<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
------------------------
DEAN WITTER CONVERTIBLE SECURITIES TRUST
(Exact Name of Registrant as Specified in Charter)
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
(Address of Principal Executive Offices)
212-392-2550
(Registrant's Telephone Number)
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(Name and Address of Agent for Service)
------------------------
COPY TO:
Stuart M. Strauss, Esq.
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON THE THIRTIETH DAY AFTER
THE DATE OF FILING, PURSUANT TO RULE 488.
THE EXHIBIT INDEX IS LOCATED ON PAGE [ ]
NO FILING FEE IS DUE BECAUSE THE REGISTRANT HAS PREVIOUSLY REGISTERED AN
INDEFINITE NUMBER OF SHARES PURSUANT TO SECTION (A)(1) OF RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED. THE REGISTRANT FILED THE RULE 24F-2
NOTICE, FOR ITS FISCAL YEAR ENDED SEPTEMBER 30, 1994, WITH THE SECURITIES AND
EXCHANGE COMMISSION ON NOVEMBER 21, 1994.
PURSUANT TO RULE 429, THIS REGISTRATION STATEMENT RELATES TO SHARES PREVIOUSLY
REGISTERED BY THE REGISTRANT ON FORM N-1A (REGISTRATION NO. 2-97963).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FORM N-14
DEAN WITTER CONVERTIBLE SECURITIES TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PART A OF FORM N-14
ITEM NO. PROXY STATEMENT AND PROSPECTUS HEADING
- ----------------------- ---------------------------------------------------------------------------------------------
<C> <S>
1(a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2(a) *
(b) Table of Contents
3(a) Fee Table
(b) Synopsis
(c) Principal Risk Factors
4(a) The Reorganization
(b) The Reorganization -- Capitalization Table (Unaudited)
5(a) Registrant's Prospectus
(b) *
(c) *
(d) *
(e) Available Information
(f) Available Information
6(a) Prospectus of TCW/DW Global Convertible Trust
(b) Available Information
(c) *
(d) *
7(a) Introduction -- Proxies
(b) *
(c) Introduction; The Reorganization -- Appraisal Rights
8(a) The Reorganization
(b) *
9 *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B OF FORM N-14
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION HEADING
- ----------------------- ---------------------------------------------------------------------------------------------
<C> <S>
10(a) Cover Page
(b) *
11 Table of Contents
12(a) Additional Information about Convertible Trust
(b) *
13(a) Additional Information about Global Convertible
(b) *
(c) *
14 Registrant's Statement of Additional Information dated November 22, 1994; TCW/DW Global
Convertible Trust's Statement of Additional Information dated August 28, 1995
<CAPTION>
PART C OF FORM N-14
ITEM NO. OTHER INFORMATION HEADING
- ----------------------- ---------------------------------------------------------------------------------------------
<C> <S>
15 Indemnification
16 Exhibits
17 Undertakings
<FN>
- ------------------------
*Not Applicable or negative answer
</TABLE>
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 19, 1995
TO THE SHAREHOLDERS OF TCW/DW GLOBAL CONVERTIBLE TRUST:
Notice is hereby given of a Special Meeting of the Shareholders of TCW/DW
Global Convertible Trust ("Global Convertible") to be held at the Conference
Center, 44th Floor, Two World Trade Center, New York, New York 10048, at 10:00
A.M., New York time, on December 19, 1995, and any adjournments thereof (the
"Meeting"), for the following purposes:
1. To consider and vote upon an Agreement and Plan of Reorganization,
dated as of August 24, 1995 (the "Reorganization Agreement") by and between
Global Convertible and Dean Witter Convertible Securities Trust
("Convertible Trust"), pursuant to which substantially all of the assets of
Global Convertible will be combined with those of Convertible Trust and
shareholders of Global Convertible will become shareholders of Convertible
Trust receiving shares of Convertible Trust with a value equal to the value
of their holdings in Global Convertible (the "Reorganization"); and
2. To act upon such other matters as may properly come before the
Meeting.
The Reorganization is more fully described in the accompanying Proxy
Statement and Prospectus and a copy of the Reorganization Agreement is attached
as Exhibit A thereto. Shareholders of record at the close of business on October
20, 1995 are entitled to notice of, and to vote at, the Meeting. Please read the
Proxy Statement and Prospectus carefully before telling us, through your proxy
or in person, how you wish your shares to be voted. The Board of Trustees of
Global Convertible recommends a vote in favor of the Reorganization. WE URGE YOU
TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
Sheldon Curtis,
SECRETARY
October , 1995
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO
ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE UNABLE TO
BE PRESENT IN PERSON, PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY IN
ORDER THAT THE NECESSARY QUORUM BE REPRESENTED AT THE MEETING. THE ENCLOSED
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
(212) 392-2550
ACQUISITION OF THE ASSETS OF
TCW/DW GLOBAL CONVERTIBLE TRUST
BY AND IN EXCHANGE FOR SHARES OF
DEAN WITTER CONVERTIBLE SECURITIES TRUST
This Proxy Statement and Prospectus is being furnished to shareholders of
TCW/DW Global Convertible Trust ("Global Convertible") in connection with an
Agreement and Plan of Reorganization dated as of August 24, 1995 (the
"Reorganization Agreement") pursuant to which substantially all of the assets of
Global Convertible will be combined with those of the Dean Witter Convertible
Securities Trust ("Convertible Trust") in exchange for shares of Convertible
Trust. As a result of this transaction, shareholders of Global Convertible will
become shareholders of Convertible Trust and will receive shares of Convertible
Trust with a value equal to the value of their holdings in Global Convertible.
The terms and conditions of this transaction are more fully described in this
Proxy Statement and Prospectus and in the Reorganization Agreement between
Global Convertible and Convertible Trust, attached hereto as Exhibit A. This
Proxy Statement also constitutes a Prospectus of Convertible Trust filed by
Convertible Trust with the Securities and Exchange Commission (the "Commission")
as part of its Registration Statement on Form N-14 (the "Registration
Statement").
Convertible Trust is an open-end, diversified management investment company
whose investment objective is to seek a high level of total return on its assets
through a combination of current income and capital appreciation. Convertible
Trust seeks to achieve its investment objective by investing principally in
"convertible securities," that is, bonds, notes, debentures, preferred stocks
and other securities which are convertible into common stocks.
This Proxy Statement and Prospectus sets forth concisely information about
Convertible Trust that shareholders of Global Convertible should know before
voting on the Reorganization Agreement. A copy of the Prospectus for Convertible
Trust dated November 22, 1994, is enclosed and incorporated herein by reference.
Also enclosed and incorporated by reference is Convertible Trust's Annual Report
for the fiscal year ended September 30, 1994 and its Semi-Annual Report for the
six months ended March 31, 1995. A Statement of Additional Information relating
to the Reorganization, described in this Proxy Statement and Prospectus (the
"Additional Statement"), dated , 1995, has been filed with the
Commission and is also incorporated herein by reference. Also incorporated
herein by reference are Global Convertible's Prospectus dated August 28, 1995,
and Global Convertible's Annual Report for its fiscal year ended June 30, 1995.
Such documents are available without charge, as noted under "Available
Information" below.
INVESTORS ARE ADVISED TO READ AND RETAIN THIS PROXY STATEMENT AND PROSPECTUS FOR
FUTURE REFERENCE.
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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated , 1995.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION..................................................................................................... 1
General........................................................................................................ 1
Record Date; Share Information................................................................................. 1
Proxies........................................................................................................ 2
Expenses of Solicitation....................................................................................... 2
Vote Required.................................................................................................. 3
SYNOPSIS......................................................................................................... 3
The Reorganization............................................................................................. 3
Fee Table...................................................................................................... 4
Tax Consequences of the Reorganization......................................................................... 5
Comparison of Global Convertible and Convertible Trust......................................................... 6
PRINCIPAL RISK FACTORS........................................................................................... 8
THE REORGANIZATION............................................................................................... 9
The Proposal................................................................................................... 9
The Board's Consideration...................................................................................... 9
The Reorganization Agreement................................................................................... 11
Amendment to Convertible Trust's Plan of Distribution Under Rule 12b-1......................................... 13
Tax Aspects of the Reorganization.............................................................................. 14
Description of Shares.......................................................................................... 15
Capitalization Table (unaudited)............................................................................... 16
Appraisal Rights............................................................................................... 16
COMPARISON OF INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS.................................................... 16
Investment Objectives and Policies............................................................................. 16
Investment Restrictions........................................................................................ 17
ADDITIONAL INFORMATION ABOUT GLOBAL CONVERTIBLE AND CONVERTIBLE TRUST............................................ 18
General........................................................................................................ 18
Financial Information.......................................................................................... 18
Management..................................................................................................... 18
Description of Securities and Shareholder Inquiries............................................................ 18
Dividends, Distributions and Taxes............................................................................. 18
Purchases, Repurchases and Redemptions......................................................................... 18
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE...................................................................... 18
FINANCIAL STATEMENTS AND EXPERTS................................................................................. 18
LEGAL MATTERS.................................................................................................... 19
AVAILABLE INFORMATION............................................................................................ 19
OTHER BUSINESS................................................................................................... 19
Exhibit A -- Agreement and Plan of Reorganization, dated as of August 24, 1995 by and between TCW/DW Global
Convertible Trust and Dean Witter Convertible Securities Trust.................................................. A-1
</TABLE>
i
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550
------------------------
PROXY STATEMENT AND PROSPECTUS
------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 19, 1995
INTRODUCTION
GENERAL
This Proxy Statement and Prospectus is being furnished to the shareholders
of TCW/DW Global Convertible Trust ("Global Convertible"), an open-end,
non-diversified management investment company, in connection with the
solicitation by the Board of Trustees of Global Convertible (the "Board") of
proxies to be used at the Special Meeting of Shareholders of Global Convertible
to be held at the Conference Center, 44th Floor, Two World Trade Center, New
York, New York 10048 at 10:00 A.M., New York time, on December 19, 1995, and any
adjournments thereof (the "Meeting"). It is expected that the mailing of this
Proxy Statement and Prospectus will be made on or about October 24, 1995.
At the Meeting, Global Convertible shareholders will consider and vote upon
an Agreement and Plan of Reorganization, dated as of August 24, 1995 (the
"Reorganization Agreement"), by and between Global Convertible and Dean Witter
Convertible Securities Trust ("Convertible Trust") pursuant to which
substantially all of the assets of Global Convertible will be combined with
those of Convertible Trust in exchange for shares of Convertible Trust. As a
result of this transaction, shareholders of Global Convertible will become
shareholders of Convertible Trust and will receive shares in Convertible Trust
equal to the value of their holdings in Global Convertible on the date of such
transaction. (The transactions described above are referred to as the
"Reorganization"). The shares to be issued by Convertible Trust (the
"Convertible Trust Shares") pursuant to the Reorganization will be issued at net
asset value without an initial sales charge. The holding period of such
Convertible Trust Shares received by each Global Convertible shareholder for
purposes of calculation of any contingent deferred sales charge applicable to
future redemptions will include the period during which Global Convertible's
shares exchanged therefor were held by such Global Convertible shareholder.
Further information relating to Convertible Trust is set forth in the current
Prospectus of Convertible Trust accompanying this Proxy Statement and Prospectus
and is incorporated herein by reference.
The information concerning Global Convertible contained herein has been
supplied by Global Convertible and the information concerning Convertible Trust
contained herein has been supplied by Convertible Trust.
RECORD DATE; SHARE INFORMATION
The Board has fixed the close of business on October 20, 1995 as the record
date (the "Record Date") for the determination of the holders of shares of
beneficial interest of Global Convertible entitled to notice of, and to vote at,
the Meeting. As of the Record Date, there were shares issued and
outstanding. The holders of record
1
<PAGE>
on the Record Date of shares of Global Convertible are entitled to one vote per
share on each matter submitted to a vote at the Meeting. A majority of the
outstanding shares entitled to vote, represented in person or by proxy, will
constitute a quorum at the Meeting.
To the knowledge of the Board, as of the Record Date, no person owned of
record or beneficially 5% or more of the outstanding shares of Global
Convertible. As of the Record Date, the trustees and officers of Global
Convertible, as a group, owned less than 1% of the outstanding shares of Global
Convertible.
To the knowledge of Convertible Trust's Board of Trustees, as of the Record
Date, no person owned of record or beneficially 5% or more of the outstanding
shares of Convertible Trust. As of the Record Date, the trustees and officers of
Convertible Trust, as a group, owned less than 1% of the outstanding shares of
Convertible Trust.
PROXIES
The enclosed form of proxy, if properly executed and returned, will be voted
in accordance with the choice specified thereon. The proxy will be voted in
favor of the Reorganization Agreement unless a choice is indicated to vote
against or to abstain from voting on the Reorganization Agreement. The Board
knows of no business, other than that set forth in the Notice of Special
Meeting, to be presented for consideration at the Meeting. However, the proxy
confers discretionary authority upon the persons named therein to vote as they
determine on other business, not currently contemplated, which may come before
the Meeting. Shares owned of record by a broker-dealer for the benefit of its
customers will be voted by the broker-dealer based on instructions received from
its customers and will not be voted if no such instructions are received.
Abstentions and broker "non-votes" will be counted as present for the purpose of
determining a quorum and will have the same effect as a vote against the
Reorganization Agreement. If a shareholder executes and returns a proxy but
fails to indicate how the votes should be cast, the proxy will be voted in favor
of the Reorganization Agreement. The proxy may be revoked at any time prior to
the voting thereof by: (i) delivering written notice of revocation to the
Secretary of Global Convertible at Two World Trade Center, New York, New York
10048; (ii) attending the Meeting and voting in person; or (iii) signing and
returning a new proxy (if returned and received in time to be voted). Attendance
at the Meeting will not in and of itself revoke a proxy.
