs.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. Interest is paid or accrues on all classes of the CMOs on a monthly,
quarterly or semi-annual basis. Certain CMOs may have variable or floating
interest rates and others may be stripped (securities which provide only the
principal or interest feature of the underlying security).
The principal of and interest on the Mortgage Assets may be allocated among
the several classes of a CMO series in a number of different ways. Generally,
the purpose of the allocation of the cash flow of a CMO to the various classes
is to obtain a more predictable cash flow to the individual tranches than exists
with the underlying collateral of the CMO. As a general rule, the more
predictable the cash flow is on a CMO tranche, the lower the anticipated yield
will be on that tranche at the time of issuance relative to prevailing market
yields on mortgage-backed securities. As part of the process of creating more
predictable cash flows on most of the tranches in a series of CMOs, one or more
tranches generally must be created that absorb most of the volatility in the
cash flows on the underlying mortgage loans. The yields on these tranches are
generally higher than prevailing market yields on mortgage-backed securities
with similar maturities. As a result of the uncertainty of the cash flows of
these tranches, the market prices of and yield on these tranches generally are
more volatile.
The Fund also may invest in, among other things, parallel pay CMOs and
Planned Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally require payments of a
specified amount of principal on each payment date. PAC Bonds always are
parallel pay CMOs with the required principal payment on such securities
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<PAGE>
having the highest priority after interest has been paid to all classes.
For a discussion of the risks of investing in mortgage-backed securities,
see "Risk Considerations" below.
The purchase or retention of stripped mortgage-backed securities, CMOs and
REMICs investments will be made only in conformity with the provisions of
Section 703.5 of the National Credit Union Administration Rules and Regulations,
as such provisions became effective on December 2, 1991.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in the
market value of its portfolio securities. Neither the value nor the yield of the
U.S. Government securities invested in by the Fund (or the value or yield of the
shares of the Fund) is guaranteed by the U.S. Government. Such values and yield
will fluctuate with changes in prevailing interest rates and other factors.
Generally, as prevailing interest rates rise, the value of the U.S.
Government securities held by the Fund, and, concomitantly, the net asset value
of the Fund's shares, will fall. Such securities with longer maturities
generally tend to produce higher yields and are subject to greater market
fluctuation as a result of changes in interest rates than debt securities with
shorter maturities. As noted above, except with regard to zero coupon
securities, the Fund is not limited as to the maturities of the U.S. Government
securities in which it may invest.
RISKS OF MORTGAGE-BACKED SECURITIES. Mortgage-backed securities have
certain different characteristics than traditional debt securities. Among the
major differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans or other assets generally may be prepaid
at any time. As a result, if the Fund purchases such a security at a premium, a
prepayment rate that is faster than expected may reduce yield to maturity, while
a pre-payment rate that is slower than expected may have the opposite effect of
increasing yield to maturity. Alternatively, if the Fund purchases these
securities at a discount, faster than expected prepayments will increase, while
slower than expected prepayments may reduce, yield to maturity.
Mortgage-backed securities, like all fixed-income securities, generally
decrease in value as a result of increases in interest rates. In addition,
although generally the value of fixed-income securities increases during periods
of falling interest rates, mortgage-backed securities may benefit less than
other fixed-income securities from declining interest rates because of the risk
of prepayments. As discussed above under "Description of GNMA Certificates," the
assumed average life of mortgages backing the majority of GNMA Certificates is
twelve years. This average life is likely to be substantially shorter than the
original maturity of the mortgage pools underlying the certificates, as a pool's
duration may be shortened by unscheduled or early payments of principal on the
underlying mortgages. As prepayment rates vary widely, it is not possible to
accurately predict the average life of a particular pool.
Although the extent of prepayments on a pool of mortgage loans depends on
various factors, including the prevailing level of interest rates, general
economic conditions, the location and age of the mortgage and other social and
demographic conditions, as a general rule prepayments on fixed rate mortgage
loans will increase during a period of falling interest rates and decrease
during a period of rising interest rates. If the Fund has purchased securities
backed by pools containing mortgages whose yields exceed the prevailing interest
rate, any premium paid for such securities may be lost. As a result, the net
asset value of shares of the Fund and the Fund's ability to achieve its
investment objective may be adversely affected by mortgage prepayments. Amounts
available for reinvestment by the Fund are likely to be greater during a period
of declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates.
There are certain risks associated specifically with CMOs. A number of
different factors, including
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<PAGE>
the extent of prepayment of principal of the Mortgage Assets, affect the
availability of cash for principal payments by the CMO issuer on any payment
date and, accordingly, affect the timing of principal payments on each CMO
class.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are negotiated,
the price is fixed at the time of the commitment, but delivery and payment can
take place between one month and 120 days after the date of the 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 accrues to the purchaser during this period. 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 portfolio securities equal in value to commitments to
purchase securities on a when-issued, delayed delivery or forward commitment
basis. There is no overall limit on the percentage of the Fund's assets which
may be committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of the Fund's
net asset value.
ZERO COUPON SECURITIES. A portion of the U.S. Government securities
purchased by the Fund may be zero coupon securities with maturity dates in each
case no later than ten years from the settlement date for the purchase of such
security. 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.
For additional risk disclosure, please refer to the discussion of specific
investments above in "Investment Objective and Policies."
PORTFOLIO TRADING
The Fund is managed within InterCapital's Taxable Fixed-Income Group, which
manages twenty-five funds and fund portfolios, with approximately $13 billion in
assets at February 28, 1997. Rajesh K. Gupta, Senior Vice President of
InterCapital and a member of InterCapital's Taxable Fixed-Income Group, has been
the primary portfolio manager of the Fund since July, 1992 and has been managing
10
<PAGE>
portfolios comprised of government securities at InterCapital for over five
years.
Although the Fund does not intend to engage in short-term trading of
portfolio securities as a means of achieving its investment objective, it may
sell portfolio securities without regard to the length of time they have been
held whenever such sale will in the Investment Manager's opinion strengthen the
Fund's position and contribute to its investment objective. The portfolio
trading engaged in by the Fund may result in its portfolio turnover rate
exceeding 100%. Brokerage commissions are not normally charged on the purchase
or sale of U.S. Government obligations, but such transactions may involve costs
in the form of spreads between bid and asked prices. Pursuant to an order of the
Securities and Exchange Commission, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds Inc. ("DWR"), a
broker-dealer affiliate of InterCapital. In addition, the Fund may incur
brokerage commissions on transactions conducted through DWR.
PURCHASE OF FUND SHARES
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The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers which have entered into selected
dealer 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 U.S. Government
Securities Trust, 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, an automatic purchase plan (see "Shareholder
Services"), is $100, provided that the schedule of automatic investments will
result in investments totalling at least $1,000 within the first twelve months.
In the case of investments pursuant to Systematic Payroll Deduction Plans
(including Individual Retirement Plans), the Fund, in its discretion, may accept
investments without regard to any minimum amounts which would otherwise be
required, if the Fund has reason to believe that additional investments will
increase the investment in all accounts 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. The offering price will be the net
asset value per share next determined following receipt of an order (see
"Determination of Net Asset Value" below).
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment generally is due on or before
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 where 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. Investors will be entitled to receive capital gains distributions if
their order is received by the close of business on the day prior to the record
date for such distributions. 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
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<PAGE>
the Distributor and/or Selected Broker-Dealer. In addition, some sales personnel
of the Selected Broker-Dealer will receive various types of non-cash
compensation as special sales incentives, including trips, educational and/or
business seminars and merchandise. The Fund and the Distributor reserve the
right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution, pursuant to Rule 12b-1 under
the Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 0.75% (0.65% on amounts
over $10 billion) of the lesser of: (a) the average daily aggregate gross sales
of the Fund's shares since the inception of the Fund (not including
reinvestments of dividends or capital gains distributions), less the average
daily aggregate net asset value of the Fund's shares redeemed since the Fund's
inception upon which a contingent deferred sales charge has been imposed or
waived, or (b) the Fund's average daily net assets. The fee is treated by the
Fund as an expense in the year it is accrued. A portion of the fee payable
pursuant to the Plan, equal to 0.20% 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 made for personal service and/or the maintenance of
shareholder accounts.
Amounts paid under the Plan are paid to the Distributor to compensate it for
the services provided and the expenses borne by the Distributor and others in
the distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to and expenses of DWR
account executives and others who engage in or support distribution of shares or
who service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed distribution expenses.
For the fiscal year ended December 31, 1996, the Fund accrued payments under
the Plan amounting to $53,189,389, which amount is equal to 0.75% of the Fund's
average daily net assets for the fiscal year. The payments accrued under the
Plan were calculated pursuant to clause (b) of the compensation formula under
the Plan.
At any given time, the expenses of 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 redemption of shares (see "Redemptions 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 $68,120,003 at December
31, 1996, which was equal to 1.06% of the Fund's net assets on such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution 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 Trustees will consider
at that time the manner in which to treat such expenses. Any cumulative expenses
incurred, but not yet recovered through distribution fees or contingent deferred
sales charges, may or may not be
recov-
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<PAGE>
ered 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 the assets of the Fund, subtracting all liabilities, dividing by the
number of shares outstanding and adjusting the result to the nearest cent. The
net asset value per share is calculated by the Investment Manager 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) all portfolio
securities for which over-the-counter market quotations are readily available
are valued at the bid price; (2) when market quotations are not readily
available, including circumstances under which it is determined by the
Investment Manager that sale or bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as determined
in good faith under procedures established by and under the general supervision
of the Fund's Board of Trustees (valuation of 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 (3) short-term instruments having a
maturity date of more than sixty days are valued on a "mark-to-market" basis,
that is, at prices based on market quotations for securities of similar type,
yield, quality and maturity, until sixty days prior to maturity and thereafter
at amortized cost. Short-term instruments having a maturity date of sixty days
or less at the time of purchase are valued at amortized cost unless the Board of
Trustees determines this does not represent fair market value.
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.
SHAREHOLDER SERVICES
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AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All 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"). 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) on the monthly payment date, which generally will be no later than the
last business day of the month for which the dividend or distribution is
payable. Processing of dividend checks begins immediately following the monthly
payment date. Shareholders who have requested to receive dividends in cash will
normally receive their monthly dividend check during the first ten days of the
following month.
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
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<PAGE>
shares of the Fund (see "Purchase of Fund Shares" and "Redemptions and
Repurchases--Involuntary Redemption").
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.")
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, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the Transfer
Agent.
EXCHANGE PRIVILEGE. The Fund makes available to its shareholders an
"Exchange Privilege" allowing the exchange of shares of the Fund for shares of
other Dean Witter Funds sold with a contingent deferred sales charge ("CDSC
funds"), and for shares of Dean Witter Short-Term U.S. Treasury Trust, Dean
Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean
Witter Balanced Growth Fund, Dean Witter Balanced Income Fund, Dean Witter
Intermediate Term U.S. Treasury Trust and five Dean Witter Funds which are money
market funds (the foregoing eleven non-CDSC funds are hereinafter referred to as
the "Exchange Funds"). Exchanges may be made after the shares of the Fund
acquired by purchase (not by exchange or dividend reinvestment) have been held
for thirty days. There is no waiting period for exchanges of shares acquired by
exchange or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share of
each fund after the exchange order is received. When exchanging into a money
market fund from the Fund, shares of the Fund are redeemed out of the Fund at
their next calculated net asset value and the proceeds of the redemption are
used to purchase shares of the money market fund at their net asset value
determined the following 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 reexchanged for
shares of the
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<PAGE>
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 Exchange Fund 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 a CDSC fund (see
"Redemptions and Repurchases--Contingent Deferred Sales Charge"). However, in
the case of shares 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. (Exchange Fund 12b-1 distribution fees are
described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may be limited by the Fund's refusal to
accept additional purchases and/ or exchanges from the investor. Although the
Fund does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests of
the Fund and its other shareholders, investors should be aware that the Fund and
each of the other Dean Witter Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such restriction will be made by the Fund on a prospective basis
only, upon notice to the shareholder not later than ten days following such
shareholder's most recent exchange. 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 have been exchanged, upon such notice as may
be required by applicable regulatory agencies. Shareholders maintaining margin
accounts with DWR or another Selected Broker-Dealer are referred to their
account executive regarding restrictions on exchange of shares of the Fund
pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares, on
which the shareholder may realize a capital gain or loss. However, the ability
to deduct capital losses on an exchange may be limited in situations where there
is an exchange of shares within ninety days after the shares are purchased. The
Exchange Privilege is only available in states where an exchange may legally be
made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this
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<PAGE>
Exchange Privilege by contacting their 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 in writing or
by contacting the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the Dean Witter
Funds in the past.