In the event that the quorum for the Meeting cannot be obtained, or, subject
to approval of the Board, for other reasons, an adjournment or adjournments of
the Meeting may be sought. Any adjournment would require a vote in favor of the
adjournment by the holders of a majority of the shares present at the Meeting
(or any adjournment thereof) in person or by proxy. The persons named as proxies
will vote all shares represented by proxies which they are required to vote in
favor of the Reorganization Agreement, in favor of an adjournment, and will vote
all shares which they are required to vote against the Reorganization Agreement,
against an adjournment.
EXPENSES OF SOLICITATION
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement and Prospectus, will be borne by Global
Convertible. The expenses of soliciting the proxies of Convertible Trust
shareholders to approve an amendment to that fund's Plan of Distribution under
Rule 12b-1 will be borne by Dean Witter InterCapital Inc. ("InterCapital") and
TCW Funds Management, Inc. ("TCW"). See "The Reorganization -- Amendment to
Convertible Trust's Plan of Distribution Under Rule 12b-1." Global Convertible
and Convertible Trust will bear all of their respective other expenses
associated with the Reorganization. In addition to the solicitation of proxies
by mail, proxies may be solicited by officers and regular employees of Global
Convertible, without compensation other than regular compensation, personally or
by mail, telephone, telegraph or
2
<PAGE>
otherwise. Brokerage houses, banks and other fiduciaries may be requested to
forward soliciting material to the beneficial owners of shares and to obtain
authorization for the execution of proxies. For those services, if any, they
will be reimbursed by Global Convertible for their reasonable out-of-pocket
expenses.
VOTE REQUIRED
Approval of the Reorganization Agreement by Global Convertible's
shareholders requires the affirmative vote of a majority (I.E., more than 50%)
of the outstanding shares of Global Convertible represented in person or by
proxy and entitled to vote at the Meeting, provided a quorum is present at the
Meeting. If the Reorganization Agreement is not approved by shareholders, Global
Convertible will continue in existence and the Board will consider alternative
actions.
Although approval or consent by Convertible Trust shareholders of the
Reorganization Agreement is not required for the Reorganization and is not being
solicited, Convertible Trust shareholders are being solicited separately to
approve an amendment to Convertible Trust's Plan of Distribution under Rule
12b-1 (the "Amendment") to authorize explicitly payments of expenses associated
with distribution of shares of an acquired fund (including Global Convertible).
Consummation of the Reorganization is conditioned upon such approval by a
"majority of the voting securities" of Convertible Trust, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). See "The
Reorganization -- The Reorganization Agreement" and "-- Amendment to Convertible
Trust's Plan of Distribution Under Rule 12b-1."
SYNOPSIS
THE FOLLOWING IS A SYNOPSIS OF CERTAIN INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROXY STATEMENT AND PROSPECTUS. THIS SYNOPSIS IS ONLY A
SUMMARY AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT AND PROSPECTUS
AND THE REORGANIZATION AGREEMENT. SHAREHOLDERS SHOULD CAREFULLY REVIEW THIS
PROXY STATEMENT AND PROSPECTUS AND THE REORGANIZATION AGREEMENT IN THEIR
ENTIRETY AND, IN PARTICULAR, THE CURRENT PROSPECTUS OF CONVERTIBLE TRUST WHICH
ACCOMPANIES THIS PROXY STATEMENT AND WHICH IS INCORPORATED HEREIN BY REFERENCE.
THE REORGANIZATION
The Reorganization Agreement provides for the transfer of substantially all
of the assets of Global Convertible, subject to stated liabilities, to
Convertible Trust in exchange for the Convertible Trust Shares, par value $.01.
The aggregate net asset value of the Convertible Trust Shares issued in the
exchange will equal the aggregate value of the net assets of Global Convertible
received by Convertible Trust. On or after the closing date scheduled for the
Reorganization (the "Closing Date"), Global Convertible will distribute the
Convertible Trust Shares received by Global Convertible to holders of shares of
beneficial interest of Global Convertible issued and outstanding as of the
Valuation Date (as hereinafter defined) in complete liquidation of Global
Convertible and Global Convertible will thereafter be dissolved and deregistered
under the 1940 Act. As a result of the Reorganization, each Global Convertible
shareholder will receive that number of full and fractional Convertible Trust
Shares equal in value to such shareholder's pro rata interest in the net assets
transferred to Convertible Trust. Global Convertible Shareholders holding
certificates representing their shares will not be required to surrender their
certificates in connection with the Reorganization. However, such shareholders
will have to surrender such certificates in order to receive certificates
representing Convertible Trust Shares or to redeem, transfer or exchange the
Convertible Trust Shares received. The Board has determined that the interests
of existing Global Convertible shareholders will not be diluted as a result of
the Reorganization.
3
<PAGE>
FOR THE REASONS SET FORTH BELOW UNDER "THE REORGANIZATION -- THE BOARD'S
CONSIDERATION," THE BOARD, INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED
PERSONS" OF GLOBAL CONVERTIBLE ("INDEPENDENT TRUSTEES"), AS THAT TERM IS DEFINED
IN THE 1940 ACT, HAS CONCLUDED THAT THE REORGANIZATION IS IN THE BEST INTERESTS
OF GLOBAL CONVERTIBLE AND ITS SHAREHOLDERS AND RECOMMENDS APPROVAL OF THE
REORGANIZATION AGREEMENT.
FEE TABLE
The following table illustrates all expenses and fees that a shareholder of
Global Convertible or Convertible Trust currently incurs and that would be
incurred if the Reorganization is consummated.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
GLOBAL CONVERTIBLE
CONVERTIBLE TRUST PRO FORMA
--------------- ------------- ------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases....................................... None None None
Maximum Sales Charge Imposed on Reinvested Dividends............................ None None None
Deferred Sales Charge (as a percentage of the lesser of original purchase price
or redemption proceeds)........................................................ 5.0 % 5.0 % 5.0 %
A deferred sales charge is imposed at the following declining rates:
YEAR SINCE PURCHASE PAYMENT MADE
First....................................................................... 5.0 % 5.0 % 5.0 %
Second...................................................................... 4.0 % 4.0 % 4.0 %
Third....................................................................... 3.0 % 3.0 % 3.0 %
Fourth...................................................................... 2.0 % 2.0 % 2.0 %
Fifth....................................................................... 2.0 % 2.0 % 2.0 %
Sixth....................................................................... 1.0 % 1.0 % 1.0 %
Seventh and thereafter...................................................... None None None
Redemption Fees............................................................... None None None
Exchange Fee.................................................................. None None None
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS*
<CAPTION>
GLOBAL CONVERTIBLE
YEAR SINCE PURCHASE PAYMENT MADE CONVERTIBLE TRUST PRO FORMA
--------------- ------------- ------------
<S> <C> <C> <C>
Management and Advisory Fees................................................ 0.85%*** 0.60% 0.60%
12b-1 Fees**................................................................ 1.00%*** 1.00% 1.00%
Other Expenses.............................................................. 1.65%*** 0.33% 0.27%
Total Fund Operating Expenses............................................... 3.50%*** 1.93% 1.87%
<FN>
- ------------------------
*Ratios are based on annualized expenses for (a) the eight months (since
inception) ended June 30, 1995 for Global Convertible; (b) the fiscal year
ended September 30, 1994, for Convertible Trust; (c) on a pro forma basis,
for the eight months ended June 30, 1995, as if the Reorganization had been
consummated on the first day of such period.
**The 12b-1 fee is accrued daily and payable monthly, at an annual rate of
1.00% of the lesser of: (a) the average daily aggregate gross sales of shares
since inception (not including reinvestment of dividends or distributions),
less the average daily aggregate net asset value of shares redeemed since
inception upon which a contingent
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
deferred sales charge has been imposed or waived, or (b) the average daily
net assets. A portion of the 12b-1 fee equal to 0.25% of average daily net
assets is characterized as a service fee within the meaning of the National
Association of Securities Dealers, Inc. guidelines.
***With respect to Global Convertible, InterCapital had undertaken to assume all
operating expenses (except for any 12b-1 and/or brokerage fees) and Dean
Witter Services Company Inc. had agreed to waive the compensation provided
for in its Management Agreement and TCW had undertaken to waive the
compensation provided for in its Advisory Agreement, until such time as the
Fund had $50 million of net assets or until six months from the date of
commencement of the Fund's operations, whichever occurred first. InterCapital
continued to assume all operating expenses (except for 12b-1 and/or brokerage
fees) and DWSC and TCW continued to waive their respective compensation until
August 23, 1995. The fees and expenses disclosed above do not reflect the
assumption of any expenses or the waiver of any compensation other than the
assumption of expenses due to mandatory expense limitations.
</TABLE>
HYPOTHETICAL EXPENSES
To attempt to show the effect of these expenses on an investment over time,
the hypotheticals shown below have been created. Assume that an investor makes a
$1,000 investment in either the Global Convertible or Convertible Trust or the
new combined fund, that the annual return is 5% and that the operating expenses
for each fund are the ones shown in the chart above, if the investment was
redeemed at the end of each period shown below, the investor would incur the
following expenses by the end of each period shown:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Global Convertible*................ $ 85 $ 137 $ 202 $ 377
Convertible Trust.................. $ 70 $ 91 $ 125 $ 226
Pro Forma Combined Fund............ $ 69 $ 89 $ 121 $ 219
If such investment was not redeemed, the investor would incur the following expenses:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Global Convertible*................ $ 35 $ 107 $ 182 $ 377
Convertible Trust.................. $ 20 $ 61 $ 105 $ 226
Pro Forma Combined Fund............ $ 19 $ 59 $ 101 $ 219
<FN>
- ------------------------
*The fees and expenses disclosed above do not reflect the assumption of any
expenses or the waiver of any compensation other than the assumption of
expenses due to mandatory expense limitations.
</TABLE>
The above example should not be considered a representation of past or
future expenses or performance. Actual operating expenses may be greater or less
than those shown. Long-term shareholders of either fund may pay more in sales
charges and distribution fees than the economic equivalent of the maximum
front-end sales charges permitted by the National Association of Securities
Dealers, Inc. ("NASD").
TAX CONSEQUENCES OF THE REORGANIZATION
As a condition to the Reorganization, Global Convertible will receive an
opinion of Gordon Altman Butowsky Weitzen Shalov & Wein to the effect that the
Reorganization will constitute a tax-free reorganization for Federal income tax
purposes, and that no gain or loss will be recognized by Global Convertible or
the shareholders of Global Convertible for Federal income tax purposes as a
result of the transactions included in the Reorganization. For further
information about the tax consequences of the Reorganization, see "The
Reorganization -- Tax Aspects of the Reorganization" below.
5
<PAGE>
COMPARISON OF GLOBAL CONVERTIBLE AND CONVERTIBLE TRUST
INVESTMENT OBJECTIVES AND POLICIES. Global Convertible and Convertible
Trust have an identical investment objective, which is to seek a high level of
total return through a combination of capital appreciation and current income.
Global Convertible seeks to achieve its investment objective by investing, under
normal circumstances, at least 65% of its total assets in convertible securities
of domestic and foreign issuers rated B or higher by Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") or, if not rated,
determined to be of comparable quality. Convertible Trust seeks to achieve its
investment objective by investing, under normal circumstances, at least 65% of
its total assets in convertible securities of domestic issuers. Convertible
Trust does not have any minimum quality rating standard for its investments.
Under normal circumstances, Global Convertible invests in convertible
securities of issuers located in at least three countries, one of which is the
United States, and at all times invests at least 25% of its total assets in
securities of U.S. issuers. In addition, Global Convertible may invest more than
25% of its total assets in securities of issuers located in Japan. Convertible
Trust may invest up to 10% of the value of its total assets, at the time of
purchase, in foreign securities (other than securities of Canadian issuers
registered under the U.S. Securities Exchange Act of 1934 (the "1934 Act") or
American Depositary Receipts ("ADRs"), on which there is no such limit). Global
Convertible may enter into forward foreign currency exchange contracts as a
hedge against fluctuations in foreign exchange rates. Convertible Trust may not
enter into such transactions. Global Convertible may, for purposes of generating
income or capital appreciation, write covered call options on securities and
currencies without limit and covered put options on obligations having an
aggregate value not to exceed 50% of net assets. Convertible Trust may write
covered call options up to 20% of its total assets for purposes of generating
income or capital appreciation and may write covered put options without limit.
Global Convertible may purchase put and call options on securities, currencies
and stock indexes in amounts up to 5% of its total assets to close out opposite
option positions or to protect against adverse price movements. Convertible
Trust has a similar policy except that it may enter into options transactions
only on U.S. Treasury and equity securities.
Global Convertible may purchase and sell U.S. and foreign exchange-traded
futures contracts on financial instruments, foreign currencies or securities
indexes, for hedging purposes. Convertible Trust may purchase and sell U.S.
exchange-traded financial futures contracts for hedging purposes. Both funds may
purchase and sell options on eligible futures contracts for hedging purposes or
to close out an opposite position.
In addition, Global Convertible is a non-diversified investment company,
within the meaning of the 1940 Act, whereas Convertible Trust is a diversified
investment company.
The investment policies of both Global Convertible and Convertible Trust are
not fundamental and may be changed by their respective Boards of Trustees. For a
more detailed comparison of the investment objectives, policies and restrictions
of Global Convertible and Convertible Trust, see "Comparison of Investment
Objectives, Policies and Restrictions," below.
INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. Global Convertible
obtains management services from Dean Witter Services Company Inc. ("DWSC"), a
wholly-owned subsidiary of InterCapital, and investment advisory services from
TCW. Fees to both DWSC and TCW are payable monthly computed on the net asset
value of such fund as of the close of business each day. DWSC is entitled to a
fee at an annual rate of 0.51% and TCW is entitled to a fee at an annual rate of
0.34%. Convertible Trust obtains investment management and advisory services
from InterCapital. InterCapital's aggregate fee for such services is payable
monthly computed on the net
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asset value of such fund as of the close of business each day. Convertible Trust
pays a management fee at the rate of 0.60% of the portion of daily net assets
not exceeding $750 million, scaled down at various asset levels to 0.425% of the
portion of daily net assets exceeding $3 billion.
Both Global Convertible and Convertible Trust have adopted distribution
plans ("Plans") pursuant to Rule 12b-1 under the 1940 Act. Pursuant to such
Plans, each of Convertible Trust and Global Convertible pays to Dean Witter
Distributors Inc. (the "Distributor") a fee, which is accrued daily and payable
monthly, at the annual rate of 1% of the lesser of (a) the average daily
aggregate gross sales of such fund's shares since its inception (not including
reinvestments of dividends or capital gains distributions), less the average
daily aggregate net asset value of such fund's shares redeemed since its
inception upon which a contingent deferred sales charge ("CDSC") has been
imposed or waived; or (b) the average daily net assets of the fund. These fees
compensate the Distributor for the services provided and the expenses borne by
the Distributor and others in distribution of such fund's shares. The
Distributor also receives the proceeds of any CDSC. For the treatment of excess
distribution expenses, see "The Reorganization -- Amendment to Convertible
Trust's Plan of Distribution Under Rule 12b-1."
OTHER SIGNIFICANT FEES. Both Global Convertible and Convertible Trust pay
additional fees in connection with their operations, including legal, auditing,
transfer agent and custodial fees. See "Synopsis -- Fee Table" above for the
percentage of average net assets represented by such other expenses.
PURCHASES, EXCHANGES AND REDEMPTIONS. Convertible Trust and Global
Convertible each continuously issue their shares to investors at a price equal
to net asset value at the time of such issuance. However, redemptions and/ or
repurchases are subject in most circumstances to a CDSC, scaled down from 5% to
1% of the amount redeemed, if made within six years of purchase, which charge is
paid to the Distributor. Shares of Convertible Trust and Global Convertible are
distributed by the Distributor and offered by Dean Witter Reynolds Inc. ("DWR")
and other dealers who have entered into selected dealer agreements with the
Distributor.
Each of Global Convertible and Convertible Trust makes available to its
shareholders exchange privileges allowing exchange of shares for shares of
certain other funds. Shares of Global Convertible may be exchanged for shares of
any of the four other TCW/DW Funds sold with a CDSC as well as shares of TCW/DW
North American Government Income Trust, TCW/DW Income and Growth Fund and TCW/DW
Balanced Fund and shares of five Dean Witter funds which are money market funds
(for which InterCapital serves as investment adviser).
After the Reorganization, former Global Convertible shareholders will have
access to the wider variety of exchange options available to the Dean Witter
family of funds, but will no longer be able to exchange into funds within the
TCW/DW family of funds. Convertible Trust shares may be exchanged for shares of
any of the 30 other funds advised by InterCapital sold with a CDSC, 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 and five Dean Witter money market funds. In addition,
shares of Convertible Trust 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 Convertible Trust, however acquired, may not be exchanged
for shares of front-end sales charge funds. Shares of a fund sold subject to a
CDSC, 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. Both Global Convertible and Convertible Trust provide telephone
exchange privileges to their shareholders.
Shareholders of Global Convertible and Convertible Trust may redeem their
shares for cash at any time at the net asset value per share next determined;
however, such redemption proceeds will be reduced by the amount of any
applicable CDSC. For purposes of calculation of the CDSC applicable to future
redemptions, the holding
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period of such Convertible Trust Shares received by each Global Convertible
shareholder will include the period during which the Global Convertible shares
exchanged therefor were held by such shareholder. Both Global Convertible and
Convertible Trust offer a reinstatement privilege whereby a shareholder who has
not previously exercised such privilege whose shares have been redeemed or
repurchased may, within thirty days after the date of redemption or repurchase,
reinstate any portion or all of the proceeds thereof and receive a pro rata
credit for any CDSC paid in connection with such redemption or repurchase.
Global Convertible and Convertible Trust may redeem involuntarily, at net asset
value, most accounts valued at less than $100.
For a more detailed discussion of purchasing, exchanging and redeeming
Convertible Trust shares, see "Purchase of Fund Shares," "Shareholder Services"
and "Redemptions and Repurchases" in Convertible Trust's current Prospectus.
DIVIDENDS. Dividends from both Global Convertible's and Convertible Trust's
anticipated net investment income are declared and paid quarterly and net
short-term capital gains and long-term capital gains distributions, if any, are
paid at least annually. Dividends and capital gains distributions of both Global
Convertible and Convertible Trust are automatically reinvested in additional
shares at net asset value unless the shareholder elects to receive cash.
PRINCIPAL RISK FACTORS
The net asset value of Convertible Trust's and Global Convertible's shares
will fluctuate with changes in the market value of their respective portfolio
securities and because both Global Convertible and Convertible Trust invest
primarily in convertible securities, the risks of investment in both funds are
similar. The principal difference between the two funds is that Global
Convertible may invest without limitation in foreign securities and under normal
circumstances, invests in at least three different countries. By contrast, the
focus of Convertible Trust is U.S. securities and it may invest only 10% of its
assets in foreign securities.
Accordingly, the investment performance of Global Convertible is affected to
a much greater extent than that of Convertible Trust by the movements in prices
of securities of issuers located outside the U.S. and by the risk factors
applicable to foreign securities. Investments in foreign securities may be
affected by changes in currency rates or exchange control regulations; changes
in governmental administration or economic or monetary policy; or changed
circumstances in dealings between nations. In addition, foreign securities,
particularly securities of issuers located in emerging market or developing
countries, may be subject to a greater degree of risk arising from possible
economic, political and social instability, insufficient market liquidity, lack
of a comprehensive regulatory scheme or inadequate available information.
In addition, Global Convertible is a non-diversified investment company
under the 1940 Act, whereas Convertible Trust is a diversified investment
company. As a result, Global Convertible may invest a higher percentage of its
assets in a more limited number of issuers than Convertible Trust.
Also, Global Convertible may not invest in any security rated lower than B
by Moody's or S&P or in unrated securities of equivalent quality, whereas
Convertible Trust does not have any minimum quality rating for its investments.
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THE REORGANIZATION
THE PROPOSAL
The Board of Trustees of Global Convertible, including the Trustees who are
not "interested persons" of Global Convertible, having reviewed Global
Convertible's financial position and its prospects for future growth, and
determined that the Reorganization is in the best interests of Global
Convertible and its shareholders and that the interests of Global Convertible's
shareholders will not be diluted as a result thereof, recommends approval of the
Reorganization by Global Convertible shareholders. The Board believes that a
combination of Global Convertible with Convertible Trust is consistent with
Global Convertible's stated investment objective.
Upon commencement of operations on October 31, 1994, the Board of Global
Convertible, TCW and DWSC anticipated that it would take a period of time for
Global Convertible to attract sufficient assets to become a viable fund able to
bear the expenses of its operations. In order to facilitate the start-up phase,
InterCapital agreed to assume all operating expenses (except for any 12b-1
and/or brokerage fees), and DWSC and TCW agreed to waive their compensation as
manager and adviser, respectively, until such time as the fund had $50 million
of net assets or six months from the date of commencement of operations,
whichever occurred first. At the end of four months, when the fund had not grown
as expected, each of the service providers named above agreed to continue to
absorb expenses and waive fees as stated until the earlier of August 23, 1995
and the date on which the fund attained $50 million of net assets. After such
date, it was intended that Global Convertible would bear all its fees and
expenses. Global Convertible's sales have remained below expectations and as of
August 23, 1995 net assets were only $18,572,813. InterCapital, DWSC, TCW and
the Distributor (collectively, "Management") believe it is unlikely that Global
Convertible will experience material growth in assets in the foreseeable future.
Because of the inefficiencies, higher costs and disadvantageous economies of
scale attendant with Global Convertible's small asset base, Management has
concluded that it would be in the best interests of the fund and its
shareholders to combine the fund's assets with those of a substantially larger
investment company advised by InterCapital that, like Global Convertible,
invests primarily in convertible securities.
THE BOARD'S CONSIDERATION
At a meeting held on August 24, 1995, the Board unanimously adopted, and
voted to recommend to the shareholders of Global Convertible that they approve,
the Reorganization Agreement. In reaching this decision, the Board made an
extensive inquiry into a number of factors, particularly the comparative
expenses currently incurred in the operations of Global Convertible and
Convertible Trust, Global Convertible's prospects for future growth and the
impact on Global Convertible shareholders if Global Convertible was not
reorganized or was liquidated. The Board also considered other factors,
including, but not limited to: the investment expertise of InterCapital in the
area of convertible securities; the comparative investment performance and past
growth in assets of Global Convertible and Convertible Trust; the compatibility
of the investment objectives, policies, restrictions and portfolios of Global
Convertible and Convertible Trust; the terms and conditions of the
Reorganization which would affect the price of Shares to be issued in the
Reorganization; the tax-free nature of the Reorganization; and any direct or
indirect costs to be incurred by Global Convertible and Convertible Trust in
connection with the Reorganization.
In recommending the Reorganization to the shareholders of Global
Convertible, the Board considered that the Reorganization would have the
following benefits for shareholders of Global Convertible:
1. The expenses borne by shareholders of the combined funds should be
lower on a percentage basis than the actual expenses per share of Global
Convertible assuming Global Convertible bears all such expenses (I.E.,
without regard to the assumption of expenses and waivers by service
providers described
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above). In part, this is because the rate of the investment management fee
payable by Convertible Trust is lower than the combined investment
management and advisory fees currently paid by Global Convertible. See
"Synopsis -- Comparison of Global Convertible and Convertible Trust --
Investment Management and Distribution Plan Fees" above. Furthermore, to the
extent that the Reorganization would result in Global Convertible
shareholders becoming shareholders of a larger fund, various fixed and
relatively fixed expenses (E.G., auditing and legal) can be spread over a
larger number of shares. In this regard, the Board noted that Global
Convertible's expense ratio, assuming it had borne all of its expenses other
than those above the mandatory expense limitations, for its fiscal year
ended June 30, 1995 (annualized, based on eight months of operations since
inception) was 3.50%, whereas the expense ratio for Convertible Trust was
1.93% (based on the twelve months ended September 30, 1994).
2. Shareholders would have a continued participation in the equity and
fixed-income markets through investment in Convertible Trust, which has a
similar investment objective and similar investment restrictions to those of
Global Convertible, without having to sell their shares. Due to the open-end
structure of Convertible Trust, shareholders will have the option of
redeeming their Convertible Trust Shares at net asset value on any business
day, subject to any applicable CDSC, as provided in Convertible Trust's
prospectus. Convertible Trust's CDSC is no higher than Global Convertible's
and shareholders will receive the benefit of the period during which they
held the Global Convertible shares which are converted to shares of
Convertible Trust in the Reorganization, in calculating the appropriate CDSC
upon redemption.
3. Shareholders of Global Convertible will be able to purchase shares
of Convertible Trust at net asset value and pursue similar investment goals
in a larger and more economically viable fund.
4. Global Convertible's shareholders would retain the capabilities and
resources of InterCapital and its affiliates in the areas of operations
management, distribution, shareholder servicing and marketing. The
shareholders would benefit from the continuity of having InterCapital
provide such services after the Reorganization and also would continue to
receive high quality investment advisory services if Global Convertible's
assets are managed by InterCapital, an experienced investment adviser.
5. The Reorganization would enable Global Convertible's shareholders to
enjoy an expanded range of mutual fund investment options. The Dean Witter
Funds complex includes 40 mutual fund portfolios which will be available for
exchange by Global Convertible shareholders that receive Convertible Trust
Shares in the Reorganization.
6. The Reorganization will constitute a tax-free reorganization for
Federal income tax purposes, and no gain or loss will be recognized by
Global Convertible or its shareholders for Federal income tax purposes as a
result of transactions included in the Reorganization.
The Board of Trustees of Convertible Trust, including a majority of such
trustees who are not "interested persons" of Convertible Trust, have also
determined that the Reorganization is in the best interests of Convertible Trust
and that the interests of existing shareholders of Convertible Trust will not be
diluted as a result thereof. The transaction will enable Convertible Trust to
acquire investment securities which are consistent with Convertible Trust's
investment objective, without the brokerage costs attendant to the purchase of
such securities in the market. Furthermore, the addition of Global Convertible's
assets to Convertible Trust's portfolio is expected to result in economies of
scale described above.
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THE REORGANIZATION AGREEMENT
The terms and conditions under which the Reorganization would be consummated
are set forth in the Reorganization Agreement and are summarized below. This
summary is qualified in its entirety by reference to the Reorganization
Agreement, a copy of which is attached as Exhibit A to this Proxy Statement and
Prospectus.