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 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 Investment 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, along with any additional information
required by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any charge upon redemption.
Shares redeemed sooner than six years after purchase may, however, be subject to
a charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the table below:
<TABLE>
<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
pur-
16
<PAGE>
chased 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. Moreover, in determining whether a CDSC is
applicable it will be assumed that amounts described in (i), (ii), and (iii)
above (in that order) are redeemed first. In addition, no CDSC will be imposed
on redemptions of shares which were purchased by the employee benefit plans
established by DWR and SPS Transaction Services, Inc. (an affiliate of DWR) for
their employees as qualified under Section 401(k) of the Internal Revenue Code.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age 59 1/2);
(B) distributions from an IRA or 403(b) Custodial Account following attainment
of age 59 1/2; or (C) a tax-free return of an excess contribution to an IRA;
and
(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of the
Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which Dean Witter Trust Company or
Dean Witter Trust FSB, each of which is an affiliate of the Investment Manager,
serves as Trustee or the 401(k) Support Services Group of DWR serves as
recordkeeper ("Eligible 401(k) Plan"), provided that either: (A) the plan
continues to be an Eligible 401(k) Plan after the redemption; or (B) the
redemption is in connection with the complete termination of the plan involving
the distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder's
entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the net
asset value next computed (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 by the Fund, the Distributor,
DWR or other Selected Broker-Dealers. The offer by DWR and other Selected
Broker-Dealers to repurchase shares may
17
<PAGE>
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 net asset value next determined after a
reinstatement request, together with the proceeds, is received by the Transfer
Agent and receive a pro-rata credit for any CDSC paid in connection with such
redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem, at 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 due to redemptions
by the shareholder have a value of less than $100 as a result of redemptions or
repurchases or such lesser amount as may be fixed by the Trustees or, in the
case of an account opened through EasyInvest, if after twelve months the
shareholder has invested less than $1,000 in the account. However, before the
Fund redeems such shares and sends the proceeds to the shareholder, it will
notify the shareholder that the value of the shares is less than the applicable
amount and allow him or her sixty days to make an additional investment in an
amount which will increase the value of his or her account to at least the
applicable amount before the redemption is processed. No CDSC will be imposed on
any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends from net
investment income on each day the New York Stock Exchange is open for business
to shareholders of record as of the close of business the preceding business
day. The amount of dividend may fluctuate from day to day. Such dividends are
paid monthly. The Fund intends to distribute substantially all of its net
investment income on an annual basis.
The Fund may distribute quarterly net realized short-term capital gains, if
any, in excess of any net realized long-term capital losses. The Fund intends to
distribute dividends from net long-term capital gains, if any, at least once
each year. The Fund may, however, elect to retain all or a portion of any net
long-term capital gains in any year for reinvestment. Also, the Fund may at
times make payments from sources other than income or net capital gains.
Payments from such sources would, in effect, represent a return of a portion of
each shareholder's investment. All, or a portion, of such payments would not be
taxable to shareholders.
All dividends and any capital gains distributions will be paid in additional
Fund shares (without sales charge) and automatically credited to the
shareholder's account without issuance of a share
certifi-
18
<PAGE>
cate unless the shareholder requests in writing that all dividends or all
dividends and distributions be paid in cash. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute substantially all of its net
investment income and net short-term capital gains to shareholders and 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 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 applicable state 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 and 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.
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 corporate dividends received deduction.
After the end of the calendar year, shareholders will be sent 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 accuracy.
The foregoing discussion relates solely to the federal income tax
consequences of an investment in the Fund. Distributions may also be subject to
state and local taxes; therefore, each shareholder is advised to consult his or
her own tax adviser.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its"total return" in
advertisements and sales literature. Both the yield and the total return of the
Fund are based on historical earnings and are not intended to indicate future
performance. The yield of the Fund is computed by dividing the Fund's net
investment income over a 30-day period by an average value (using the average
number of shares entitled to receive dividends and the net asset value per share
at the end of the period), all in accordance with applicable regulatory
requirements. Such amount is compounded for six months and then annualized for a
twelve-month period to derive the Fund's yield.
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, and 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
19
<PAGE>
$100,000 in shares of the Fund. The Fund from time to time may also advertise
its performance relative to certain performance rankings and indexes compiled by
independent organizations.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure that
the interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within sixty days of a
sale or a sale within sixty days of a purchase) of a security. In addition,
investment personnel may not purchase or sell a security for their personal
account within thirty 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.
20
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
<TABLE>
<S> <C>
MONEY MARKET FUNDS FIXED-INCOME FUNDS
Dean Witter Liquid Asset Fund Inc. Dean Witter High Yield Securities Inc.
Dean Witter Tax-Free Daily Income Trust Dean Witter Tax-Exempt Securities Trust
Dean Witter New York Municipal Money Market Trust Dean Witter U.S. Government Securities Trust
Dean Witter California Tax-Free Daily Income Trust Dean Witter California Tax-Free Income Fund
Dean Witter U.S. Government Money Market Trust Dean Witter New York Tax-Free Income Fund
EQUITY FUNDS Dean Witter Convertible Securities Trust
Dean Witter American Value Fund Dean Witter Federal Securities Trust
Dean Witter Natural Resource Development Dean Witter World Wide Income Trust
Securities Inc. Dean Witter Intermediate Income Securities
Dean Witter Dividend Growth Securities Inc. Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Developing Growth Securities Trust Dean Witter Multi-State Municipal Series Trust
Dean Witter World Wide Investment Trust Dean Witter Premier Income Trust
Dean Witter Value-Added Market Series Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Utilities Fund Dean Witter Diversified Income Trust
Dean Witter Precious Metals and Minerals Trust Dean Witter Limited Term Municipal Trust
Dean Witter Capital Growth Securities Dean Witter Short-Term Bond Fund
Dean Witter European Growth Fund Inc. Dean Witter High Income Securities
Dean Witter Pacific Growth Fund Inc. Dean Witter National Municipal Trust
Dean Witter Health Sciences Trust Dean Witter Balanced Income Fund
Dean Witter Global Dividend Growth Securities Dean Witter Hawaii Municipal Trust
Dean Witter Global Utilities Fund Dean Witter Intermediate Term U.S. Treasury
Dean Witter International SmallCap Fund Trust
Dean Witter Mid-Cap Growth Fund DEAN WITTER RETIREMENT SERIES
Dean Witter Balanced Growth Fund Liquid Asset Series
Dean Witter Capital Appreciation Fund U.S. Government Money Market Series
Dean Witter Information Fund U.S. Government Securities Series
Dean Witter Special Value Fund Intermediate Income Securities Series
Dean Witter Financial Services Trust American Value Series
Dean Witter Market Leader Trust Capital Growth Series
ASSET ALLOCATION FUNDS Dividend Growth Series
Dean Witter Strategist Fund Strategist Series
Dean Witter Global Asset Allocation Fund Utilities Series
ACTIVE ASSETS ACCOUNT PROGRAM Value-Added Market Series
Active Assets Money Trust Global Equity Series
Active Assets Tax-Free Trust
Active Assets Government Securities Trust
Active Assets California Tax-Free Trust
</TABLE>
<PAGE>
Dean Witter
U.S. Government Securities Trust
Dean Witter
Two World Trade Center
New York, New York 10048
TRUSTEES U.S. Government
Michael Bozic Securities
Charles A. Fiumefreddo Trust
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Barry Fink
Vice President, Secretary and
General Counsel
Rajesh K. Gupta
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.
PROSPECTUS -- MARCH 31, 1997
<PAGE>
(This page left blank intentionally.)
21
<PAGE>
(This page left blank intentionally.)
22
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
MARCH 31, 1997 DEAN WITTER
U.S. GOVERNMENT
SECURITIES TRUST
</TABLE>
- --------------------------------------------------------------------------------
Dean Witter U.S. Government Securities Trust (the "Fund") is an open-end
diversified management investment company whose investment objective is to
provide high current income consistent with safety of principal. The Fund
invests only in obligations issued or guaranteed by the U.S. Government or its
instrumentalities. All such obligations are backed by the full faith and credit
of the United States Government.
A Prospectus for the Fund dated March 31 , 1997, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at its address or telephone numbers listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide you
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Dean Witter
U.S. Government Securities Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or (800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............................................................ 3
Trustees and Officers.................................................................. 7
Investment Practices and Policies...................................................... 12
Investment Restrictions................................................................ 13
Portfolio Transactions and Brokerage................................................... 14
The Distributor........................................................................ 15
Shareholder Services................................................................... 18
Redemptions and Repurchases............................................................ 22
Dividends, Distributions and Taxes..................................................... 25
Performance Information................................................................ 26
Shares of the Fund..................................................................... 27
Custodian and Transfer Agent........................................................... 28
Independent Accountants................................................................ 28
Reports to Shareholders................................................................ 28
Legal Counsel.......................................................................... 28
Experts................................................................................ 28
Registration Statement................................................................. 28
Report of Independent Accountants...................................................... 29
Financial Statements -- December 31, 1996.............................................. 30
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund is a Trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts on
September 29, 1983.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware corporation. In
an internal reorganization which took place in January, 1993, InterCapital
assumed the investment advisory, administrative and management activities
previously performed by the InterCapital Division of Dean Witter Reynolds Inc.
("DWR"), a broker-dealer affiliate of InterCapital. (As hereinafter used in this
Statement of Additional Information, the terms "InterCapital" and "Investment
Manager" refer to DWR's InterCapital Division prior to the internal
reorganization and Dean Witter InterCapital Inc. thereafter.) The daily
management of the Fund and research relating to the Fund's portfolio are
conducted by or under the direction of officers of the Fund and of the
Investment Manager, subject to periodic review by the Fund's Board of Trustees.
Information as to these Trustees and officers is contained under the caption
"Trustees and Officers."
The Investment Manager is the investment manager or investment adviser of
the following investment companies:
<TABLE>
<C> <S>
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 Appreciation Fund
11 Dean Witter Capital Growth Securities
12 Dean Witter Convertible Securities Trust
13 Dean Witter Developing Growth Securities
Trust
14 Dean Witter Diversified Income Trust
15 Dean Witter Dividend Growth Securities
Inc.
16 Dean Witter European Growth Fund Inc.
17 Dean Witter Federal Securities Trust
18 Dean Witter Financial Services Trust
19 Dean Witter Global Asset Allocation Fund
20 Dean Witter Global Dividend Growth
Securities
21 Dean Witter Global Short-Term Income
Fund Inc.
22 Dean Witter Global Utilities Fund
23 Dean Witter Hawaii Municipal Trust
24 Dean Witter Health Sciences Trust
25 Dean Witter High Income Securities
26 Dean Witter High Yield Securities Inc.
27 Dean Witter Income Builder Fund
28 Dean Witter Information Fund
29 Dean Witter Intermediate Income
Securities
30 Dean Witter Intermediate Term U.S.
Treasury Trust
31 Dean Witter International SmallCap Fund
32 Dean Witter Japan Fund
33 Dean Witter Limited Term Municipal Trust
34 Dean Witter Liquid Asset Fund Inc.
35 Dean Witter Market Leader Trust
36 Dean Witter Mid-Cap Growth Fund
37 Dean Witter Multi-State Municipal Series
Trust
38 Dean Witter National Municipal Trust
39 Dean Witter Natural Resource Development
Securities Inc.