The Reorganization Agreement provides that (i) Global Convertible will
transfer all of its assets, including portfolio securities, cash (other than
cash amounts retained by Global Convertible as a "Cash Reserve" in the amount
sufficient to discharge its liabilities not discharged prior to the Valuation
Date and for expenses of the dissolution), cash equivalents and receivables to
Convertible Trust on the Closing Date in exchange for the assumption by
Convertible Trust of Global Convertible's stated liabilities, including all
expenses, costs, charges and reserves, as reflected on an unaudited statement of
assets and liabilities of Global Convertible prepared by the Treasurer of Global
Convertible as of the Valuation Date in accordance with generally accepted
accounting principles consistently applied from the prior audited period, and
the delivery of Convertible Trust Shares, (ii) such Convertible Trust Shares
will be distributed to the shareholders of Global Convertible on the Closing
Date or as soon as practicable thereafter, (iii) Global Convertible will be
dissolved and (iv) the outstanding shares of Global Convertible will be
canceled.
For technical reasons, certain of Global Convertible's existing investment
limitations may be deemed to preclude Global Convertible from consummating the
Reorganization to the extent that the Reorganization would involve Global
Convertible holding all of its assets as shares of Convertible Trust until such
shares are distributed to Global Convertible's shareholders. By approving the
Reorganization Agreement, Global Convertible's shareholders will be deemed to
have agreed to waive each of these limitations. It is anticipated that the
distribution of the Convertible Trust Shares to Global Convertible's
shareholders will occur on the Closing Date or as soon as practicable
thereafter.
The number of Convertible Trust Shares to be delivered to Global Convertible
will be determined by dividing the value of Global Convertible assets acquired
by Convertible Trust (net of stated liabilities assumed by Convertible Trust) by
the net asset value of a Convertible Trust Share; these values will be
calculated as of the close of business of the New York Stock Exchange on the
fifth business day following the receipt of the requisite approval by the
shareholders of Global Convertible of the Reorganization Agreement or at such
other time as Global Convertible and Convertible Trust may agree (the "Valuation
Date"). As an illustration, if on the Valuation Date Global Convertible were to
have securities with a market value of $95,000 and cash in the amount of $10,000
(of which $5,000 was to be retained by it as the Cash Reserve), the value of the
assets which would be transferred to Convertible Trust would be $100,000. If the
net asset value per share of Convertible Trust were $10 per share at the close
of business on the Valuation Date, the number of shares to be issued would be
10,000 ($100,000 DIVIDED BY $10). These 10,000 shares of Convertible Trust would
be distributed to the former shareholders of Global Convertible. This example is
given for illustration purposes only and does not bear any relationship to the
dollar amounts or shares expected to be involved in the Reorganization.
On the Closing Date or as soon as practicable thereafter, Global Convertible
will distribute pro rata to its shareholders of record as of the close of
business on the Valuation Date ("Global Convertible Shareholders"), the
Convertible Trust Shares it receives. Convertible Trust will cause its transfer
agent to credit and confirm an appropriate number of Convertible Trust Shares to
each Global Convertible Shareholder. Certificates for Convertible Trust Shares
will be issued upon written request of a Global Convertible Shareholder but only
for whole shares, with fractional shares credited to the name of the shareholder
on the books of Convertible Trust. Such
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shareholders who wish certificates representing their Convertible Trust Shares
must, after receipt of their confirmations, make a written request to
Convertible Trust's transfer agent, Dean Witter Trust Company, Harborside
Financial Center, Jersey City, New Jersey 07311. Global Convertible Shareholders
holding certificates representing their shares will not be required to surrender
their certificates in connection with the Reorganization. However, such
shareholders will have to surrender such certificates (or provide indemnities
reasonably acceptable to Convertible Trust in respect of lost certificates) in
order to receive certificates representing Convertible Trust Shares or to
redeem, transfer or exchange the Convertible Trust Shares received.
The Closing Date will be the next business day following the Valuation Date.
The consummation of the Reorganization is contingent upon the approval of the
Reorganization by the shareholders of Global Convertible and the receipt of the
other opinions and certificates set forth in Sections 6, 7 and 8 of the
Reorganization Agreement and the occurrence of the events described in those
Sections, certain of which may be waived by Global Convertible or Convertible
Trust. In addition, consummation of the Reorganization is contingent upon the
approval of the Amendment by Convertible Trust's shareholders. See "The
Reorganization -- Amendment to Convertible Trust's Plan of Distribution Under
Rule 12b-1" below. The Reorganization Agreement may be amended in any mutually
agreeable manner, except that no amendment may be made subsequent to the Meeting
which would detrimentally affect the value of the shares of Convertible Trust to
be distributed. Global Convertible and Convertible Trust will bear all of their
respective expenses associated with the Reorganization, other than expenses
associated with the costs of soliciting approval of the Amendment by Convertible
Trust's shareholders. Management estimates that such expenses associated with
the Reorganization to be borne by Global Convertible will not exceed $79,500.
The Reorganization Agreement may be terminated and the Reorganization
abandoned at any time, before or after approval by Global Convertible's
shareholders, by mutual consent of Global Convertible and Convertible Trust. In
addition, either party may terminate the Reorganization Agreement upon the
occurrence of a material breach of the Reorganization Agreement by the other
party or if, by February 29, 1996, any condition set forth in the Reorganization
Agreement has not been fulfilled or waived by the party entitled to its
benefits.
Under the Reorganization Agreement, within one year after the Closing Date,
Global Convertible shall: either pay or make provision for all of its
liabilities and distribute any remaining amount of the Cash Reserve (after
paying or making provision for such liabilities and the estimated cost of making
the distribution) to Global Convertible Shareholders. Global Convertible shall
be dissolved and deregistered as an investment company promptly following the
distributions of shares of Convertible Trust to shareholders of record of Global
Convertible.
The effect of the Reorganization is that shareholders of Global Convertible
who vote their shares in favor of the Reorganization Agreement are electing to
sell their shares of Global Convertible (at net asset value on the Valuation
Date calculated after subtracting the Cash Reserve) and reinvest the proceeds in
Convertible Trust Shares at net asset value and without recognition of taxable
gain or loss for Federal income tax purposes. See "Tax Aspects of the
Reorganization" below. As noted in "Tax Aspects of the Reorganization" below, if
Global Convertible recognizes net gain from the sale of securities prior to the
Closing Date, such gain, to the extent not offset by capital loss carry
forwards, will be distributed to shareholders prior to the Closing Date and will
be taxable to shareholders as capital gain.
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Shareholders of Global Convertible will continue to be able to redeem their
shares at net asset value next determined after receipt of the redemption
request (subject to any applicable CDSC) until the close of business on the
business day next preceding the Closing Date. Redemption requests received by
Global Convertible thereafter will be treated as requests for redemption of
shares of Convertible Trust.
AMENDMENT TO CONVERTIBLE TRUST'S PLAN OF DISTRIBUTION UNDER RULE 12B-1
In any given year, the Distributor may incur expenses in distributing shares
of Convertible Trust and Global Convertible, respectively, which may be in
excess of the total of payments pursuant to the Plans and the proceeds of CDSC's
paid by investors upon the redemption of shares. In connection with the
Reorganization, the excess distribution charges of Global Convertible will be
combined with the excess distribution charges of Convertible Trust and reflected
in reports provided to Convertible Trust's Board of Trustees in its annual
review of management and distribution arrangements. Convertible Trust
shareholders are being solicited separately to approve the Amendment to
authorize explicitly payments of expenses associated with distribution of shares
of an acquired fund (including Global Convertible).
As of June 30, 1995, Global Convertible's and Convertible Trust's respective
excess distribution charges amounted to $1,399,716 and $66,091,968, representing
7.42% and 36.82% of Global Convertible's and Convertible Trust's respective net
assets. If the Reorganization had occurred on that date, the combined fund's
total excess distribution charges would have been $67,491,684 (or 34.0% of
combined pro forma assets of $198,269,345). The Board of Trustees of Convertible
Trust is of the view that reports of excess distribution charges will serve as a
useful reminder of the Distributor's unreimbursed distribution expenses which
the Trustees may accord such weight as they deem appropriate in making their
annual determination as to whether to continue Convertible Trust's 12b-1 Plan.
Paragraph 2 of Convertible Trust's current Plan sets forth the purposes for
which payments may be made under its Plan. That paragraph provides that:
"The amount set forth in paragraph 1 of this Plan shall be paid for
services of the Distributor, DWR, its affiliates and other
broker-dealers it may select in connection with the distribution of the
Fund's shares..."
Convertible Trust has been advised that its Plan, as currently in effect,
authorizes the proposed treatment of excess distribution expenses. Nevertheless,
approval of the Amendment by Convertible Trust's shareholders is being solicited
to authorize explicitly payments with respect to expenses associated with the
distribution of shares of an acquired fund (including Global Convertible).
Specifically, the Amendment would add the following sentence to paragraph 2 of
Convertible Trust's Plan:
"Payments may also be made with respect to distribution expenses
incurred in connection with the distribution of shares of an investment
company whose assets are acquired by [Convertible Trust] in a tax-free
reorganization."
Adoption of the Amendment will have no immediate implications for
Convertible Trust. Payments under the Plan would continue to be made at the
annual rates specified in the Plan. While the Distributor may hope to recover
its excess distribution expenses over an extended period of time, Convertible
Trust will not be obligated to assure that such amounts are recouped by the
Distributor. These charges do not currently appear as an expense or liability on
the books of Global Convertible nor will they so appear on the books of
Convertible Trust subsequent to the Reorganization. They do not enter into the
calculation of net asset value and do not enter into the formula for calculation
of 12b-1 fees. In the event of termination or non-continuance of Convertible
Trust's 12b-1 Plan,
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Convertible Trust is not legally committed, and is not required to commit, to
the payment of those charges upon termination or non-continuation of the Plan.
Convertible Trust's Board has not made any determination as to whether it would
be appropriate for Convertible Trust to pay amounts attributable to expenses
associated with the distribution of Global Convertible's shares. Rather,
Convertible Trust's Board has taken the position that, in the event Convertible
Trust's 12b-1 Plan is terminated or not continued for any reason, the Board will
determine at that time how the excess distribution charges will be treated. The
Amendment would simply make it clear that (i) excess distribution expenses
associated with Global Convertible may appropriately be reflected in reports
provided to Convertible Trust's Board of Trustees and (ii) Convertible Trust is
authorized to pay the expenses of the Distributor incurred in distribution of
shares of Global Convertible to the extent its Trustees determine it appropriate
to do so.
Although approval or consent of Convertible Trust shareholders of the
Reorganization Agreement is not required for the Reorganization and is not being
solicited, Convertible Trust shareholders are being solicited separately to
approve the Amendment. Consummation of the Reorganization is conditioned upon
such approval by a "majority of the voting securities" of Convertible Trust, as
defined in the 1940 Act (I.E., the affirmative vote of the lesser of (a) 67% or
more of the shares of Convertible Trust present at the Convertible Trust Meeting
or represented by proxy if the holders of more than 50% of the outstanding
shares are present or represented by proxy or (b) more than 50% of Convertible
Trust's outstanding shares).
TAX ASPECTS OF THE REORGANIZATION
At least one but not more than 20 business days prior to the Valuation Date,
Global Convertible will declare and pay a dividend or dividends which, together
with all previous such dividends, will have the effect of distributing to Global
Convertible's shareholders all of Global Convertible's investment company
taxable income for all periods since inception of Global Convertible through and
including the Valuation Date (computed without regard to any dividends paid
deduction), and all of Global Convertible's net capital gain, if any, realized
in such periods (after reduction for any capital loss carry-forward).
The Reorganization is intended to qualify for Federal income tax purposes as
a tax-free reorganization under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"). Global Convertible and Convertible Trust have
represented that, to their best knowledge, there is no plan or intention by
Global Convertible shareholders to redeem, sell, exchange or otherwise dispose
of a number of Convertible Trust Shares received in the transaction that would
reduce Global Convertible shareholders' ownership of Convertible Trust Shares to
a number of shares having a value, as of the Closing Date, of less than 50% of
the value of all of the formerly outstanding Global Convertible shares as of the
same date. Global Convertible and Convertible Trust have each further
represented that, as of the Closing Date, Global Convertible and Convertible
Trust will qualify as regulated investment companies.
As a condition to the Reorganization, Global Convertible and Convertible
Trust will receive an opinion of Gordon Altman Butowsky Weitzen Shalov & Wein
that, based on certain assumptions, facts, the terms of the Reorganization
Agreement and additional representations set forth in the Reorganization
Agreement or provided by Global Convertible and Convertible Trust:
1. The transfer of substantially all of Global Convertible's assets in
exchange for the Convertible Trust Shares and the assumption by Convertible
Trust of certain stated liabilities of Global Convertible followed by the
distribution by Global Convertible of the Convertible Trust Shares to Global
Convertible Shareholders in
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exchange for their Global Convertible shares will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and
Global Convertible and Convertible Trust will each be a "party to a
reorganization" within the meaning of Section 368 (b) of the Code;
2. No gain or loss will be recognized by the Convertible Trust upon the
receipt of the assets of Global Convertible solely in exchange for the
Convertible Trust Shares and the assumption by Convertible Trust of the
stated liabilities of Global Convertible;
3. No gain or loss will be recognized by Global Convertible upon the
transfer of the assets of Global Convertible to Convertible Trust in
exchange for the Convertible Trust Shares and the assumption by Convertible
Trust of the stated liabilities or upon the distribution of Convertible
Trust Shares to Global Convertible's shareholders in exchange for their
Global Convertible shares;
4. No gain or loss will be recognized by the shareholders of Global
Convertible upon the exchange of the shares of Global Convertible for the
Convertible Trust Shares;
5. The aggregate tax basis for the Convertible Trust Shares received by
each of Global Convertible's shareholders pursuant to the reorganization
will be the same as the aggregate tax basis of the shares in Global
Convertible held by each such shareholder of Global Convertible immediately
prior to the reorganization;
6. The holding period of the Convertible Trust Shares to be received by
each shareholder of Global Convertible will include the period during which
the shares in Global Convertible surrendered in exchange therefor were held
(provided such shares in Global Convertible were held as capital assets on
the date of the Reorganization);
7. The tax basis of the assets of Global Convertible acquired by
Convertible Trust will be the same as the tax basis of such assets to Global
Convertible immediately prior to the Reorganization; and
8. The holding period of the assets of Global Convertible in the hands
of Convertible Trust will include the period during which those assets were
held by Global Convertible.