40 Dean Witter New York Municipal Money
Market Trust
41 Dean Witter New York Tax-Free Income
Fund
42 Dean Witter Pacific Growth Fund Inc.
43 Dean Witter Precious Metals and Minerals
Trust
44 Dean Witter Premier Income Trust
45 Dean Witter Retirement Series
46 Dean Witter Select Dimensions Investment
Series
</TABLE>
3
<PAGE>
<TABLE>
<C> <S>
47 Dean Witter Select Municipal
Reinvestment Fund
48 Dean Witter Short-Term Bond Fund
49 Dean Witter Short-Term U.S. Treasury
Trust
50 Dean Witter Special Value Fund
51 Dean Witter Strategist Fund
52 Dean Witter Tax-Exempt Securities Trust
53 Dean Witter Tax-Free Daily Income Trust
54 Dean Witter U.S. Government Money Market
Trust
55 Dean Witter U.S. Government Securities
Trust
56 Dean Witter Utilities Fund
57 Dean Witter Value-Added Market Series
58 Dean Witter Variable Investment Series
59 Dean Witter World Wide Income Trust
60 Dean Witter World Wide Investment Trust
</TABLE>
<TABLE>
<C> <S>
CLOSED-END FUNDS
1 High Income Advantage Trust
2 High Income Advantage Trust II
3 High Income Advantage Trust III
4 InterCapital Income Securities Inc.
5 Dean Witter Government Income Trust
6 InterCapital Insured Municipal Bond
Trust
7 InterCapital Insured Municipal Trust
8 InterCapital Insured Municipal Income
Trust
9 InterCapital California Insured
Municipal Income Trust
10 InterCapital Insured Municipal
Securities
11 InterCapital Insured California
Municipal Securities
12 InterCapital Quality Municipal
Investment Trust
13 InterCapital Quality Municipal Income
Trust
14 InterCapital Quality Municipal
Securities
15 InterCapital California Quality
Municipal Securities
16 InterCapital New York Quality Municipal
Securities
17 Municipal Income Trust
18 Municipal Income Trust II
19 Municipal Income Trust III
20 Municipal Income Opportunities Trust
21 Municipal Income Opportunities II
22 Municipal Income Opportunities III
23 Prime Income Trust
24 Municipal Premium Income Trust
</TABLE>
The foregoing investment companies, together with the Fund, are collectively
referred to as the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following companies for
which TCW Funds Management, Inc. is the investment adviser (the "TCW/DW Funds"):
<TABLE>
<C> <S>
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 Mid-Cap Equity Trust
8 TCW/DW Global Telecom Trust
9 TCW/DW Strategic Income Trust
CLOSED-END FUNDS
10 TCW/DW Term Trust 2000
11 TCW/DW Term Trust 2002
12 TCW/DW Term Trust 2003
13 TCW/DW Total Return Trust
14 TCW/DW Emerging Markets Opportunities
Trust
</TABLE>
InterCapital also serves as: (i) sub-adviser to Templeton Global
Opportunities Trust, an open-end investment company; (ii) administrator of The
BlackRock Strategic Term Trust Inc., a closed-end investment company; and (iii)
sub-administrator of MassMutual Participation Investors and Templeton Global
Governments Income Trust, closed-end investment companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager
4
<PAGE>
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 by InterCapital and DWSC on that date. The
foregoing internal reorganizations did not result in any change in the nature or
scope of the administrative services being provided to the Fund or any of the
fees being paid by the Fund for the overall services being performed under the
terms of the existing Management Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Dean Witter Distributors Inc.
("Distributors" or the "Distributor") (see "The Distributor"), will be paid by
the Fund. The expenses borne by the Fund include, but are not limited to: fees
pursuant to any plan of distribution; charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage commissions;
taxes; engraving and printing share certificates; registration costs of the Fund
and its shares under federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Trustees or members of any advisory board or
committee who are not employees of the Investment Manager or any corporate
affiliate of the Investment Manager; all expenses incident to any dividend,
withdrawal or redemption options; charges and expenses of any outside service
used for pricing of the Fund's shares; fees and expenses of legal counsel,
including counsel to the Trustees who are not interested persons of the Fund or
of the Investment Manager (not including compensation or expenses of attorneys
who are employees of the Investment Manager) and independent accountants;
membership dues of industry associations; interest on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and Trustees) of
the Fund which inure to its benefit; extraordinary expenses (including, but not
limited to, legal claims and liabilities and litigation costs and any
indemnification relating thereto); and all other costs of the Fund's operation.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates to the Fund's daily net assets pursuant to the Agreement:
0.50% of the portion of such daily net assets not exceeding $1 billion; 0.475%
of the portion of such daily net assets exceeding $1 billion but not exceeding
$1.5 billion; 0.45% of the portion of such daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.425% of the portion of such daily net
assets exceeding $2 billion but not exceeding $2.5 billion; 0.40% of that
portion of such daily net assets exceeding $2.5 billion but not exceeding $5
billion; 0.375% of that portion of such daily net assets exceeding $5 billion
but not exceeding $7.5 billion; 0.35% of that portion of such daily net assets
exceeding $7.5 billion but not exceeding $10 billion; 0.325% of that portion of
such daily net assets
5
<PAGE>
exceeding $10 billion but not exceeding $12.5 billion; and 0.30% of that portion
of such daily net assets exceeding $12.5 billion. For the fiscal years ended
December 31, 1994, 1995 and 1996, the Fund accrued to the Investment Manager
total compensation of $40,553,081, $33,295,918 and $29,579,546, respectively.
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 does not restrict the Investment Manager from
acting as investment manager or adviser to others.
The Agreement was initially approved by the Trustees on October 30, 1992 and
by the shareholders at a Meeting of Shareholders held on January 12, 1993. The
Agreement is substantially identical to a prior investment management agreement
which was initially approved by the Trustees on April 16, 1984, by DWR as the
then sole shareholder of the Fund on May 1, 1984, and, as such agreement had
been amended to provide for breakpoints in the management fee, by the
shareholders of the Fund at a Meeting of Shareholders held on April 22, 1985.
The Agreement took effect on June 30, 1993 upon the spin-off by Sears, Roebuck
and 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 Trustees of the
Fund, by the holders of a majority, as defined in the Investment Company Act of
1940 (the "Act"), of the outstanding shares of the Fund, or by the Investment
Manager. The Agreement will automatically terminate in the event of its
assignment (as defined in the Act).
Under its terms, the Agreement had an initial term ending April 30, 1994 and
will remain in effect from year to year thereafter, provided continuance of the
Agreement is approved at least annually by the vote of the holders of a majority
(as defined in the Act) of the outstanding shares of the Fund, or by the Board
of Trustees of the Fund; provided that in either event such continuance is
approved annually by the vote of a majority of the Trustees of the Fund who are
not parties to the Agreement or "interested persons" (as defined in the Act) of
any such party (the "Independent Trustees"), which vote must be cast in person
at a meeting called for the purpose of voting on such approval. At their meeting
held on April 17, 1996, the Fund's Board of Trustees, including all of the
Independent Trustees, approved continuation of the Agreement until April 30,
1997.
The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that DWR or its parent company may use or, at any time,
permit others to use, the name "Dean Witter." The Fund has also agreed that in
the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate the
name "Dean Witter" from its name if DWR or its parent company shall so request.
6
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 79 Dean Witter Funds and the 12 TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND
ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------------- ----------------------------------------------------------------------
<S> <C>
Michael Bozic (56) Chairman and Chief Executive Officer of Levitz Furniture Corporation
Trustee (since November, 1995); Director or Trustee of the Dean Witter Funds;
c/o Levitz Furniture Corporation formerly President and Chief Executive Officer of Hills Department
6111 Broken Sound Parkway, N.W. Stores (May, 1991-July, 1995); formerly variously Chairman, Chief
Boca Raton, Florida Executive Officer, and President and Chief Operating Officer of the
Sears Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services, Inc., the United Negro College Fund and
Weirton Steel Corporation.
Charles A. Fiumefreddo* (63) Chairman, Chief Executive Officer and Director of InterCapital, DWSC
Chairman of the Board, President, and Distributors; Executive Vice President and Director of DWR;
Chief Executive Officer and Trustee Chairman, Director or Trustee, President and Chief Executive Officer
Two World Trade Center of the Dean Witter Funds; Chairman, Chief Executive Officer and
New York, New York Trustee of the TCW/DW Funds; Chairman and Director of Dean Witter
Trust Company ("DWTC"); Director and/or officer of various DWDC
subsidiaries; formerly Executive Vice President and Director of DWDC
(until February, 1993).
Edwin J. Garn (64) Director or Trustee of the Dean Witter Funds; formerly United States
Trustee Senator (R-Utah) (1974-1992) and Chairman, Senate Banking Committee
c/o Huntsman Chemical Corporation (1980-1986); formerly Mayor of Salt Lake City, Utah (1971-1974);
500 Huntsman Way formerly Astronaut, Space Shuttle Discovery (April 12-19, 1985); Vice
Salt Lake City, Utah Chairman, Huntsman Chemical Corporation (since January, 1993); Direc-
tor of Franklin Quest (time management systems) and John Alden
Financial Corp. (health insurance); Member of the board of various
civic and charitable organizations.
John R. Haire (72) Chairman of the Audit Committee and Chairman of the Committee of the
Trustee Independent Directors or Trustees and Director or Trustee of the Dean
Two World Trade Center Witter Funds; Chairman of the Audit Committee and Chairman of the
New York, New York Committee of the Independent Trustees and Trustee of the TCW/DW Funds;
formerly President, Council for Aid to Education (1978 - October,
1989) and Chairman and Chief Executive Officer of Anchor Corporation,
an Investment Adviser (1964-1978); Director of Washington National
Corporation (insurance).
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND
ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------------- ----------------------------------------------------------------------
<S> <C>
Dr. Manuel H. Johnson (48) Senior Partner, Johnson Smick International, Inc., a consulting firm;
Trustee Co-Chairman and a founder of the Group of Seven Council (G7C), an
c/o Johnson Smick International, Inc. international economic commission; Director or Trustee of the Dean
1133 Connecticut Avenue, N.W. Witter Funds; Trustee of the TCW/DW Funds; Director of NASDAQ;
Washington, DC Director of Greenwich Capital Markets, Inc. (broker-dealer); Trustee
of the Financial Accounting Foundation (oversight organization of the
Financial Accounting Standards Board); formerly Vice Chairman of the
Board of Governors of the Federal Reserve System (February,
1986-August, 1990) and Assistant Secretary of the U.S. Treasury
(1982-1986).
Michael E. Nugent (60) General Partner, Triumph Capital, LP., a private investment
Trustee partnership (since April, 1988); Director or Trustee of the Dean
c/o Triumph Capital, L.P. Witter Funds; Trustee of the TCW/DW Funds; formerly Vice President,
237 Park Avenue Bankers Trust Company and BT Capital Corporation (1984-1988); Director
New York, New York of various business organizations.
Philip J. Purcell* (53) Chairman of the Board of Directors and Chief Executive Officer of
Trustee DWDC, DWR and Novus Credit Services Inc.; Director of InterCapital,
Two World Trade Center DWSC and Distributors; Director or Trustee of the Dean Witter Funds;
New York, New York Director and/or officer of various DWDC subsidiaries.
John L. Schroeder (66) Retired; Director or Trustee of the Dean Witter Funds; Trustee of the
Trustee TCW/DW Funds; Director of Citizens Utilities Company; formerly
c/o Gordon Altman Butowsky Executive Vice President and Chief Investment Officer of the Home
Weitzen Shalov & Wein Insurance Company (August, 1991-September, 1995), Chairman and Chief
Counsel to the Independent Trustees Investment Officer of Axe-Houghton Management and the Axe-Houghton
114 West 47th Street Funds (April, 1983-June, 1991) and President of USF&G Financial
New York, New York Services, Inc. (June, 1990-June, 1991).
Barry Fink (42) Senior Vice President (since March, 1997) and Secretary and General
Vice President, Counsel (since February, 1997) of InterCapital and DWSC; Senior Vice
Secretary and General President (since March, 1997) and Assistant Secretary and Assistant
Counsel General Counsel (since February, 1997) of Distributors; Assistant
Two World Trade Center Secretary of DWR (since August, 1996); Vice President, Secretary and
New York, New York General Counsel of the Dean Witter Funds and the TCW/DW Funds (since
February, 1997); previously First Vice President (June, 1993-February,
1997), Vice President (until June, 1993) and Assistant Secretary and
Assistant General Counsel of InterCapital and DWSC and Assistant
Secretary of the Dean Witter Funds and the TCW/DW Funds.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND
ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------------- ----------------------------------------------------------------------
<S> <C>
Rajesh K. Gupta (36) Senior Vice President of InterCapital (since May 1991); Vice President
Vice President of various Dean Witter Funds; previously Vice President of
Two World Trade Center InterCapital.
New York, New York
Thomas F. Caloia (51) First Vice President and Assistant Treasurer of InterCapital and DWSC.
Treasurer Treasurer of the Dean Witter Funds and the TCW/DW Funds.
Two World Trade Center
New York, New York
<FN>
- ------------
*Denotes Trustees who are "Interested persons" of the Fund, as defined in the
Act.
</TABLE>
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of InterCapital and Director of DWTC, Robert S. Giambrone,
Senior Vice President of InterCapital, DWSC, Distributors and DWTC and Director
of DWTC, and Peter M. Avelar, Jonathan R. Page and James F. Willison, Senior
Vice Presidents of InterCapital, are Vice Presidents of the Fund, and Marilyn K.
Cranney, First Vice President and Assistant General Counsel of InterCapital and
DWSC, Lou Anne D. McInnis and Ruth Rossi, Vice Presidents and Assistant General
Counsels of InterCapital and DWSC, and Frank Bruttomesso and Carsten Otto, Staff
Attorneys with InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of eight (8) trustees. These same individuals
also serve as directors or trustees for all of the Dean Witter Funds, and are
referred to in this section as Trustees. As of the date of this Statement of
Additional Information, there are a total of 84 Dean Witter Funds, comprised of
127 portfolios. As of February 28, 1997, the Dean Witter Funds had total net
assets of approximately $84.2 billion and more than five million shareholders.
Six Trustees (75% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own any
stock or other securities issued by InterCapital's parent company, DWDC. These
are the "disinterested" or "independent" Trustees. The other two Trustees (the
"management Trustees") are affiliated with InterCapital. Four of the six
independent Trustees are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Trustees. The Dean Witter Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee and
the Committee of the Independent Trustees. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1996,
the three Committees held a combined total of sixteen meetings. The Committees
hold some meetings at InterCapital's offices and some outside InterCapital.
Management Trustees or officers do not attend these meetings unless they are
invited for purposes of furnishing information or making a report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well
9
<PAGE>
as other matters that arise from time to time. The Independent Trustees are
required to select and nominate individuals to fill any Independent Trustee
vacancy on the Board of any Fund that has a Rule 12b-1 plan of distribution.
Most of the Dean Witter Funds have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and the
Funds' operations and management. He screens and/or prepares written materials
and identifies critical issues for the Independent Trustees to consider,
develops agendas for Committee meetings, determines the type and amount of
information that the Committees will need to form a judgment on various issues,
and arranges to have that information furnished to Committee members. He also
arranges for the services of independent experts and consults with them in
advance of meetings to help refine reports and to focus on critical issues.
Members of the Committees believe that the person who serves as Chairman of both
Committees and guides their efforts is pivotal to the effective functioning of
the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In effect,
the Chairman of the Committees serves as a combination of chief executive and
support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and, since July
1, 1996, as Chairman of the Committee of the Independent Trustees and the Audit
Committee of the TCW/DW Funds. The current Committee Chairman has had more than
35 years experience as a senior executive in the investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Trustees arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Trustees serve on all Fund Boards
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of Independent Trustees, and a Chairman of their Committees,
of the caliber, experience and business acumen of the individuals who serve as
Independent Trustees of the Dean Witter Funds.
10
<PAGE>
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Trustees an additional annual fee of $1,200). The Fund also
reimburses such Trustees for travel and other out-of-pocket expenses incurred by
them in connection with attending such meetings. Trustees and officers of the
Fund who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended December 31, 1996.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,800
Edwin J. Garn................................................. 1,850
John R. Haire................................................. 3,950
Dr. Manuel H. Johnson......................................... 1,800
Michael E. Nugent............................................. 1,800
John L. Schroeder............................................. 1,800
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1996 for services
to the 82 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 14 TCW/DW Funds that were in operation at December 31, 1996.
With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the TCW/DW Funds
are included solely because of a limited exchange privilege between those Funds
and five Dean Witter Money Market Funds.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS FOR SERVICE
CHAIRMAN OF AS TOTAL CASH
COMMITTEES OF CHAIRMAN OF COMPENSATION
FOR SERVICE INDEPENDENT COMMITTEES OF FOR SERVICES
AS DIRECTOR OR DIRECTORS/ INDEPENDENT TO
TRUSTEE AND FOR SERVICE AS TRUSTEES AND TRUSTEES AND 82 DEAN
COMMITTEE MEMBER TRUSTEE AND AUDIT AUDIT WITTER
OF 82 DEAN COMMITTEE MEMBER COMMITTEES OF COMMITTEES OF FUNDS AND
NAME OF WITTER OF 14 TCW/DW 82 DEAN WITTER 14 TCW/DW 14 TCW/DW
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
Michael Bozic.............. $138,850 -- -- -- $138,850
<S> <C> <C> <C> <C> <C>
Edwin J. Garn.............. 140,900 -- -- -- 140,900
John R. Haire.............. 106,400 $64,283 $195,450 $ 12,187 378,320
Dr. Manuel H. Johnson...... 137,100 66,483 -- -- 203,583
Michael E. Nugent.......... 138,850 64,283 -- -- 203,133
John L. Schroeder.......... 137,150 69,083 -- -- 206,233
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, including the Fund, have adopted a retirement program under which
an Independent Trustee who retires after serving for at least five years (or
such lesser period as may be determined by the Board) as an Independent Director
or Trustee of any Dean Witter Fund that has adopted the retirement program (each
such Fund referred to as an "Adopting Fund" and each such Trustee referred to as
an "Eligible Trustee") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Trustee
is entitled to receive from the Adopting Fund, commencing as of his or her
retirement date and continuing for the remainder of his or her life, an annual
retirement benefit (the "Regular Benefit") equal to 25.0% of his or her Eligible
Compensation plus 0.4166666% of such Eligible Compensation for each full month
of
11
<PAGE>
service as an Independent Director or Trustee of any Adopting Fund in excess of
five years up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(1) "Eligible Compensation" is one-fifth
of the total compensation earned by such Eligible Trustee for service to the
Adopting Fund in the five year period prior to the date of the Eligible
Trustee's retirement. Benefits under the retirement program are not secured or
funded by the Adopting Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended December 31,
1996 and by the 57 Dean Witter Funds (including the Fund) for the year ended
December 31, 1996, and the estimated retirement benefits for the Fund's
Independent Trustees, to commence upon their retirement, from the Fund as of
December 31, 1996 and from the 57 Dean Witter Funds as of December 31, 1996.
RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS RETIREMENT BENEFITS ESTIMATED ANNUAL
-------------------------------------- ACCRUED AS EXPENSES BENEFITS
ESTIMATED UPON RETIREMENT(2)
CREDITED YEARS ESTIMATED -------------------- ----------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- ----------------------------------- ------------------- ----------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic...................... 10 50.0% $ 381 $ 20,147 $ 950 $ 51,325
Edwin J. Garn...................... 10 50.0 553 27,772 950 51,325
John R. Haire...................... 10 50.0 (282 (3) 46,952 2,343 129,550
Dr. Manuel H. Johnson.............. 10 50.0 231 10,926 950 51,325
Michael E. Nugent.................. 10 50.0 396 19,217 950 51,325
John L. Schroeder.................. 8 41.7 736 38,700 792 42,771
</TABLE>
- ------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of such Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) above.
(3) This number reflects the effect of the extension of Mr. Haire's term as
Trustee until June 1, 1998.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund may only invest in obligations
issued or guaranteed by the U.S. Government or its instrumentalities ("U.S.
Government Securities"). All such obligations are backed by the "full faith and
credit" of the United States. Investments may be made in obligations of
instrumentalities of the U.S. Government only where such obligations are
guaranteed by the U.S. Government.
ZERO COUPON SECURITIES. A portion of the U.S. Government securities
purchased by the Fund may be "zero coupon" Treasury securities with maturity
dates in each case no later than ten years from the settlement date for the
purchase of such security. These are U.S. Treasury bills, notes and bonds which
have been stripped of their unmatured interest coupons and receipts or which are
certificates representing interests in such stripped debt obligations and
coupons. "Zero coupon" securities are purchased at a discount from their face
amount, giving the purchaser the right to receive their full value at maturity.
A
12
<PAGE>
zero coupon security pays no interest to its holder during its life. Its value
to an investor consists of the difference between its face value at the time of
maturity and the price for which it was acquired, which is generally an amount
significantly less than its face value (sometimes referred to as a "deep
discount" price).
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 if
prevailing interest rates rise. For this reason, zero coupon securities are
subject to substantially greater market price fluctuations during periods of
changing prevailing interest rates than are comparable debt securities which
make current distributions of interest. 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.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below have been adopted by the Fund as
fundamental policies, which 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% of the shares present at a meeting
of shareholders, if the holders of more than 50% of the outstanding shares of
the Fund are present or represented by proxy, or (b) more than 50% of the
outstanding shares of the Fund. For purposes of the following restrictions (a)
an "issuer" of a security is the entity whose assets and revenues are committed
to the payment of interest and principal on that particular security, provided
that the guarantee of a security will be considered a separate security; and (b)
all percentage limitations apply immediately after a purchase or initial
investment, and 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. Purchase any securities other than obligations issued or guaranteed
by the United States Government. Such obligations are backed by the full
faith and credit of the United States. There is no limit on the amount of
its assets which may be invested in the securities of any one issuer of such
obligations.
2. Borrow money except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise require
the untimely disposition of securities. Borrowing in the aggregate may not
exceed 20%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the value of the Fund's total assets (including the amount
borrowed) at the time the borrowing is made. It is the Fund's current
intention not to borrow for other than meeting redemptions requests.
Borrowings in excess of 5% will be repaid before additional investments are
made. Interest on borrowings will reduce net investment income.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount not exceeding 10% of the value of its net assets but
only to secure borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin.
5. Make loans to others except through the purchase of debt obligations
in accordance with the Fund's investment objective and policies.
6. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have a senior security by reason of (a) borrowing
money in accordance with restriction (2) described above, or (b) by
purchasing securities on a when-issued or delayed delivery basis or
purchasing or selling securities on a forward commitment basis.
13
<PAGE>
7. Underwrite the securities of other issuers or purchase restricted
securities.
8. Purchase or sell real estate or interests therein, 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.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Board of Trustees of the Fund, the
Investment Manager is responsible for the investment decisions and the placing
of the orders for portfolio transactions for the Fund. The Fund's portfolio
transactions will occur primarily with issuers, underwriters or major dealers in
U.S. Government Securities acting as principals. Such transactions are normally
on a net basis which do not involve payment of brokerage commissions. The cost
of securities purchased from an underwriter usually includes a commission paid
by the issuer to the underwriters; transactions with dealers normally reflect
the spread between bid and asked prices. During the fiscal years ended December
31, 1994, 1995 and 1996, the Fund did not pay any brokerage commissions.
The Investment Manager currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, 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 process 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 be given to obtaining the most
favorable prices and efficient execution of transactions. In seeking to
implement the Fund's policies, the Investment Manager effects transactions with
those brokers and dealers who the Investment Manager believes provide the most
favorable prices and are capable of providing efficient executions. If the
Investment Manager believes such prices and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Investment Manager. Such services may include, but
are not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investment; wire services; and appraisals
or evaluations of portfolio securities.
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 every case, 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.