The Reorganization will be treated as a "change in ownership" under Section
382 of the Code. It is not anticipated that any resulting limitations on the use
of any capital loss carryovers of Global Convertible will be material. In
addition, the economic benefit of any capital loss carryovers of Global
Convertible would be available to shareholders of the combined entity with a
resulting benefit to Convertible Trust shareholders. It is not anticipated that
any such benefit will be material.
SHAREHOLDERS OF GLOBAL CONVERTIBLE SHOULD CONSULT THEIR TAX ADVISORS
REGARDING THE EFFECT, IF ANY, OF THE PROPOSED TRANSACTION IN LIGHT OF THEIR
INDIVIDUAL CIRCUMSTANCES. BECAUSE THE FOREGOING DISCUSSION ONLY RELATES TO THE
FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED TRANSACTION, SHAREHOLDERS OF
GLOBAL CONVERTIBLE SHOULD ALSO CONSULT THEIR TAX ADVISORS AS TO STATE AND LOCAL
TAX CONSEQUENCES, IF ANY, OF THE PROPOSED TRANSACTION.
DESCRIPTION OF SHARES
Shares of Convertible Trust to be issued pursuant to the Reorganization
Agreement will, when issued, be fully paid and non-assessable by Convertible
Trust and transferable without restrictions and will have no preemptive or
conversion rights.
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CAPITALIZATION TABLE (UNAUDITED)
The following table sets forth the capitalization of Convertible Trust and
Global Convertible as of June 30, 1995 and on a pro forma combined basis as if
the Reorganization had occurred on that date:
<TABLE>
<CAPTION>
NET ASSET
SHARES VALUE PER
NET ASSETS OUTSTANDING SHARE
-------------- ------------ -----------
<S> <C> <C> <C>
Convertible Securities........................................................ $ 179,395,969 16,178,700 $ 11.09
Global Convertible............................................................ $ 18,873,376 1,787,684 $ 10.56
As the Surviving Fund (Pro Forma Combined).................................... $ 198,269,345 17,880,537 $ 11.09
</TABLE>
APPRAISAL RIGHTS
Shareholders of Global Convertible will have no appraisal rights in
connection with the Reorganization.
COMPARISON OF INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES AND POLICIES
Global Convertible and Convertible Trust have an identical investment
objective, which is to seek a high level of total return through a combination
of capital appreciation and current income. The principal difference between the
two funds is that Global Convertible, under normal circumstances, invests in
convertible securities of issuers located in at least three countries, one of
which is the United States, and at all times invests at least 25% of its total
assets in securities of U.S. issuers. In addition, Global Convertible may invest
more than 25% of its total assets in securities of issuers located in Japan.
Convertible Trust may invest only up to 10% of its total assets in foreign
securities (other than securities of Canadian issuers registered under the 1934
Act or ADRs, on which there is no such limit). In addition, Global Convertible
is a non-diversified investment company, within the meaning of the 1940 Act,
whereas Convertible Trust is a diversified investment company. A non-diversified
investment company may invest a greater portion of its assets in the securities
of a single issuer than a diversified investment company. To the extent that a
relatively high percentage of a non-diversified fund's assets may be invested in
the securities of a limited number of issuers, such fund may be more susceptible
to any single economic, political or regulatory occurrence than the portfolio
securities of a diversified investment company.
Global Convertible seeks to achieve its investment objective by investing at
least 65% of its total assets in convertible securities of domestic and foreign
issuers rated B or higher by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") or, if not rated, determined to be of
comparable quality. Convertible Trust seeks to achieve its investment objective
by investing at least 65% of its total assets principally in "convertible
securities," that is, bonds, notes, debentures, preferred stocks and other
securities which are convertible into common stocks. Convertible Trust does not
have any minimum quality rating standard for its investments and may invest in
fixed-income securities in default on payments of interest or principal.
Each fund may invest up to 35% of its total assets in any combination and
quantity of common stock, nonconvertible preferred stock, nonconvertible
corporate debt securities, options on debt and equity securities, financial
futures contracts and related options thereon and money market instruments. Both
Convertible Trust and Global Convertible may invest part or all of their
respective assets in money market instruments to maintain temporarily a
"defensive" posture when, in the opinion of the investment adviser, it is
advisable to do so because of market conditions.
Global Convertible may, for purposes of generating income or capital
appreciation, write covered call options on securities and currencies without
limit and covered put options on obligations having an aggregate value not to
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exceed 50% of net assets. Convertible Trust may write covered call options up to
20% of its total assets for purposes of generating income or capital
appreciation and may write covered put options without limit. Global Convertible
may purchase put and call options on securities, currencies and stock indexes in
amounts up to 5% of its total assets to close out opposite option positions or
to protect against adverse price movements. Convertible Trust has a similar
policy except that it may enter into options transactions only on U.S. Treasury
and equity securities.
Convertible Trust may purchase and sell U.S. exchange-traded financial
futures contracts for hedging purposes only. Global Convertible may purchase and
sell U.S. and foreign exchange-traded futures contracts on financial
instruments, foreign currencies or securities indexes, for hedging purposes.
Both funds may purchase and sell options on eligible futures contracts for
holding purposes or to close out an opposite position. In addition, consistent
with its policies with respect to its investments abroad, Global Convertible may
enter into forward foreign currency exchange contracts as a hedge against
fluctuations in foreign exchange rates.
Both Convertible Trust and Global Convertible may purchase securities on a
when-issued or delayed delivery basis, may purchase or sell securities on a
forward commitment basis and may purchase securities on a "when, as and if
issued" basis. Both funds may invest in warrants and stock rights attached to
other portfolio securities without limit and may invest up to 5% of its net
assets in other warrants. Rights and/or warrants are, in effect, options to
purchase equity securities at a specific price, during a specific period, and
have no voting or other rights with respect to the corporation issuing them and
pay no dividends. Both funds may enter into repurchase agreements subject to
certain procedures designed to minimize risks associated with such agreements.
Both funds may invest up to 5% of their total assets in securities which are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933, or which are otherwise not readily marketable.
The investment policies of both Global Convertible and Convertible Trust are
not fundamental and may be changed by their respective Boards of Trustees. The
foregoing discussion is a summary of the principal differences and similarities
between the investment policies of the funds. For a more complete discussion of
each fund's policies see "Investment Objective and Policies" in each fund's
respective Prospectus and "Investment Practices and Policies" in each fund's
respective Statement of Additional Information.
INVESTMENT RESTRICTIONS
The investment restrictions adopted by Global Convertible and Convertible
Trust as fundamental policies are substantially similar and are summarized under
the caption "Investment Restrictions" in their respective Prospectuses and
Statements of Additional Information. A fundamental investment restriction
cannot be changed without the vote of a majority of the outstanding voting
securities of a fund, as defined in the 1940 Act. The material differences are
as follows. Convertible Trust may not, as a matter of fundamental policy, invest
more than 5% of the value of its total assets in the securities of any one
issuer (other than obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government securities")), whereas Global
Convertible is subject to a similar non-fundamental limitation only with respect
to 50% of its assets. Convertible Trust may not, as a matter of fundamental
policy, purchase more than 10% of all outstanding voting securities of any one
issuer, whereas Global Convertible is subject to a similar non-fundamental
limitation only with respect to 75% of its assets. Global Convertible may not,
as a matter of fundamental policy, invest more than 5% of the value of its total
assets in securities of issuers having a record, together with predecessors, of
less than three years of continuous operations (other than U.S. Government
securities), whereas Convertible Trust has no similar limitation. While both
funds are prohibited from making short sales, Convertible Trust has an exception
for short sales "against-the-box." In addition, the restriction against
purchasing more than 10% of the voting securities of any
17
<PAGE>
one issuer is applied by Global Convertible only with respect to 75% of Global
Convertible's total assets. Finally, Convertible Trust, as a matter of
fundamental policy, may not invest in securities of any issuer if, to the
knowledge of such fund, any officer, or trustee/director of the fund or of the
Investment Manager, owns more than 1/2 of 1% of the outstanding securities of
such issuer, and such officers and trustees/directors who own more than 1/2 of
1% own in the aggregate more than 5% of the outstanding securities of such
issuer, whereas Global Convertible is subject to such limitation on a
non-fundamental basis.
ADDITIONAL INFORMATION ABOUT GLOBAL CONVERTIBLE
AND CONVERTIBLE TRUST
GENERAL
For a discussion of the organization and operation of Convertible Trust and
Global Convertible, see "The Fund and its Management", "Investment Objective and
Policies", "Investment Restrictions" and "Prospectus Summary" in, and the cover
page of, their respective prospectuses.
FINANCIAL INFORMATION
For certain financial information about Convertible Trust and Global
Convertible, see "Financial Highlights" and "Performance Information" in their
respective prospectuses.
MANAGEMENT
For information about Convertible Trust's and Global Convertible's Board of
Trustees, investment manager and distributor, see "The Fund and its Management"
and "Investment Objective and Policies" in, and the back cover of, their
respective prospectuses.
DESCRIPTION OF SECURITIES AND SHAREHOLDER INQUIRIES
For a description of the nature and most significant attributes of shares of
Global Convertible and Convertible Trust, and information regarding shareholder
inquiries, see "Additional Information" in their respective prospectuses.
DIVIDENDS, DISTRIBUTIONS AND TAXES
For a discussion of Convertible Trust's and Global Convertible's policies
with respect to dividends, distributions and taxes, see "Dividends,
Distributions and Taxes" in their respective prospectuses.
PURCHASES, REPURCHASES AND REDEMPTIONS
For a discussion of how Convertible Trust's and Global Convertible's shares
may be purchased, repurchased and redeemed, see "Purchase of Fund Shares",
"Shareholder Services" and "Redemption and Repurchases" in their respective
prospectuses.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For management's discussion of Convertible Trust's performance, see
management's letter to shareholders in its Annual Report for its fiscal year
ended September 30, 1994 and its Semi-annual Report for the six months ended
March 31, 1995, each accompanying this Proxy Statement and Prospectus. For a
discussion of Global Convertible's performance, see its Annual Report for its
fiscal year ended June 30, 1995. Such Reports are available without charge, as
noted under "Available Information" below.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of Convertible Trust and Global Convertible
incorporated by reference in the Statement of Additional Information relating to
the Registration Statement on Form N-14 of which this Proxy
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<PAGE>
Statement and Prospectus forms a part have been audited by Price Waterhouse LLP,
independent accountants, for the periods indicated in its respective reports
thereon. Such financial statements have been incorporated by reference in
reliance upon such reports given upon the authority of Price Waterhouse LLP as
experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Convertible Trust
will be passed upon by Gordon Altman Butowsky Weitzen Shalov & Wein, New York,
New York. Such firm will rely on Lane Altman & Owens as to matters of
Massachusetts law.
AVAILABLE INFORMATION
Additional information about Global Convertible and Convertible Trust is
available, as applicable, in the following documents which are incorporated
herein by reference: (i) Convertible Trust's Prospectus dated November 22, 1994,
accompanying this Proxy Statement and Prospectus, which Prospectus forms a part
of Post-Effective Amendment No. 10 to Convertible Trust's Registration Statement
on Form N-1A (File Nos. 2-97963; 811-4310); (ii) Convertible Trust's Annual
Report for its fiscal year ended September 30, 1994 and its Semi-Annual Report
for the six months ended March 31, 1995, accompanying this Proxy Statement and
Prospectus; (iii) Global Convertible's Prospectus dated August 28, 1995, which
Prospectus forms a part of Post-Effective Amendment No. 2 to Global
Convertible's Registration Statement on Form N-1A (File Nos. 33-81210;
811-8610); and (iv) Global Convertible's Annual Report for the eight months
(since inception) ended June 30, 1995. The foregoing documents may be obtained
without charge upon request from Adrienne Ryan Pinto at Dean Witter Trust
Company, Harborside Financial Center, Plaza Two, Jersey City, New Jersey 07311
(telephone 1-800-526-3143) (toll-free).
Global Convertible and Convertible Trust are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith, file reports and other information with the Commission.
Proxy material, reports and other information about Global Convertible and
Convertible Trust which are of public record can be inspected and copied at
public reference facilities maintained by the Commission at Room 1204, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and certain of its
regional offices, and copies of such materials can be obtained at prescribed
rates from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C.
20549.
OTHER BUSINESS
Management of Global Convertible knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not known
at the time of the solicitation may come before the Meeting, the proxy as
solicited confers discretionary authority with respect to such matters as
properly come before the Meeting, including any adjournment or adjournments
thereof, and it is the intention of the persons named as attorneys-in-fact in
the proxy to vote this proxy in accordance with their judgment on such matters.