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 Securities. Such
transactions will be effected with DWR only when the price available from DWR is
better than that available from other dealers.
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 portfolio transactions for the
Fund, the commissions, fees or other remuneration received by DWR
14
<PAGE>
must be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time. This standard would allow DWR to receive no more than
the remuneration which would be expected to be received by an unaffiliated
broker in a commensurate arm's-length transaction. Furthermore, the Trustees of
the Fund, including a majority of the Trustees who are not "interested"
Trustees, 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. For the fiscal years ended December 31, 1994, 1995 and 1996,
the Fund did not effect any securities transactions with or through DWR.
THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of DWDC. The Trustees who are
not, and were not at the time they voted, interested persons of the Fund, as
defined in the Act (the "Independent Trustees"), approved, at their meeting held
on October 30, 1992, the current Distribution Agreement appointing the
Distributor as exclusive distributor of the Fund's shares and providing for the
Distributor to bear distribution expenses not borne by the Fund. By its terms,
the Distribution Agreement had an initial term ending April 30, 1994, and will
remain in effect from year to year thereafter if approved by the Board. At their
meeting held on April 17, 1996, the Trustees, including all of the Independent
Trustees, approved the continuation of the Distribution Agreement until April
30, 1997.
The Distributor bears all expenses incurred 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 to other than current shareholders. The Fund bears the
costs of initial typesetting, printing and distribution of prospectuses and
supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws. The
Fund and the Distributor have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Under the Distribution Agreement, the Distributor uses its best efforts in
rendering services to the Fund, but in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations, the
Distributor is not liable to the Fund or any of its shareholders for any error
of judgment or mistake of law or for any act or omission or for any losses
sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan") pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at the annual rate of 0.75% (0.65% of amounts
over $10 billion) of the lesser of: (a) the average daily aggregate gross sales
of the Fund's shares since the inception of the Fund (not including
reinvestments of dividends or capital gains distributions), less the average
daily aggregate net asset value of the Fund's shares redeemed since the Fund's
inception upon which a contingent deferred sales charge has been imposed or upon
which such charge has been waived, or (b) the average daily net assets of the
Fund. 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 $23,000,000,
$10,629,000 and $8,964,262 in contingent deferred sales charges for the fiscal
years ended December 31, 1994, 1995 and 1996, respectively, none of which was
retained by the Distributor.
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<PAGE>
The Distributor has informed the Fund that a portion of the fees payable by
the Fund each year pursuant to the Plan equal to 0.20% of the Fund's average
daily net assets is characterized as a "service fee" under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (of which the
Distributor is a member). Such portion of the fee is a payment made for personal
service and/or the maintenance of shareholder accounts. The remaining portion of
the Plan fees payable by the Fund is characterized as an "asset-based sales
charge" as such is defined by the aforementioned Rules of Fair Practice.
The Plan was adopted by a majority vote of the Board of Trustees, including
all of the Trustees of the Fund who are not "interested persons" of the Fund (as
defined in the Act) and who have no direct or indirect financial interest in the
operation of the Plan (the "Independent 12b-1 Trustees"), cast in person at a
meeting called for the purpose of voting on the Plan, on April 16, 1984, by DWR
as the then sole shareholder of the Fund on May 1, 1984, and by the shareholders
holding a majority, as defined in the Act, of the outstanding voting securities
of the Fund at a Meeting of Shareholders of the Fund held on April 22, 1985.
At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved certain amendments to
the Plan which took effect in January, 1993 and were designed to reflect the
fact that upon the reorganization described above the share distribution
activities theretofore performed for the Fund by DWR were assumed by the
Distributor and DWR's sales activities are now being performed pursuant to the
terms of a selected dealer agreement between the Distributor and DWR. The
amendments provide that payments under the Plan will be made to the Distributor
rather than to DWR as before the amendment, and that the Distributor in turn is
authorized to make payments to DWR, its affiliates or other selected
broker-dealers (or direct that the Fund pay such entities directly). The
Distributor is also authorized to retain part of such fee as compensation for
its own distribution-related expenses. At their meeting held on April 28, 1993,
the Trustees, including a majority of the Independent 12b-1 Trustees, approved
certain technical amendments to the Plan in connection with amendments adopted
by the National Association of Securities Dealers, Inc. to its Rules of Fair
Practice. At their meeting held on October 26, 1995, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved an amendment to the
Plan to permit payments to be made under the Plan with respect to certain
distribution expenses incurred in connection with the distribution of shares,
including personal services to shareholders with respect to holdings of such
shares, of an investment company whose assets are acquired by the Fund in a
tax-free reorganization.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended by the Distributor under the Plan and
the purpose for which such expenditures were made. The Fund accrued amounts
payable to the Distributor under the Plan, during the fiscal year ended December
31, 1996, of $53,189,389. This amount is equal to 0.75% of the average daily net
assets of the Fund for the fiscal year and was calculated pursuant to clause (b)
under the Plan. This amount is treated by the Fund as an expense in the year it
is accrued.
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 4% of the amount sold and an annual
residual commission of up to 0.20 of 1% of the current value (not including
reinvested dividends and distributions) of the amount sold. The gross sales
credit is a charge which reflects commissions paid by DWR to its account
executives and DWR's Fund associated distribution-related expenses, including
sales compensation and overhead and other branch office distribution-related
expenses including: (a) the expenses of operating DWR's branch offices in
connection with the sale of Fund shares, including lease costs, the salaries and
employee benefits of operations and sales support personnel, utility costs,
16
<PAGE>
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares and (d) other expenses relating to branch
promotion of Fund share sales. The distribution fee that the Distributor
receives from the Fund under the Plan, in effect, offsets distribution expenses
incurred under the Plan on behalf of the Fund and opportunity costs, such as the
gross sales credit and an assumed interest charge thereon ("carrying charge").
In the Distributor's reporting of the distribution expenses to the Fund, 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 $53,189,389 accrued under the Plan for the fiscal
year ended December 31, 1996 to the Distributor. The Distributor and DWR
estimate that they have spent, pursuant to the Plan, $1,150,496,391 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) 0.59% ($6,764,961) -- advertising
and promotional expenses; (ii) 0.12% ($1,386,515) -- printing of prospectuses
for distribution to other than current shareholders; and (iii) 99.29%
($1,142,344,915) -- other expenses, including the gross sales credit and the
carrying charge, of which 14.97% ($171,001,978) represents carrying charges,
34.96% ($399,319,081) represents commission credits to DWR branch offices for
payments of commissions to account executives and 50.07% ($572,023,856)
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 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 $108,126,636 as of December 31, 1995.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution 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 Trustees will consider
at that time the manner in which to treat such expenses. Any cumulative expenses
incurred, but not yet recovered through distribution fees or contingent deferred
sales charges, may or may not be recovered through future distribution fees or
contingent deferred sales charges.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct financial
interest in the operation of the Plan except to the extent that the Distributor,
InterCapital, DWSC, DWR, or certain of their employees, may be deemed to have
such an interest as a result of benefits derived from the successful operation
of the Plan or as a result of receiving a portion of the amounts expended
thereunder by the Fund.
Under its terms, the Plan remained in effect until December 31, 1984, and
will continue from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees in the manner described above. The
most recent continuance of the Plan for one year, until April 30, 1996, was
approved by the Board of Trustees of the Fund, including a majority of the
Independent 12b-1 Trustees, at a Board meeting held on April 20, 1995. Prior to
approving the continuation of the Plan, the Trustees requested and received from
the Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated; (2)
the benefits the Fund had obtained, was obtained and would
17
<PAGE>
be likely to obtain under the Plan; and (3) what services had been provided and
were continuing to be provided under the Plan to the Fund and its shareholders.
Based upon their review, the Trustees of the Fund, including each of the
Independent 12b-1 Trustees, determined that continuation of the Plan would be in
the best interest of the Fund and would have a reasonable likelihood of
continuing to benefit the Fund and its shareholders. In the Trustees' quarterly
review of the Plan, they will consider its continued appropriateness and the
level of compensation provided herein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
Fund, and all material amendments to the Plan must also be approved by the
Trustees in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent 12b-1
Trustees 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 12b-1 Trustees shall be committed to the discretion of
the Independent 12b-1 Trustees.
DETERMINATION OF NET ASSET VALUE
As discussed in the Prospectus, the net asset value of a 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 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.
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 the Fund's
Transfer Agent, 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 share certificate. If a share certificate is
desired, it must be requested in writing for each transaction. Certificates are
issued only for full shares and may be redeposited in the account at any time.
There is no charge to the investor for issuance of a certificate. Whenever a
shareholder-instituted transaction takes place in the Shareholder Investment
Account, the shareholder will be mailed a confirmation of the transaction from
the Fund or from DWR or other selected broker-dealer.
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of the
Fund is made upon the condition that the Transfer Agent is thereby automatically
appointed as agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and distributions
will be paid, at the net asset value per share, in shares of the Fund (or in
cash if the shareholder so requests) as of the close of business on the monthly
payment date, as stated in the Prospectus. 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 be received by the Transfer
Agent at least five business days prior to the payment date of the dividend or
the record date of the distribution. In the case of recently purchased shares
for which registration instructions have not been received on the payment or
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.-SM- 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 U.S. Government Securities Trust. 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
18
<PAGE>
selected Dean Witter Fund as of the close of business on the monthly payment
date and will begin to earn dividends, if any, in the selected Dean Witter Fund
the next business day. To participate in the Targeted Dividends program,
shareholders should contact their DWR or other selected broker-dealer account
executive or the Transfer Agent. Shareholders of the Fund must be shareholders
of the Dean Witter Fund targeted to receive investments from dividends at the
time they enter the Targeted Dividends program. Investors should review the
prospectus of the targeted Dean Witter Fund before entering the program.
EASYINVEST.-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. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected. For further information or to subscribe to
EasyInvest, shareholders should contact their DWR or other selected
broker-dealer account executive or the Transfer Agent.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or capital gains distribution may invest such dividend or distribution
at net asset value, without the imposition of a contingent deferred sales charge
upon redemption, by returning the check or the proceeds to the Transfer Agent
within thirty days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset value
per share next determined after receipt of the check or proceeds by the Transfer
Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a 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 then $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
selected 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 currently 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").
19
<PAGE>
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her Account Executive or by written notification to the Transfer Agent.
In addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature guarantees
required in the manner described above. The shareholder may also terminate the
Withdrawal Plan at any time by written notice to the Transfer Agent. In the
event of such termination, the account will be continued as a regular
shareholder investment account. The shareholder may also redeem all or part of
the shares held in the Withdrawal Plan account (see "Redemptions and
Repurchases" in the Prospectus) at any time.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time through
the Shareholder Investment Account by sending a check in any amount, not less
than $100, payable to Dean Witter U.S. Government Securities Trust, directly to
the Fund's Transfer Agent. Such amounts will be applied to the purchase of Fund
shares at the net asset value per share next computed after receipt of the check
or purchase payment by the Transfer Agent. The shares so purchased will be
credited to the investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of the Fund may exchange their shares
for shares of other Dean Witter Funds sold with a contingent deferred sales
charge ("CDSC funds"), and for shares of Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond
Fund, Dean Witter Balanced Growth Fund, Dean Witter Balanced Income Fund, Dean
Witter Intermediate Term U.S. Treasury Trust and five Dean Witter Funds which
are money market funds (the foregoing eleven non-CDSC funds are hereinafter
referred to as 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 a CDSC 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
20
<PAGE>
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 a CDSC 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
another CDSC fund, or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon redemption,
will be the last day of the month in which the shares being exchanged were
originally purchased. In allocating the purchase payments between funds for
purposes of the CDSC, the amount which represents the current net asset value of
shares at the t ime 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
acquired prior to April 30, 1984, shares of Dean Witter Dividend Growth
Securities Inc. and Dean Witter Natural Resource Development Securities Inc.
acquired prior to July 2, 1984, and shares of Dean Witter Strategist Fund
acquired prior to November 8, 1989, are also considered Free Shares and will be
the first Free Shares to be exchanged. After an exchange, all dividends earned
on shares in Dean Witter Short-Term U.S. Treasury Trust or the money market 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
21
<PAGE>
selected broker-dealer, if any, in the performance of such functions. The
Transfer Agent shall be liable for its own negligence and not for the default or
negligence of its correspondents or for losses in transit. The Fund shall not be
liable for any default or negligence of the Transfer Agent, the Distributor or
any selected broker-dealer.
The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
fund and the general administration of the Exchange Privilege. No commission or
discounts will be paid to the Distributor or any selected broker-dealer for any
transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000 for
Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income Trust,
Dean Witter California Tax-Free Daily Income Trust and Dean Witter New York
Municipal Money Market Trust, although those funds may, at their discretion,
accept initial investments of as low as $1,000. The minimum initial investment
is $10,000 for Dean Witter Short-Term U.S. Treasury Trust, although that fund
may, at its discretion, may accept initial purchases of as low as $5,000. The
minimum initial investment for Dean Witter Special Value Fund is $5,000. The
minimum initial investment for all other Dean Witter Funds for which the
Exchange Privilege is available is $1,000.) Upon exchange into an Exchange Fund,
the shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of 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' prior written notice for
termination or material revision), provided that six months' prior written
notice of termination will be given to the shareholders who hold shares of an
Exchange Fund pursuant to the Exchange Privilege, and provided further that the
Exchange Privilege may be terminated or materially revised without notice at
times (a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c) when
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, (d) during any
other period when the Securities and Exchange Commission by order so permits
(provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist) or (e) if the Fund would be unable to invest amounts effectively in
accordance with its investment objective, policies and restrictions.
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. 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
22
<PAGE>
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 supplement
to the prospectus or a new prospectus.
CONTINGENT DEFERRED SALES CHARGE. As stated in the Prospectus, a contingent
deferred sales charge ("CDSC") will be imposed on any redemption by an investor
if after such redemption the current value of the investor's shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Fund shares during the preceding six years. However, no CDSC will be
imposed to the extent that the net asset value of the shares redeemed does not
exceed: (a) the current net asset value of shares purchased more than six years
prior to the redemption, plus (b) the current net asset value of shares
purchased through reinvestment of dividends or distributions of the Fund or
another Dean Witter Fund (see "Shareholder Services -- Targeted Dividends"),
plus (c) the current net asset value of shares acquired in exchange for (i)
shares of Dean Witter front-end sales charge funds, or (ii) shares of other Dean
Witter Funds for which shares of front-end sales charge funds have been
exchanged (see "Shareholder Services -- Exchange Privilege"), plus (d) increases
in the net asset value of the investor's shares above the total amount of
payments for the purchase of Fund shares made during the preceding six years. In
addition, no CDSC will be imposed on redemptions of shares which were purchased
by the employee benefit plans established by DWR and SPS Transaction Services,
Inc. (an affiliate of DWR) for their employees as qualified under Section 401(k)
of the Internal Revenue Code. The CDSC will be paid to the Distributor.
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 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
23
<PAGE>
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
SALES CHARGE AS
A PERCENTAGE OF
YEAR SINCE PURCHASE 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. 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. Such payment may be
postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the Securities
and Exchange Commission by order so permits; provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist. If the shares to be redeemed have
recently been purchased by check (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). 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 accounts.
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
24
<PAGE>
shares in the same proportion that the transferred shares bear to the total
shares in the account immediately prior to the transfer). The transferred shares
will continue to be subject to any applicable contingent deferred sales charge
as if they had not been so transferred.
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within thirty days after the date of
redemption or repurchase, reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund at the net asset value next
determined after a reinstatement request, together with the proceeds, is
received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, 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 will notify shareholders that, following an election by the
Fund, the shareholders will be required to include such undistributed gains in
determining their taxable income and may 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 applicable
state 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 short-term capital gains, are taxable to
the shareholder as ordinary income regardless of whether the shareholder
receives such payments in additional shares or in cash. Any dividends declared
in the last quarter of any calendar year which are paid in the following 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
twelve months. Gains or losses on the sale of securities held for twelve months
or less will be short-term gains or losses.
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.
Net income, for dividend purposes, includes accrued interest and
amortization of original issue discount and market discounts where applicable,
less the expenses of the Fund. Net income will be calculated immediately prior
to the determination of net asset value per share of the Fund.
Under current federal law, the Fund will receive net investment income in
the form of interest by virtue of holding Treasury bills, notes and bonds, and
will recognize income attributable to it from holding zero coupon Treasury
securities. Current federal tax law requires that a holder (such as the Fund) of
a zero coupon security accrue a portion of the discount at which the security
was purchased as income each year even though the Fund receives no interest
payment in cash on the security during the year. As an investment company, the
Fund must pay out substantially all of its net investment income each year.
Accordingly, the Fund, to the extent it invests in zero coupon Treasury
securities, may be required to pay
25
<PAGE>
out as an income distribution each year an amount which is greater than the
total amount of cash receipts of interest the Fund actually received. Such
distributions will be made from the available cash of the Fund or by liquidation
of portfolio securities if necessary. If a distribution of cash necessitates the
liquidation of portfolio securities, the Investment Manager will select which
securities to sell. The Fund may realize a gain or loss from such sales. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution, if any, than they
would in the absence of such transactions.
Any dividend or capital gains distribution received by a shareholder from an
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
dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or the distribution of realized long-term capital gains, such
payment or distribution would be in part a return of the shareholder's
investment to the extent of such reduction below the shareholder's cost, but
nonetheless would be fully taxable at either ordinary or capital gain rates.
Therefore, an investor should consider the tax implications of purchasing Fund
shares immediately prior to a distribution record date.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature. Yield
is calculated for any 30-day period as follows: the amount of interest income
for each security in the Fund's portfolio is determined in accordance with
regulatory requirements; the total for the entire portfolio, adjusted by the
gain or loss on paydowns during the period, constitutes the Fund's gross income
for the period. Expenses accrued during the period are subtracted to arrive at
"net investment income". The resulting amount is divided by the product of the
net asset value per share on the last day of the period multiplied by the
average number of Fund shares outstanding during the period that were entitled
to dividends. This amount is added to 1 and raised to the sixth power. 1 is then
subtracted from the result and the difference is multiplied by 2 to arrive at
the annualized yield. For the 30-day period ended December 31, 1996, the Fund's
yield, calculated pursuant to the formula described above, was 6.11%.
The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. The ending redeemable value is
reduced by any contingent deferred sales charge at the end of the one, five or
ten year or other period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for computing
the average annual total return involves a percentage obtained by dividing the
ending redeemable value by the amount of the initial investment, taking a root
of the quotient (where the root is equivalent to the number of years in the
period) and subtracting 1 from the result. The average annual total returns of
the Fund for the year ended December 31, 1996, for the five years ended December
31, 1996 and for the ten years ended December 31, 1996 were -1.69%, 5.35% and
6.97%, 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 annual total return of
the Fund may be calculated in the manner described above but without deduction
for any applicable contingent deferred sales charge.
26
<PAGE>
Based on this calculation, the average annual total returns of the Fund for the
year ended December 31, 1996, for the five years ended December 31, 1996 and for
the ten years ended December 31, 1996 were 3.16%, 5.65% and 6.97%, 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 December 31, 1996 was
3.16%, the total return for the five years ended December 31, 1996 was 31.65%,
and the total return for the ten years ended December 31, 1996 was 96.14%.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a decimal and without taking into
account the effect of any applicable CDSC) and multiplying by $10,000, $50,000
or $100,000. Investments of $10,000, $50,000 and $100,000 in the Fund at
inception (June 29, 1984) would have grown to $26,827, $134,135 and $268,270,
respectively, at December 31, 1996.
SHARES OF THE FUND
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
held. All of the Trustees, except for Messrs. Bozic, Purcell and Schroeder, have
been elected by the shareholders of the Fund, most recently at a Special Meeting
of Shareholders held on January 12, 1993. Messrs. Bozic, Purcell and Schroeder
were elected by the other Trustees of the Fund on April 8, 1994. The Fund is
authorized to issue an unlimited number of shares of beneficial interest. The
Trustees themselves have the power to alter the number and the terms of office
of the Trustees (as provided for in the Declaration of Trust), and they may at
any time lengthen their own terms or make their terms of unlimited duration and
appoint their own successors, provided that always at least a majority of the
Trustees has been elected by the shareholders of the Fund. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove the
Trustees. The voting rights of shareholders are not cumulative, so that holders
of more than 50 percent of the shares voting can, if they choose, elect all
Trustees being selected, while the holders of the remaining shares would be
unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances). The Trustees have not currently authorized
any such additional series or classes of shares.
The Declaration of Trust further provides that no Trustee, officer, employee
or agent of the Fund is liable to the Fund or to a shareholder, nor is any
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Fund, except as such liability may arise from his/her or
its own bad faith, willful misfeasance, gross negligence, or reckless disregard
of his duties. It also provides that all third persons shall look solely to the
Fund property for satisfaction of claims arising in connection with the affairs
of the Fund. With the exceptions stated, the Declaration of Trust provides that
a Trustee, officer, employee or agent is entitled to be indemnified against all
liability in connection with the affairs of the Fund.
The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders.
27
<PAGE>
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager, and of Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these services
Dean Witter Trust Company receives a per shareholder account fee from the Fund.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report, containing
financial statements audited by independent accountants, will be sent to
shareholders each year.
The Fund's fiscal year ends on December 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and General Counsel of the Investment
Manager, is an officer and General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund included in this Statement of
Additional Information and incorporated by reference in the Prospectus have been
so included and incorporated in reliance on the report of Price Waterhouse 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.
28
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
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 U.S. Government
Securities Trust (the "Fund") at December 31, 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 at December 31, 1996 by correspondence with the
custodian and a broker, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 18, 1997
29
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES (80.5%)
Government National Mortgage Assoc. I (79.6%)
$ 348,269 10/15/22-02/15/24....................................... 6.50 % $ 332,053,085
25,000 (a)..................................................... 7.00 24,437,500
2,194,356 04/15/17-04/15/26....................................... 7.00 2,144,983,431
1,098,215 11/15/02-06/15/26....................................... 7.50 1,098,557,782
372,670 10/15/16-07/15/26....................................... 8.00 380,240,075
390,028 07/15/06-04/15/25....................................... 8.50 404,044,832
283,195 10/15/08-08/15/21....................................... 9.00 298,239,454
199,610 10/15/09-12/15/20....................................... 9.50 215,641,679
214,924 11/15/09-11/15/20....................................... 10.00 235,543,142
588 04/15/10-06/15/15....................................... 12.50 676,881
-----------------
5,134,417,861
-----------------
Government National Mortgage Assoc. II (0.7%)
49,127 01/20/24-02/20/24....................................... 6.50 46,624,166
-----------------
Government National Mortgage Assoc. GPM I (0.2%)
9,269 06/15/13-09/15/15....................................... 12.25 10,794,963
-----------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $5,168,329,453)................................... 5,191,836,990
-----------------
U.S. GOVERNMENT OBLIGATIONS (13.4%)
U.S. Treasury Notes (4.1%)
29,000 02/28/97................................................ 6.875 29,073,370
42,500 03/31/97................................................ 6.875 42,660,650
75,000 04/15/97................................................ 8.50 75,653,250
58,000 04/30/97................................................ 6.875 58,294,640
55,000 04/15/99................................................ 7.00 56,235,850
-----------------
261,917,760
-----------------
U.S. Treasury Coupon Strips (9.3%)
123,000 02/15/04................................................ 0.00 78,426,030
380,000 05/15/04................................................ 0.00 238,001,600
385,000 08/15/04................................................ 0.00 237,129,200
75,000 11/15/04................................................ 0.00 45,396,750
-----------------
598,953,580
-----------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $778,502,738)..................................... 860,871,340
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. GOVERNMENT AGENCIES (6.2%)
Resolution Funding Corp Zero Coupon Strips
$ 33,500 07/15/02................................................ 0.00 % $ 23,649,660
10,049 10/15/02................................................ 0.00 6,975,614
109,000 04/15/03................................................ 0.00 72,932,990
55,000 07/15/03................................................ 0.00 36,196,600
69,000 10/15/03................................................ 0.00 44,616,090
123,882 01/15/04................................................ 0.00 78,748,072
104,419 04/15/04................................................ 0.00 65,220,107
80,000 07/15/04................................................ 0.00 49,127,200
40,000 04/15/06................................................ 0.00 21,746,800
5,000 10/15/06................................................ 0.00 2,626,900
-----------------
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $365,230,502)..................................... 401,840,033
-----------------
TOTAL INVESTMENTS
(IDENTIFIED COST $6,312,062,693) (B)...... 100.1% 6,454,548,363
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS.................................... (0.1) (5,010,207)
----- -------------
NET ASSETS................................ 100.0% $6,449,538,156
----- -------------
----- -------------
<FN>
- ---------------------
GPM Graduated Payment Mortgage.