By Order of the Board of Trustees,
Sheldon Curtis,
SECRETARY
October , 1995
19
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
24th day of August, 1995, by and between TCW/DW GLOBAL CONVERTIBLE TRUST, a
Massachusetts business trust ("Global Convertible") and DEAN WITTER CONVERTIBLE
SECURITIES TRUST, a Massachusetts business trust ("Convertible Trust").
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Treas. Reg. 1.368-2(g), for a
reorganization under Section 368(a) (1) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization ("Reorganization") will consist of the
transfer to Convertible Trust of substantially all of the assets of Global
Convertible in exchange for the assumption by Convertible Trust of all stated
liabilities of Global Convertible and the issuance by Convertible Trust of
shares of beneficial interest, par value $0.01 per share ("Convertible Trust
Shares"), to be distributed, after the Closing Date hereinafter referred to, to
the shareholders of Global Convertible in liquidation of Global Convertible as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF GLOBAL CONVERTIBLE
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, Global Convertible
agrees to assign, deliver and otherwise transfer the Global Convertible Assets
(as defined in paragraph 1.2) to Convertible Trust and Convertible Trust agrees
in exchange therefor to assume all stated liabilities of Global Convertible on
the Closing Date as set forth in paragraph 1.3(a) and to deliver to Global
Convertible the number of Convertible Trust Shares, including fractional
Convertible Trust Shares, determined by dividing the value of the Global
Convertible Assets, net of such stated liabilities, computed as of the Valuation
Date (as defined in paragraph 2.1) in the manner set forth in paragraph 2.1, by
the net asset value of a Convertible Trust Share, computed at the time and date
and in the manner set forth in paragraph 2.2. Such transactions shall take place
at the closing provided for in paragraph 3.1 ("Closing").
1.2 (a) The "Global Convertible Assets" shall consist of all property,
including without limitation, all cash (other than the "Cash Reserve" (as
defined in paragraph 1.3(b)), cash equivalents, securities and dividend and
interest receivables owned by Global Convertible, and any deferred or prepaid
expenses shown as an asset on Global Convertible's books on the Valuation Date.
(b) On or prior to the Valuation Date, Global Convertible will provide
Convertible Trust with a list of all of Global Convertible's assets to be
assigned, delivered and otherwise transferred to Convertible Trust and of the
stated liabilities to be assumed by Convertible Trust pursuant to this
Agreement. Global Convertible reserves the right to sell any of the securities
on such list but will not, without the prior approval of Convertible Trust,
acquire any additional securities other than securities of the type in which
Convertible Trust is permitted to invest and in amounts agreed to in writing by
Convertible Trust. Convertible Trust will, within a reasonable time prior to the
Valuation Date, furnish Global Convertible with a statement of Convertible
Trust's investment objective, policies and restrictions and a list of the
securities, if any, on the list referred to in the first sentence of this
paragraph that do not conform to Convertible Trust's investment objective,
policies and restrictions. In the event that Global Convertible holds any
investments that Convertible Trust is not permitted to hold, Global Convertible
will dispose
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of such securities on or prior to the Valuation Date. In addition, if it is
determined that the portfolios of Global Convertible and Convertible Trust, when
aggregated, would contain investments exceeding certain percentage limitations
imposed upon Convertible Trust with respect to such investments (including,
among others, percentage limitations necessary to satisfy the diversification
requirements of the Code), Global Convertible if requested by Convertible Trust
will, on or prior to the Valuation Date, dispose of and/or reinvest a sufficient
amount of such investments as may be necessary to avoid violating such
limitations as of the Closing Date (as defined in paragraph 3.1).
1.3 (a) Global Convertible will endeavor to discharge all of its
liabilities and obligations on or prior to the Valuation Date. Convertible Trust
will assume all stated liabilities, which includes, without limitation, all
expenses, costs, charges and reserves reflected on an unaudited Statement of
Assets and Liabilities of Global Convertible prepared by the Treasurer of Global
Convertible as of the Valuation Date in accordance with generally accepted
accounting principles consistently applied from the prior audited period.
(b) On the Valuation Date, Global Convertible may establish a cash
reserve, which shall not exceed 5% of Global Convertible's net assets as of the
close of business on the Valuation Date ("Cash Reserve") to be retained by
Global Convertible and used for the payment of its liabilities not discharged
prior to the Valuation Date and for the expenses of dissolution.
1.4 In order for Global Convertible to comply with Section 852(a)(1) of the
Code and to avoid having any investment company taxable income or net capital
gain (as defined in Sections 852(b)(2) and 1222(11) of the Code, respectively)
in the short taxable year ending with its dissolution, Global Convertible will
on or before the Valuation Date (a) declare a dividend in an amount large enough
so that it will have declared dividends of all of its investment company taxable
income and net capital gain, if any, for such taxable year (determined without
regard to any deduction for dividends paid) and (b) distribute such dividend.
1.5 On the Closing Date or as soon as practicable thereafter, Global
Convertible will distribute Convertible Trust Shares received by Global
Convertible pursuant to paragraph 1.1 pro rata to its shareholders of record
determined as of the close of business on the Valuation Date ("Global
Convertible Shareholders"). Such distribution will be accomplished by an
instruction, signed by Global Convertible's Secretary, to transfer Convertible
Trust Shares then credited to Global Convertible's account on the books of
Convertible Trust to open accounts on the books of Convertible Trust in the
names of the Global Convertible Shareholders and representing the respective pro
rata number of Convertible Trust Shares due such Global Convertible
Shareholders. All issued and outstanding shares of Global Convertible
simultaneously will be canceled on Global Convertible's books; however, share
certificates representing interests in Global Convertible will represent a
number of Convertible Trust Shares after the Closing Date as determined in
accordance with paragraph 2.3. Convertible Trust will issue certificates
representing Convertible Trust Shares in connection with such exchange only upon
the written request of a Global Convertible Shareholder.
1.6 Ownership of Convertible Trust Shares will be shown on the books of
Convertible Trust's transfer agent. Convertible Trust Shares will be issued in
the manner described in Convertible Trust's current Prospectus and Statement of
Additional Information.
1.7 Any transfer taxes payable upon issuance of Convertible Trust Shares in
a name other than the registered holder of Convertible Trust Shares on Global
Convertible's books as of the close of business on the Valuation Date shall, as
a condition of such issuance and transfer, be paid by the person to whom
Convertible Trust Shares are to be issued and transferred.
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1.8 Any reporting responsibility of Global Convertible is and shall remain
the responsibility of Global Convertible up to and including the date on which
Global Convertible is dissolved and deregistered pursuant to paragraph 1.9.
1.9 Within one year after the Closing Date, Global Convertible shall pay or
make provision for the payment of all its liabilities and taxes, and distribute
to the shareholders of Global Convertible as of the close of business on the
Valuation Date any remaining amount of the Cash Reserve (as reduced by the
estimated cost of distributing it to shareholders). Global Convertible shall be
dissolved as a Massachusetts business trust and deregistered as an investment
company under the Investment Company Act of 1940, as amended ("1940 Act"),
promptly following the making of all distributions pursuant to paragraph 1.5.
1.10 Copies of all books and records maintained on behalf of Global
Convertible in connection with its obligations under the 1940 Act, the Code,
state blue sky laws or otherwise in connection with this Agreement will promptly
after the Closing be delivered to officers of Convertible Trust or their
designee and Convertible Trust or its designee shall comply with applicable
record retention requirements to which Global Convertible is subject under the
1940 Act.
2. VALUATION
2.1 The value of the Global Convertible Assets shall be the value of such
assets computed as of 4:00 p.m. on the New York Stock Exchange on the 5th
business day following the receipt of the requisite approval by shareholders of
Global Convertible of this Agreement or at such time on such earlier or later
date after such approval as may be mutually agreed upon in writing (such time
and date being hereinafter called the "Valuation Date"), using the valuation
procedures set forth in Convertible Trust's then current Prospectus and
Statement of Additional Information.
2.2 The net asset value of a Convertible Trust Share shall be the net asset
value per share computed on the Valuation Date, using the valuation procedures
set forth in Convertible Trust's then current Prospectus and Statement of
Additional Information.
2.3 The number of Convertible Trust Shares (including fractional shares, if
any) to be issued hereunder shall be determined by dividing the value of the
Global Convertible Assets, net of the liabilities of Global Convertible assumed
by Convertible Trust pursuant to paragraph 1.1, determined in accordance with
paragraph 2.1, by the net asset value of a Convertible Trust Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made by Dean Witter Services Company
("Services") in accordance with its regular practice in pricing Convertible
Trust. Convertible Trust shall cause Services to deliver a copy of its valuation
report at the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing shall take place on the next business day following the
Valuation Date (the "Closing Date"). The Closing shall be held as of 9:00 a.m.
Eastern time, or at such other time as the parties may agree. The Closing shall
be held in a location mutually agreeable to the parties hereto. All acts taking
place at the Closing shall be deemed to take place simultaneously as of 9:00
a.m. Eastern time on the Closing Date unless otherwise provided.
3.2 Portfolio securities held by Global Convertible and represented by a
certificate or other written instrument shall be presented by it or on its
behalf to The Bank of New York (the "Custodian"), as custodian for Convertible
Trust, for examination no later than five business days preceding the Valuation
Date. Such portfolio
A-3
<PAGE>
securities (together with any cash or other assets) shall be delivered by Global
Convertible to the Custodian for the account of Convertible Trust on or before
the Closing Date in conformity with applicable custody provisions under the 1940
Act and duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof in accordance with the custom of brokers. The
portfolio securities shall be accompanied by all necessary federal and state
stock transfer stamps or a check for the appropriate purchase price of such
stamps. Portfolio securities and instruments deposited with a securities
depository (as defined in Rule 17f-4 under the 1940 Act) shall be delivered on
or before the Closing Date by book-entry in accordance with customary practices
of such depository and the Custodian. The cash delivered shall be in the form of
a Federal Funds wire, payable to the order of "The Bank of New York, Custodian
for Dean Witter Convertible Securities Trust."
3.3 In the event that on the Valuation Date, (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such Exchange or elsewhere shall be
disrupted so that, in the judgment of both Convertible Trust and Global
Convertible, accurate appraisal of the value of the net assets of Convertible
Trust or the Global Convertible Assets is impracticable, the Valuation Date
shall be postponed until the first business day after the day when trading shall
have been fully resumed without restriction or disruption and reporting shall
have been restored.
3.4 If requested, Global Convertible shall deliver to Convertible Trust or
its designee (a) at the Closing, a list, certified by its Secretary, of the
names, addresses and taxpayer identification numbers of the Global Convertible
Shareholders and the number and percentage ownership of outstanding Global
Convertible shares owned by each such Global Convertible Shareholder, all as of
the Valuation Date, and (b) as soon as practicable after the Closing, all
original documentation (including Internal Revenue Service forms, certificates,
certifications and correspondence) relating to the Global Convertible
Shareholders' taxpayer identification numbers and their liability for or
exemption from back-up withholding. Convertible Trust shall issue and deliver to
such Secretary a confirmation evidencing delivery of Convertible Trust Shares to
be credited on the Closing Date to Global Convertible or provide evidence
satisfactory to Global Convertible that such Convertible Trust Shares have been
credited to Global Convertible's account on the books of Convertible Trust. At
the Closing, each party shall deliver to the other such bills of sale, checks,
assignments, share certificates, if any, receipts or other documents as such
other party or its counsel may reasonably request.
4. COVENANTS OF CONVERTIBLE TRUST AND GLOBAL CONVERTIBLE
4.1 Except as otherwise expressly provided herein with respect to Global
Convertible, Convertible Trust and Global Convertible each will operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include customary
dividends and other distributions.
4.2 Convertible Trust will prepare and file with the Securities and
Exchange Commission ("Commission") a registration statement on Form N-14 under
the Securities Act of 1933, as amended ("1933 Act"), relating to Convertible
Trust Shares ("Registration Statement"). Global Convertible will provide
Convertible Trust with the Proxy Materials as described in paragraph 4.3 below,
for inclusion in the Registration Statement. Global Convertible will further
provide Convertible Trust with such other information and documents relating to
Convertible Trust as are reasonably necessary for the preparation of the
Registration Statement.
4.3 Global Convertible will call a meeting of its shareholders to consider
and act upon this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated herein. Global Convertible will
prepare the notice of meeting, form of proxy and proxy statement (collectively,
"Proxy Materials") to be used
A-4
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in connection with such meeting; provided that Convertible Trust will furnish
Global Convertible with a currently effective prospectus relating to Convertible
Trust Shares for inclusion in the Proxy Materials and with such other
information relating to Convertible Trust as is reasonably necessary for the
preparation of the Proxy Materials.
4.4 Convertible Trust will call a special meeting of its shareholders to
consider and act upon an amendment to its Plan of Distribution under Rule 12b-1
under the 1940 Act to authorize explicitly payments of expenses associated with
distribution of shares of an acquired fund, including Global Convertible (the
"Amendment"), and will take all other action necessary to obtain approval of the
Amendment. Convertible Trust will prepare the notice of meeting, form of proxy
and the proxy statement to be used in connection with such a meeting, provided
that Global Convertible will furnish Convertible Trust with such information
relating to Global Convertible's excess distribution expenses as is reasonably
necessary for the preparation of such material.
4.5 Global Convertible will assist Convertible Trust in obtaining such
information as Convertible Trust reasonably requests concerning the beneficial
ownership of Global Convertible shares.