(a) Securities purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date; the actual principal
amount and maturity date will be determined upon settlement.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $211,958,662 and the
aggregate gross unrealized depreciation is $69,472,992, resulting in net
unrealized appreciation of $142,485,670.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $6,312,062,693).......................... $ 6,454,548,363
Cash........................................................ 449,209
Receivable for:
Interest................................................ 37,055,157
Shares of beneficial interest sold...................... 13,471,656
Prepaid expenses and other assets........................... 100,149
---------------
TOTAL ASSETS........................................... 6,505,624,534
---------------
LIABILITIES:
Payable for:
Investments purchased................................... 24,730,035
Dividends to shareholders............................... 18,555,177
Shares of beneficial interest repurchased............... 5,216,188
Plan of distribution fee................................ 4,283,834
Investment management fee............................... 2,404,212
Accrued expenses and other payables......................... 896,932
---------------
TOTAL LIABILITIES...................................... 56,086,378
---------------
NET ASSETS:
Paid-in-capital............................................. 7,598,295,399
Net unrealized appreciation................................. 142,485,670
Dividends in excess of net investment income................ (4,722)
Accumulated net realized loss............................... (1,291,238,191)
---------------
NET ASSETS............................................. $ 6,449,538,156
---------------
---------------
NET ASSET VALUE PER SHARE,
723,414,184 SHARES OUTSTANDING (UNLIMITED SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$8.92
---------------
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 533,679,451
-------------
EXPENSES
Plan of distribution fee.................................... 53,189,389
Investment management fee................................... 29,579,546
Transfer agent fees and expenses............................ 4,382,628
Custodian fees.............................................. 1,025,583
Shareholder reports and notices............................. 177,325
Professional fees........................................... 107,597
Registration fees........................................... 31,140
Trustees' fees and expenses................................. 22,931
Servicing fees.............................................. 19,454
Other....................................................... 68,060
-------------
TOTAL EXPENSES......................................... 88,603,653
LESS EXPENSE OFFSET.................................... (20,817)
-------------
NET EXPENSES........................................... 88,582,836
-------------
NET INVESTMENT INCOME.................................. 445,096,615
-------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................................... (18,950,945)
Net change in unrealized appreciation....................... (237,138,336)
-------------
NET LOSS............................................... (256,089,281)
-------------
NET INCREASE................................................ $ 189,007,334
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE YEAR ENDED
ENDED DECEMBER 31,
DECEMBER 31, 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 445,096,615 $ 522,928,136
Net realized loss........................................... (18,950,945) (77,736,417)
Net change in unrealized appreciation/depreciation.......... (237,138,336) 811,733,423
----------------- -------------
NET INCREASE........................................... 189,007,334 1,256,925,142
Dividends from net investment income........................ (447,472,130) (522,076,848)
Net decrease from transactions in shares of beneficial
interest.................................................. (1,246,903,069) (990,646,568)
----------------- -------------
NET DECREASE........................................... (1,505,367,865) (255,798,274)
NET ASSETS:
Beginning of period......................................... 7,954,906,021 8,210,704,295
----------------- -------------
END OF PERIOD
(INCLUDING DIVIDENDS IN EXCESS OF NET INVESTMENT INCOME
OF $4,722 AND UNDISTRIBUTED NET INVESTMENT INCOME OF
$2,370,793, RESPECTIVELY)............................... $ 6,449,538,156 $7,954,906,021
----------------- -------------
----------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter U.S. Government Securities Trust (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 high
current income consistent with safety of principal. The Fund seeks to achieve
its objective by investing in obligations issued or guaranteed by the U.S.
Government or its instrumentalities. The Fund was organized as a Massachusetts
business trust on September 29, 1983 and commenced operations on June 29, 1984.
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) all 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; (2) when market
quotations are not readily available, including circumstances under which it is
determined by Dean Witter InterCapital Inc. (the "Investment Manager") that sale
or bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Trustees
(valuation of debt securities for which market quotations are not readily
available may be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); and (3) certain portfolio securities may be valued by an
outside pricing service approved by the Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/ or research and evaluations by its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the securities valued by
such pricing service; (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 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.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
35
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 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 record date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to the Fund's net assets
determined at the close of each business day: 0.50% to the portion of daily net
assets not exceeding $1 billion; 0.475% to the portion of daily net assets
exceeding $1 billion but not exceeding $1.5 billion; 0.45% to the portion of
daily net assets exceeding $1.5 billion but not exceeding $2 billion; 0.425% to
the portion of daily net assets exceeding $2 billion but not exceeding $2.5
billion; 0.40% to the portion of daily net assets exceeding $2.5 billion but not
exceeding $5 billion; 0.375% to the portion of daily net assets exceeding $5
billion but not exceeding $7.5 billion; 0.35% to the portion of daily net assets
exceeding $7.5 billion but not exceeding $10 billion; 0.325% to the portion of
daily net assets exceeding $10 billion but not exceeding $12.5 billion; and
0.30% to the portion of daily net assets exceeding $12.5 billion.
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
36
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, CONTINUED
all personnel, including officers of the Fund who are employees of the
Investment Manager. The Investment Manager also bears the cost of telephone
services, heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 0.75% (0.65% on amounts over $10 billion) of the
lesser of: (a) the average daily aggregate gross sales of the Fund's shares
since the Fund's inception (not including reinvestment of dividend or capital
gain distributions) less the average daily aggregate net asset value of the
Fund's shares redeemed since the Fund's 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. 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., 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 by
the Distributor but not yet recovered, may be recovered through future
distribution fees from the Fund and contingent deferred sales charges from the
Fund's shareholders.
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 Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, including carrying charges, total $68,120,003 at
December 31, 1996.
37
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, CONTINUED
The Distributor has informed the Fund that for the year ended December 31, 1996,
it received approximately $8,964,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The costs of purchases and sales/prepayments of portfolio securities, excluding
short-term investments, for the year ended December 31, 1996 were $541,075,742
and $1,760,020,882, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $546,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended December 31, 1996
included in Trustees' fees and expenses in the Statement of Operations amounted
to $1,285. At December 31, 1996, the Fund had an accrued pension liability of
$50,453 included in accrued expenses in the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 44,291,927 $ 394,473,930 48,336,027 $429,525,036
Reinvestment of dividends........................................ 25,980,320 230,960,458 30,293,874 269,738,501
----------- -------------- ----------- ------------
70,272,247 625,434,388 78,629,901 699,263,537
Repurchased...................................................... (210,573,457) (1,872,337,457) (190,805,203) (1,689,910,105)
----------- -------------- ----------- ------------
Net decrease..................................................... (140,301,210) $(1,246,903,069) (112,175,302) $(990,646,568)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
38
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, CONTINUED
6. FEDERAL INCOME TAX STATUS
At December 31, 1996, the Fund had a net capital loss carryover which may be
used to offset future capital gains to the extent provided by regulations which
is available through December 31 of the following years:
<TABLE>
<CAPTION>
IN THOUSANDS
---------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004 Total
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 270,987 $ 108,731 $ 261,525 $ 154,964 $ 263,492 $ 118,056 $ 63,667 $ 49,143 $1,290,565
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $673,000 during fiscal 1996.
At December 31, 1996, the Fund had temporary book/tax differences primarily
attributable to post-October losses and a permanent book/tax difference
attributable to an expired capital loss carryover. To reflect reclassifications
arising from permanent book/tax differences for the year ended December 31,
1996, accumulated net realized loss was credited and paid-in-capital was charged
$277,199,313.
39
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------------------------------------
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.......... $ 9.21 $ 8.41 $ 9.31 $ 9.30 $ 9.52 $ 9.37 $ 9.51 $ 9.42 $ 9.75 $ 10.33
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net investment
income.......... 0.56 0.57 0.58 0.64 0.74 0.87 0.90 0.91 0.97 0.96
Net realized and
unrealized gain
(loss).......... (0.29) 0.80 (0.90) 0.01 (0.22) 0.15 (0.14) 0.09 (0.33) (0.58)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total from
investment
operations...... 0.27 1.37 (0.32) 0.65 0.52 1.02 0.76 1.00 0.64 0.38
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Less dividends
from net
investment
income.......... (0.56) (0.57) (0.58) (0.64) (0.74) (0.87) (0.90) (0.91) (0.97) (0.96)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net asset value,
end of period... $ 8.92 $ 9.21 $ 8.41 $ 9.31 $ 9.30 $ 9.52 $ 9.37 $ 9.51 $ 9.42 $ 9.75
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
TOTAL INVESTMENT
RETURN+.......... 3.16% 16.74% (3.51)% 7.13% 5.76% 11.43% 8.49% 11.10% 6.74% 3.92%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 1.25% 1.24% 1.22% 1.18% 1.20% 1.17% 1.23% 1.19% 1.21% 1.18%
Net investment
income.......... 6.28% 6.44% 6.57% 6.78% 7.91% 9.23% 9.60% 9.62% 10.01% 9.63%
SUPPLEMENTAL DATA:
Net assets, end
of period, in
millions........ $6,450 $7,955 $8,211 $12,235 $12,484 $11,736 $9,829 $10,167 $10,366 $10,418
Portfolio
turnover rate... 8% 14% 26% 32% 40% 104% 54% 44% 15% 51%
</TABLE>
<TABLE>
<C> <S>
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
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 December 31, 1987, 1988, 1989, 1990,
1991, 1992, 1993, 1994, 1995 and 1996......................... 4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
---
Portfolio of Investments at December 31, 1996.................30
Statement of assets and liabilities at
December 31, 1996.............................................32
Statement of operations for the year
ended December 31, 1996.......................................33
Statement of changes in net assets for the years
ended December 31, 1995 and 1996..............................34
Notes to Financial Statements ................................35
Financial highlights for the fiscal years ended
December 31, 1987, 1988, 1989, 1990, 1991, 1992, 1993,
1994, 1995 and 1996...........................................40
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
2. - Amended and Restated By-Laws of the Registrant
dated as of October 25, 1996.
8. - Amendment to the Custodian Agreement between the
Registrant and The Bank of New York
1
<PAGE>
11. - Consent of Independent Accountant
16. - Schedules for Computation of Performance
Quotations
27. - Financial Data Schedule
____________________
All other exhibits were previously filed and are hereby
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 February 28, 1997
-------------- ------------------------
Shares of Beneficial Interest 272,167
Item 27. INDEMNIFICATION.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for
2
<PAGE>
any action or failure to act, except in the case of bad faith, willful
misfeasance, gross negligence or reckless disregard of duties to the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
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.
3
<PAGE>
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
(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
4
<PAGE>
(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
(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
(57) Dean Witter Income Builder Fund
(58) Dean Witter Special Value Fund
(59) Dean Witter Financial Services Trust
(60) Dean Witter Market Leader Trust
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
(9) TCW/DW Global Telecom Trust
(10)TCW/DW Strategic Income Trust
5
<PAGE>
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 Executive Officer Witter Reynolds Inc. ("DWR"); Chairman, Chief
and Director Executive Officer and Director of Dean Witter
Distributors Inc. ("Distributors") and Dean Witter
Services Company Inc. ("DWSC"); Chairman and Director
of Dean Witter Trust Company ("DWTC"); Chairman,
Director or Trustee, President and Chief Executive
Officer of the Dean Witter Funds and Chairman, Chief
Executive Officer and Trustee of the TCW/DW Funds;
Formerly Executive Vice President and Director of Dean
Witter, Discover & Co. ("DWDC"); Director and/or
officer of various DWDC subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and Distributors;
Director or Trustee of the Dean Witter Funds; Director
and/or officer of various DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;Director
of DWR, DWSC, Distributors and DWTC; Trustee of the
TCW/DW Funds; Member (since January, 1993) and Chairman
(since January, 1995) of the Board of Directors of
NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial Executive
Vice President, Officer of DWDC, DWR, DWSC and Distributors;
Chief Financial Director of DWR, DWSC and Distributors.
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.
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
- ----------------- -----------------------------------------------------
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.
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Joseph J. McAlinden
Executive Vice President
and Chief Investment
Office Vice President of the Dean Witter Funds and Director of
DWTC.
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
Secretary and General President, Assistant Secretary and Assistant
Counsel General Counsel of Distributors; 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 and 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.
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
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.
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
- ----------------- -----------------------------------------------------
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira N. Ross
Senior Vice President Vice President of various Dean Witter Funds.
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader Trust.
Senior Vice President
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
Secretary and General President, Assistant Secretary and Assistant
Counsel General Counsel of Distributors; Vice President,
Secretary and General Counsel of the Dean Witter
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
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
- ----------------- -----------------------------------------------------
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Kirk Balzer
Vice President Vice President of Various Dean Witter Funds.
Douglas Brown
Vice President
Philip Casparius
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
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
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
- ----------------- -----------------------------------------------------
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
James Kastberg
Vice President
Stanley Kapica
Vice President
Michael Knox
Vice President Vice President of various Dean Witter Funds
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
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
- ----------------- -----------------------------------------------------
Richard Norris
Vice President
Anne Pickrell
Vice President Vice President of Dean Witter Global Short-Term Income
Fund Inc.
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious Metals
Vice President and Minerals Trust.
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
Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Katherine Wickham
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
11
<PAGE>
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Global Utilities Fund
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter World Wide Income Trust
(23) Dean Witter Utilities Fund
(24) Dean Witter Strategist Fund
(25) Dean Witter New York Municipal Money Market Trust
(26) Dean Witter Intermediate Income Securities
(27) Prime Income Trust
(28) Dean Witter European Growth Fund Inc.
(29) Dean Witter Developing Growth Securities Trust
(30) Dean Witter Precious Metals and Minerals Trust
(31) Dean Witter Pacific Growth Fund Inc.
(32) Dean Witter Multi-State Municipal Series Trust
(33) Dean Witter Premier Income Trust
(34) Dean Witter Short-Term U.S. Treasury Trust
(35) Dean Witter Diversified Income Trust
(36) Dean Witter Health Sciences Trust
(37) Dean Witter Global Dividend Growth Securities
(38) Dean Witter American Value Fund
(39) Dean Witter U.S. Government Money Market Trust
(40) Dean Witter Global Short-Term Income Fund Inc.
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Short-Term Bond Fund
(44) Dean Witter National Municipal Trust
(45) Dean Witter High Income Securities
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Hawaii Municipal Trust
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Intermediate Term U.S. Treasury Trust
(51) Dean Witter Global Asset Allocation Fund
(52) Dean Witter Mid-Cap Growth Fund
(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
(57) Dean Witter Income Builder Fund
(58) Dean Witter Special Value Fund
(59) Dean Witter Financial Services Trust
(60) Dean Witter Market Leader Trust
(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
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
12
<PAGE>
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service contract.
Item 32. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
13
<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 27th day of March, 1997.
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
By /s/ Barry Fink
-------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 14 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,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 03/27/97
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 03/27/97
----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 03/27/97
----------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
By /s/ David M. Butowsky 03/27/97
----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
EXHIBIT INDEX
2. - Amended and Restated By-Laws of the Registrant dated as of October 25,
1996
8. - Amendment to the Custodian Agreement between the Registrant and The
Bank of New York
11. - Consent of Independent Accountant
16. - Schedules for Computation of Performance Quotations
27. - Financial Data Schedule
___________________________________
All other exhibits were previously filed and are hereby incorporated by
reference.
<PAGE>
BY-LAWS
OF
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
AMENDED AND RESTATED AS OF OCTOBER 25, 1996
ARTICLE I
DEFINITIONS
The terms "COMMISSION", "DECLARATION", "DISTRIBUTOR", "INVESTMENT
ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SHAREHOLDER", "SHARES",
"TRANSFER AGENT", "TRUST", "TRUST PROPERTY", and "TRUSTEES" have the
respective meanings given them in the Declaration of Trust of Dean Witter
U.S. Government Securities Trust dated September 29, 1983, as amended from
time to time.
ARTICLE II
OFFICES
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. OTHER OFFICES. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. MEETINGS. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote not less than twenty-five percent
(25%) of all the votes entitled to be cast at such meeting. Such request
shall state the purpose or purposes of such meeting and the matters proposed
to be acted on thereat. The Secretary shall inform such Shareholders of the
reasonable estimated cost of preparing and mailing such notice of the
meeting, and upon payment to the Trust of such costs, the Secretary shall
give notice stating the purpose or purposes of the meeting to all entitled to
vote at such meeting. No meeting need be called upon the request of the
holders of Shares entitled to cast less than a majority of all votes entitled
to be cast at such meeting, to consider any matter which is substantially the
same as a matter voted upon at any meeting of Shareholders held during the
preceding twelve months.
SECTION 3.3. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
SECTION 3.4. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the
<PAGE>
Shareholders present or represented by proxy and entitled to vote thereat
shall have power to adjourn the meeting from time to time. Any adjourned
meeting may be held as adjourned without further notice. At any adjourned
meeting at which a quorum shall be present, any business may be transacted as
if the meeting had been held as originally called.
SECTION 3.5. VOTING RIGHTS, PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. VOTE REQUIRED. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. INSPECTION OF BOOKS AND RECORDS. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under the Corporations and Associations Law of
the State of Maryland.
SECTION 3.9. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
SECTION 3.10. PRESENCE AT MEETINGS. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any
two (2) Trustees.
2
<PAGE>
SECTION 4.2. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. TELEPHONE MEETINGS. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. ACTION BY TRUSTEES WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. EXPENSES AND FEES. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
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(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties as described
in Section 17(h) and (i) of the Investment Company Act of 1940
("disabling conduct"). A person shall be deemed not liable by reason of
disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
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(3) either, (i) such person provides a security for his undertaking,
or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
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SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the President the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. TERM AND REMOVAL AND VACANCIES. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to
the extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. POWER AND DUTIES. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. THE CHAIRMAN. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, shall be a signatory on all Annual and
Semi-Annual Reports as may be sent to shareholders, and he shall perform such
other duties as the Trustees may from time to time prescribe.
SECTION 6.7. THE PRESIDENT. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the Board
of Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time prescribe.
SECTION 6.8. THE VICE PRESIDENTS. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.
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SECTION 6.9. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the President.
SECTION 6.10. THE SECRETARY. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
President may from time to time prescribe.
SECTION 6.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the President, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the President, may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the President, may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of
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the Trust by the President, or a Vice President, and countersigned by the
Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. APPOINTMENT AND DUTIES. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
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ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. LOCATION OF BOOKS AND RECORDS. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. RECORD DATE. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. SEAL. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. FISCAL YEAR. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended,
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adopted or repealed by the Trustees if such amendment, adoption or repeal
requires, pursuant to law, the Declaration, or these By-Laws, a vote of the
Shareholders. The Trustees shall in no event adopt By-Laws which are in
conflict with the Declaration, and any apparent inconsistency shall be
construed in favor of the related provisions in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter U.S. Government
Securities Trust, dated September 29, 1983, a copy of which is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that
the name Dean Witter U.S. Government Securities Trust refers to the Trustees
under the Declaration collectively as Trustees, but not as individuals or
personally; and no Trustee, Shareholder, officer, employee or agent of Dean
Witter U.S. Government Securities Trust shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Dean Witter U.S. Government Securities Trust, but the Trust
Estate only shall be liable.
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Exhibit 99.8
AMENDMENT TO CUSTODY AGREEMENT
Amendment made as of this 17th day of April, 1996 by and between Dean
Witter U.S. Government Securities Trust (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 U.S. GOVERNMENT SECURITIES TRUST
[SEAL] By: /s/ David A. Hughey
------------------------------
Attest:
/s/ Robert M. Scanlan
- ------------------------------
THE BANK OF NEW YORK
[SEAL] By: /s/ S. Grunston
------------------------------
Attest:
/s/ Vincent M. Blazewicz
- ------------------------------
<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 Bank
Israel Israel Discount Bank
Italy Banca Commerciale Italiana
Japan Yasuda Trust & Banking Co., Lt.
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
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
<PAGE>
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Sweden Skandianaviska Enskilda Banken
Switzerland Union Bank of Switerzland
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>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 14 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 18, 1997, relating to the financial statements and financial highlights
of Dean Witter U.S. Government Securities Trust, 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 "Experts" and
"Independent Accountants" 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 Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
March 24, 1997
<PAGE>
DW US GOVERNMENT SECURITIES TRUST
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DECEMBER 31, 1996
6
YIELD = 2 { [ ((a-b) /cd) +1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price per share on the last
day of the period
6
YIELD = 2 { [ ((39,316,603.32 - 6,716,144.37) /726,454,284.389 X 8.92) +1] -1}
= 6.11%
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
U.S. GOVERNMENT SECURITIES TRUST
(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 31-Dec-96 YEARS - n TOTAL RETURN - T
- ------------ --------- --------- ----------------
31-Dec-95 $983.10 1 (1.69%)
31-Dec-91 $1,297.80 5 5.35%
31-Dec-86 $1,961.40 10 6.97%
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-96 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
31-Dec-95 $1,031.60 3.16% 1 3.16%
31-Dec-91 $1,316.50 31.65% 5 5.65%
31-Dec-86 $1,961.40 96.14% 10 6.97%
</TABLE>
(E) GROWTH OF $10,000
(F) GROWTH OF $50,000
(G) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
(E) (F) (G)
$10,000 TOTAL GROWTH OF GROWTH OF GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ------------ ----------- -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
29-Jun-84 168.27 $26,827 $134,135 $268,270
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 6,312,062,693
<INVESTMENTS-AT-VALUE> 6,454,548,363
<RECEIVABLES> 50,526,813
<ASSETS-OTHER> 549,358
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,505,624,534
<PAYABLE-FOR-SECURITIES> 24,730,035
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,356,343
<TOTAL-LIABILITIES> 56,086,378
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,598,295,399
<SHARES-COMMON-STOCK> 723,414,184
<SHARES-COMMON-PRIOR> 863,715,394
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (4,722)
<ACCUMULATED-NET-GAINS> (1,291,238,191)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 142,485,670
<NET-ASSETS> 6,449,538,156
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 533,679,451
<OTHER-INCOME> 0
<EXPENSES-NET> 88,582,836
<NET-INVESTMENT-INCOME> 445,096,615
<REALIZED-GAINS-CURRENT> (18,950,945)
<APPREC-INCREASE-CURRENT> (237,138,336)
<NET-CHANGE-FROM-OPS> 189,007,334
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (447,472,130)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (4,722)
<NUMBER-OF-SHARES-SOLD> (44,291,927)
<NUMBER-OF-SHARES-REDEEMED> 210,573,457
<SHARES-REINVESTED> 25,980,320
<NET-CHANGE-IN-ASSETS> (1,505,367,865)
<ACCUMULATED-NII-PRIOR> 2,370,793
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 29,579,546
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 88,582,836
<AVERAGE-NET-ASSETS> 7,091,893,920
<PER-SHARE-NAV-BEGIN> 9.21
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> (0.29)
<PER-SHARE-DIVIDEND> (0.56)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.92
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