4.6 Subject to the provisions of this Agreement, Convertible Trust and
Global Convertible will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
4.7 Global Convertible shall furnish or cause to be furnished to
Convertible Trust within 30 days after the Closing Date a statement of Global
Convertible's assets and liabilities as of the Closing Date, which statement
shall be certified by Global Convertible's Treasurer and shall be in accordance
with generally accepted accounting principles consistently applied. As promptly
as practicable, but in any case within 60 days after the Closing Date, Global
Convertible shall furnish Convertible Trust, in such form as is reasonably
satisfactory to Convertible Trust, a statement certified by Global Convertible's
Treasurer of Global Convertible's earnings and profits for federal income tax
purposes that will be carried over to Convertible Trust pursuant to Section 381
of the Code.
4.8 As soon after the Closing Date as is reasonably practicable, Global
Convertible (a) shall prepare and file all federal and other tax returns and
reports of Global Convertible required by law to be filed with respect to all
periods ending on or before the Closing Date but not theretofore filed and (b)
shall pay all federal and other taxes shown as due thereon and/or all federal
and other taxes that were unpaid as of the Closing Date, including without
limitation, all taxes for which the provision for payment was made as of the
Closing Date (as represented in paragraph 5.2(k)).
4.9 Convertible Trust agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state Blue Sky and securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
5. REPRESENTATIONS AND WARRANTIES
5.1 Convertible Trust represents and warrants to Global Convertible as
follows:
(a) Convertible Trust is a validly existing Massachusetts business trust
with full power to carry on its business as presently conducted;
(b) Convertible Trust is a duly registered, open-end, management
investment company, and its registration with the Commission as an investment
company under the 1940 Act and the registration of its shares under the 1933 Act
are in full force and effect;
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(c) All of the issued and outstanding shares of beneficial interest of
Convertible Trust have been offered and sold in compliance in all material
respects with applicable registration requirements of the 1933 Act and state
securities laws. Shares of Convertible Trust are registered in all jurisdictions
in which they are required to be registered under state securities laws and
other laws, and said registrations, including any periodic reports or
supplemental filings, are complete and current, all fees required to be paid
have been paid, and Convertible Trust is not subject to any stop order and is
fully qualified to sell its shares in each state in which its shares have been
registered;
(d) The current Prospectus and Statement of Additional Information of
Convertible Trust conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations thereunder and
do not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(e) Convertible Trust is not in, and the execution, delivery and
performance of this Agreement will not result in a, material violation of any
provision of Convertible Trust's Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
Convertible Trust is a party or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its knowledge,
threatened against Convertible Trust or any of its properties or assets which,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business; and Convertible Trust knows of no
facts that might form the basis for the institution of such proceedings and is
not a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects, or is
reasonably likely to materially and adversely effect, its business or its
ability to consummate the transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights as of Convertible
Trust's most recent fiscal year-end, and for the year then ended, of Convertible
Trust certified by Price Waterhouse LLP (copies of which have been furnished to
Global Convertible), fairly present, in all materials respects, Convertible
Trust's financial condition as of such date in accordance with generally
accepted accounting principles, and its results of such operations, changes in
its net assets and financial highlights for such period, and as of such date
there were no known liabilities of Convertible Trust (contingent or otherwise)
not disclosed therein that would be required in accordance with generally
accepted accounting principles to be disclosed therein;
(h) All issued and outstanding Convertible Trust Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof,
except as set forth under the caption "Additional Information" in Convertible
Trust's current Prospectus incorporated by reference in the Registration
Statement. Convertible Trust does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of its shares, nor is there
outstanding any security convertible to any of its shares:
(i) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of Convertible Trust, and
this Agreement constitutes a valid and binding obligation of Convertible Trust
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency,
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reorganization, moratorium and other laws relating to or affecting creditors
rights and to general equity principles. No other consents, authorizations or
approvals are necessary in connection with Convertible Trust's performance of
this Agreement;
(j) Convertible Trust Shares to be issued and delivered to Global
Convertible, for the account of the Global Convertible Shareholders, pursuant to
the terms of this Agreement will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued Convertible
Trust Shares, and will be fully paid and non-assessable with no personal
liability attaching to the ownership thereof, except as set forth under the
caption "Additional Information" in Convertible Trust's current Prospectus
incorporated by reference in the Registration Statement:
(k) All material Federal and other tax returns and reports of
Convertible Trust required by law to be filed on or before the Closing Date have
been filed and are correct, and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports have been paid or
provision has been made for the payment thereof, and to the best of Convertible
Trust's knowledge, no such return is currently under audit and no assessment has
been asserted with respect to any such return;
(l) For each taxable year since its inception, Convertible Trust has met
the requirements of Subchapter M of the Code for qualification and treatment as
a "regulated investment company" and neither the execution or delivery of nor
the performance of its obligations under this Agreement will adversely affect,
and no other events are reasonably likely to occur which will adversely affect
the ability of Convertible Trust to continue to meet the requirements of
Subchapter M of the Code;
(m) Since Convertible Trust's most recent fiscal year-end, there has
been no change by Convertible Trust in accounting methods, principles, or
practices, including those required by generally accepted accounting principles;
(n) The information furnished or to be furnished by Convertible Trust
for use in registration statements, proxy materials and other documents which
may be necessary in connection with the transactions contemplated hereby shall
be accurate and complete in all material respects and shall comply in all
material respects with Federal securities and other laws and regulations
applicable thereto; and
(o) The Proxy Materials to be included in the Registration Statement
(only insofar as they relate to Convertible Trust) will, on the effective date
of the Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially misleading.
5.2 Global Convertible represents and warrants to Convertible Trust as
follows:
(a) Global Convertible is a validly existing Massachusetts business
trust with full power to carry on its business as presently conducted;
(b) Global Convertible is a duly registered, open-end, management
investment company, and its registration with the Commission as an investment
company under the 1940 Act and the registration of its shares under the 1933 Act
are in full force and effect;
(c) All of the issued and outstanding shares of beneficial interest of
Global Convertible have been offered and sold in compliance in all material
respects with applicable registration requirements of the 1933 Act and state
securities laws. Shares of Global Convertible are registered in all
jurisdictions in which they are required
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to be registered under state securities laws and other laws, and said
registrations, including any periodic reports or supplemental filings, are
complete and current, all fees required to be paid have been paid, and Global
Convertible is not subject to any stop order and is fully qualified to sell its
shares in each state in which its shares have been registered;
(d) The current Prospectus and Statement of Additional Information of
Global Convertible conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations thereunder and
do not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(e) Global Convertible is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of any
provision of Global Convertible's Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
Global Convertible is a party or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its knowledge,
threatened against Global Convertible or any of its properties or assets which,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business; and Global Convertible knows of no
facts that might form the basis for the institution of such proceedings and is
not a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects, or is
reasonably likely to materially and adversely effect, its business or its
ability to consummate the transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights of Global
Convertible as of June 30, 1995 and for the year then ended, certified by Price
Waterhouse LLP (copies of which have been or will be furnished to Convertible
Trust) fairly present, in all material respects, Global Convertible's financial
condition as of such date, and its results of operations, changes in its net
assets and financial highlights for such period in accordance with generally
accepted accounting principles, and as of such date there were no known
liabilities of Global Convertible (contingent or otherwise) not disclosed
therein that would be required in accordance with generally accepted accounting
principles to be disclosed therein;
(h) Global Convertible has no material contracts or other commitments
(other than this Agreement) that will be terminated with liability to it prior
to the Closing Date;
(i) All issued and outstanding shares of Global Convertible are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the ownership thereof,
except as set forth under the caption "Additional Information" in Global
Convertible's current Prospectus incorporated by reference in the Registration
Statement. Global Convertible does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of its shares, nor is there
outstanding any security convertible to any of its shares. All such shares will,
at the time of Closing, be held by the persons and in the amounts set forth in
the list of shareholders submitted to Convertible Trust pursuant to paragraph
3.4;
(j) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on the
part of Global Convertible, and subject to the approval of Global Convertible's
shareholders, this Agreement constitutes a valid and binding obligation of
Global Convertible, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization,
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moratorium and other laws relating to or affecting creditors rights and to
general equity principles. No other consents, authorizations or approvals are
necessary in connection with Global Convertible's performance of this Agreement;
(k) All material federal and other tax returns and reports of Global
Convertible required by law to be filed on or before the Closing Date shall have
been filed and are correct and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports have been paid or
provision has been made for the payment thereof, and to the best of Global
Convertible's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any such return;
(l) For each taxable year since its inception, Global Convertible has
met all the requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company" and neither the execution or
delivery of nor the performance of its obligations under this Agreement will
adversely affect, and no other events are reasonably likely to occur which will
adversely affect the ability of Global Convertible to continue to meet the
requirements of Subchapter M of the Code;
(m) At the Closing Date, Global Convertible will have good and valid
title to the Global Convertible Assets, subject to no liens (other than the
obligation, if any, to pay the purchase price of portfolio securities purchased
by Global Convertible which have not settled prior to the Closing Date),
security interests or other encumbrances, and full right, power and authority to
assign, deliver and otherwise transfer such assets hereunder, and upon delivery
and payment for such assets, Convertible Trust will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including any restrictions as might arise under the 1933 Act;
(n) On the effective date of the Registration Statement, at the time of
the meeting of Global Convertible's shareholders and on the Closing Date, the
Proxy Materials (exclusive of the currently effective Convertible Trust
Prospectus contained therein) will (i) comply in all material respects with the
provisions of the 1933 Act, the Securities Exchange Act of 1934, as amended
("1934 Act") and the 1940 Act and the regulations thereunder and (ii) not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. Any other information furnished by Global Convertible for use in the
Registration Statement or in any other manner that may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete and shall comply in all material respects with applicable federal
securities and other laws and regulations thereunder;
(o) Global Convertible will, on or prior to the Valuation Date, declare
one or more dividends or other distributions to shareholders that, together with
all previous dividends and other distributions to shareholders, shall have the
effect of distributing to the shareholders all of its investment company taxable
income and net capital gain, if any, through the Valuation Date (computed
without regard to any deduction for dividends paid);
(p) Global Convertible has maintained or has caused to be maintained on
its behalf all books and accounts as required of a registered investment company
in compliance with the requirements of Section 31 of the 1940 Act and the Rules
thereunder; and
(q) Global Convertible is not acquiring Convertible Trust Shares to be
issued hereunder for the purpose of making any distribution thereof other than
in accordance with the terms of this Agreement.
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6. CONDITIONS PRECEDENT TO OBLIGATIONS OF GLOBAL CONVERTIBLE
The obligations of Global Convertible to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
Convertible Trust of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of Convertible Trust contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date;
6.2 Convertible Trust shall have delivered to Global Convertible a
certificate of its President and Treasurer, in a form reasonably satisfactory to
Global Convertible and dated as of the Closing Date, to the effect that the
representations and warranties of Convertible Trust made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as Global Convertible shall reasonably request;
6.3 Global Convertible shall have received a favorable opinion from Gordon
Altman Butowsky Weitzen Shalov & Wein, counsel to Convertible Trust, dated as of
the Closing Date, to the effect that:
(a) Convertible Trust is a validly existing Massachusetts business
trust, and has the power to own all of its properties and assets and to
carry on its business as presently conducted (Massachusetts counsel may be
relied upon in delivering such opinion); (b) Convertible Trust is a duly
registered, open-end, management investment company, and its registration
with the Commission as an investment company under the 1940 Act is in full
force and effect; (c) this Agreement has been duly authorized, executed and
delivered by Convertible Trust and, assuming that the Registration Statement
complies with the 1933 Act, the 1934 Act and the 1940 Act and regulations
thereunder and assuming due authorization, execution and delivery of this
Agreement by Global Convertible, is a valid and binding obligation of
Convertible Trust enforceable against Convertible Trust in accordance with
its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors
rights and to general equity principles; (d) Convertible Trust Shares to be
issued to Global Convertible Shareholders as provided by this Agreement are
duly authorized and upon such delivery will be validly issued and
outstanding and fully paid and non-assessable (except as set forth under the
caption "Additional Information" in Convertible Trust's Prospectus), and no
shareholder of Convertible Trust has any preemptive rights to subscription
or purchase in respect thereof (Massachusetts counsel may be relied upon in
delivering such opinion); (e) the execution and delivery of this Agreement
did not, and the consummation of the transactions contemplated hereby will
not, violate Convertible Trust's Declaration of Trust or By-Laws; and (f) to
the knowledge of such counsel, no consent, approval, authorization or order
of any court or governmental authority of the United States or any state is
required for the consummation by Convertible Trust of the transactions
contemplated herein, except such as have been obtained under the 1933 Act,
the 1934 Act and the 1940 Act and such as may be required under state
securities laws; and
6.4 As of the Closing Date, there shall have been no material change in the
investment objective, policies and restrictions nor any increase in the
investment management fees or annual fees payable pursuant to Convertible
Trust's 12b-1 plan of distribution from those described in the Prospectus and
Statement of Additional Information of Convertible Trust dated November 22,
1994.
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7. CONDITIONS PRECEDENT TO OBLIGATIONS OF CONVERTIBLE TRUST
The obligations of Convertible Trust to complete the transactions provided
for herein shall be subject, at its election, to the performance by Global
Convertible of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of Global Convertible contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date;
7.2 Global Convertible shall have delivered to Convertible Trust at the
Closing a certificate of its President and its Treasurer, in form and substance
satisfactory to Convertible Trust and dated as of the Closing Date, to the
effect that the representations and warranties of Global Convertible made in
this Agreement are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated by this Agreement, and as
to such other matters as Convertible Trust shall reasonably request;
7.3 Global Convertible shall have delivered to Convertible Trust a
statement of the Global Convertible Assets and its liabilities, together with a
list of Global Convertible's portfolio securities and other assets showing the
respective adjusted bases and holding periods thereof for income tax purposes,
as of the Closing Date, certified by the Treasurer of Global Convertible;
7.4 Global Convertible shall have delivered to Convertible Trust at the
Closing a letter from Price Waterhouse LLP dated the Closing Date stating that
(a) such firm has performed a limited review of the federal and state income tax
returns of Global Convertible for each of the last three taxable years and,
based on such limited review, nothing came to their attention that caused them
to believe that such returns did not properly reflect, in all material respects,
the federal and state income tax liabilities of Global Convertible for the
periods covered thereby, (b) for the period from June 30, 1995 to and including
the Closing Date, such firm has performed a limited review (based on unaudited
financial data) to ascertain the amount of applicable federal, state and local
taxes and has determined that same either have been paid or reserves have been
established for payment of such taxes, and, based on such limited review,
nothing came to their attention that caused them to believe that the taxes paid
or reserves set aside for payment of such taxes were not adequate in all
materials respects for the satisfaction of all federal, state and local tax
liabilities for the period from June 30, 1995 to and including the Closing Date
and (c) based on such limited reviews, nothing came to their attention that
caused them to believe that Global Convertible would not qualify as a regulated
investment company for federal income tax purposes for any such year or period;
7.5 Convertible Trust shall have received at the Closing a favorable
opinion from Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Global
Convertible, dated as of the Closing Date to the effect that:
(a) Global Convertible is a validly existing Massachusetts business
trust and has the power to own all of its properties and assets and to carry
on its business as presently conducted (Massachusetts counsel may be relied
upon in delivering such opinion); (b) Global Convertible is a duly
registered, open-end management investment company under the 1940 Act, and
its registration with the Commission as an investment company under the 1940
Act is in full force and effect; (c) this Agreement has been duly
authorized, executed and delivered by Global Convertible and, assuming that
the Registration Statement complies with the 1933 Act, the 1934 Act and the
1940 Act and the regulations thereunder and assuming due authorization,
execution and delivery of this Agreement by Convertible Trust, is a valid
and binding obligation of Global Convertible
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enforceable against Global Convertible in accordance with its terms, subject
as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights and to general equity
principles; (d) the execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, violate
Global Convertible's Declaration of Trust or By-Laws; and (e) to the
knowledge of such counsel, no consent, approval, authorization or order of
any court or governmental authority of the United States or any state is
required for the consummation by Global Convertible of the transactions
contemplated herein, except such as have been obtained under the 1933 Act,
the 1934 Act and the 1940 Act and such as may be required under state
securities laws; and
7.6 On the Closing Date, the Global Convertible Assets shall include no
assets that Convertible Trust, by reason of Declaration of Trust limitations or
otherwise, may not properly acquire.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF CONVERTIBLE TRUST AND GLOBAL
CONVERTIBLE
The obligations of Global Convertible and Convertible Trust hereunder are
each subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of
Global Convertible in accordance with the provisions of Global Convertible's
Declaration of Trust, and certified copies of the resolutions evidencing such
approval shall have been delivered to Convertible Trust;
8.2 The Amendment shall have been approved by the affirmative vote of a
"majority of the outstanding voting securities" of Convertible Trust, as such
term is defined in the 1940 Act, and certified copies of the resolutions
evidencing such approval shall have been delivered to Global Convertible.
8.3 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein;
8.4 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by Convertible Trust or Global Convertible to
permit consummation, in all material respects, of the transactions contemplated
herein shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve risk of a material adverse effect on
the assets or properties of Convertible Trust or Global Convertible;
8.5 The Registration Statement shall have become effective under the 1933
Act, no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act;
8.6 Global Convertible shall have declared and paid a dividend or dividends
and/or other distribution or distributions that, together with all previous such
dividends or distributions, shall have the effect of distributing to the Global
Convertible Shareholders all of Global Convertible's investment company taxable
income (computed
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without regard to any deduction for dividends paid) and all of its net capital
gain (after reduction for any capital loss carry-forward and computed without
regard to any deduction for dividends paid) for all taxable years ending on or
before the Closing Date; and
8.7 The parties shall have received a favorable opinion of the law firm of
Gordon Altman Butowsky Weitzen Shalov & Wein (based on such representations as
such law firm shall reasonably request), addressed to Convertible Trust and
Global Convertible, which opinion may be relied upon by the shareholders of
Global Convertible, substantially to the effect that, for federal income tax
purposes:
(a) The transfer of substantially all of Global Convertible's assets in
exchange for Convertible Trust Shares and the assumption by Convertible
Trust of certain stated liabilities of Global Convertible followed by the
distribution by Global Convertible of Convertible Trust Shares to the Global
Convertible Shareholders in exchange for their Global Convertible shares
will constitute a "reorganization" within the meaning of Section 368(a)(1)
of the Code, and Global Convertible and Convertible Trust will each be a
"party to a reorganization" within the meaning of Section 368(b) of the
Code;
(b) No gain or loss will be recognized by Convertible Trust upon the
receipt of the assets of Global Convertible solely in exchange for
Convertible Trust Shares and the assumption by Convertible Trust of the
stated liabilities of Global Convertible;
(c) No gain or loss will be recognized by Global Convertible upon the
transfer of the assets of Global Convertible to Convertible Trust in
exchange for Convertible Trust Shares and the assumption by Convertible
Trust of the stated liabilities or upon the distribution of Convertible
Trust Shares to the Global Convertible Shareholders in exchange for their
Global Convertible shares;
(d) No gain or loss will be recognized by the Global Convertible
Shareholders upon the exchange of the Global Convertible shares for
Convertible Trust Shares;
(e) The aggregate tax basis for Convertible Trust Shares received by
each Global Convertible Shareholder pursuant to the reorganization will be
the same as the aggregate tax basis of the Global Convertible Shares held by
each such Global Convertible Shareholder immediately prior to the
Reorganization;
(f) The holding period of Convertible Trust Shares to be received by
each Global Convertible Shareholder will include the period during which the
Global Convertible Shares surrendered in exchange therefor were held
(provided such Global Convertible Shares were held as capital assets on the
date of the Reorganization);
(g) The tax basis of the assets of Global Convertible acquired by
Convertible Trust will be the same as the tax basis of such assets to Global
Convertible immediately prior to the Reorganization; and
(h) The holding period of the assets of Global Convertible in the hands
of Convertible Trust will include the period during which those assets were
held by Global Convertible.
Notwithstanding anything herein to the contrary, neither Convertible Trust
nor Global Convertible may waive the condition set forth in this paragraph 8.6.
9. FEES AND EXPENSES
9.1 (a) Convertible Trust shall bear its expenses incurred in connection
with entering into and carrying out the provisions of this Agreement, including
legal, accounting and Commission registration fees and Blue Sky expenses. Global
Convertible shall bear its expenses incurred in connection with entering into
and carrying out the
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provisions of this Agreement, including legal and accounting fees, printing,
filing and proxy solicitation expenses and portfolio transfer taxes (if any)
incurred in connection with the consummation of the transactions contemplated
herein.
(b) In the event the transactions contemplated herein are not
consummated by reason of Global Convertible's being either unwilling or unable
to go forward (other than by reason of the nonfulfillment or failure of any
condition to Global Convertible's obligations specified in this Agreement),
Global Convertible's only obligation hereunder shall be to reimburse Convertible
Trust for all reasonable out-of-pocket fees and expenses incurred by Convertible
Trust in connection with those transactions.
(c) In the event the transactions contemplated herein are not
consummated by reason of Convertible Trust's being either unwilling or unable to
go forward (other than by reason of the nonfulfillment or failure of any
condition to Convertible Trust's obligations specified in the Agreement),
Convertible Trust's only obligation hereunder shall be to reimburse Global
Convertible for all reasonable out-of-pocket fees and expenses incurred by
Global Convertible in connection with those transactions.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 This Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated herein, except
that the representations, warranties and covenants of Global Convertible
hereunder shall not survive the dissolution and complete liquidation of Global
Convertible in accordance with Section 1.9.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Global Convertible and Convertible
Trust;
(b) by either Convertible Trust or Global Convertible by notice to the
other, without liability to the terminating party on account of such
termination (providing the termination party is not otherwise in material
default or breach of this Agreement) if the Closing shall not have occurred
on or before February 29, 1996; or
(c) by either Convertible Trust or Global Convertible, in writing
without liability to the terminating party on account of such termination
(provided the terminating party is not otherwise in material default or
breach of this Agreement), if (i) the other party shall fail to perform in
any material respect its agreements contained herein required to be
performed on or prior to the Closing Date, (ii) the other party materially
breaches any of its representations, warranties or covenants contained
herein, (iii) the Global Convertible shareholders fail to approve this
Agreement at any meeting called for such purpose at which a quorum was
present or (iv) any other condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably
appears that it will not or cannot be met.
11.2 (a) Termination of this Agreement pursuant to paragraphs 11.1 (a) or
(b) shall terminate all obligations of the parties hereunder and there shall be
no liability for damages on the part of Convertible Trust or Global Convertible
or the trustees or officers of Convertible Trust or Global Convertible, to any
other party or its trustees or officers.
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(b) Termination of this Agreement pursuant to paragraph 11.1 (c) shall
terminate all obligations of the parties hereunder and there shall be no
liability for damages on the part of Convertible Trust or Global Convertible or
the trustees or officers of Convertible Trust or Global Convertible, except that
any party in breach of this Agreement shall, upon demand, reimburse the
non-breaching party for all reasonable out-of-pocket fees and expenses incurred
in connection with the transactions contemplated by this Agreement, including
legal, accounting and filing fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties; PROVIDED, HOWEVER, that
following the meeting of Global Convertible's shareholders called by Global
Convertible pursuant to paragraph 4.3, no such amendment may have the effect of
changing the provisions for determining the number of Convertible Trust Shares
to be issued to the Global Convertible Shareholders under this Agreement to the
detriment of such Global Convertible Shareholders without their further
approval.
13. MISCELLANEOUS
13.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
13.5 The obligations and liabilities of Convertible Trust hereunder are
solely those of Convertible Trust. It is expressly agreed that no shareholder,
nominee, trustee, officer, agent, or employee of Convertible Trust shall be
personally liable hereunder. The execution and delivery of this Agreement have
been authorized by the trustees of Convertible Trust and signed by authorized
officers of Convertible Trust acting as such, and neither such authorization by
such trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally.
13.6 The obligations and liabilities of Global Convertible hereunder are
solely those of Global Convertible. lt is expressly agreed that no shareholder,
nominee, trustee, officer, agent, or employee of Global Convertible shall be
personally liable hereunder. The execution and delivery of this Agreement have
been authorized by the trustees of Global Convertible and signed by authorized
officers of Global Convertible acting as such, and neither such authorization by
such trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally.
A-15
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by a duly authorized officer.
TCW/DW GLOBAL CONVERTIBLE TRUST
By: ______/s/_Charles A. Fiumefreddo_____
Name: Charles A. Fiumefreddo
Title: President
DEAN WITTER CONVERTIBLE SECURITIES TRUST
By: __________/s/_Sheldon Curtis_________
Name: Sheldon Curtis
Title: Vice President
A-16
<PAGE>
PROSPECTUS
NOVEMBER 22, 1994
Dean Witter Convertible Securities Trust (the "Fund") is an
open-end diversified management investment company whose investment objective is
to seek a high level of total return on its assets through a combination of
current income and capital appreciation. It seeks to achieve its investment
objective by investing principally in "convertible securities," that is, bonds,
notes, debentures, preferred stocks and other securities which are convertible
into common stock. INVESTORS SHOULD CAREFULLY CONSIDER THE RELATIVE RISKS OF
INVESTING IN HIGH YIELD SECURITIES, WHICH ARE COMMONLY KNOWN AS JUNK BONDS.
BONDS OF THIS TYPE ARE CONSIDERED TO BE SPECULATIVE WITH REGARD TO THE PAYMENT
OF INTEREST AND RETURN OF PRINCIPAL. INVESTORS SHOULD ALSO BE COGNIZANT OF THE
FACT THAT SUCH SECURITIES ARE NOT GENERALLY MEANT FOR SHORT-TERM INVESTING AND
SHOULD ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. (see
"Investment Objective and Policies").
Shares of the Fund are continuously offered at net asset value
without the imposition of a sales charge. However, redemptions and/or
repurchases are subject in most cases to a contingent deferred sales charge,
scaled down from 5% to 1% of the amount redeemed, if made within six years of
purchase, which charge will be paid to the Fund's Distributor, Dean Witter
Distributors Inc. (See "Redemptions and Repurchases--Contingent Deferred Sales
Charge.") In addition, the Fund pays the Distributor a Rule 12b-1 distribution
fee pursuant to a Plan of Distribution at the annual rate of 1% 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 November 22, 1994, which has been filed with
the Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed 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/6
Investment Restrictions/11
Purchase of Fund Shares/12
Shareholder Services/14
Redemptions and Repurchases/17
Dividends, Distributions and Taxes/19
Performance Information/20
Additional Information/20
Appendix--Ratings of Investments/22
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
Convertible Securities Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 526-3143
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an open-end
Fund diversified management investment company investing principally in corporate securities that can be converted
into common stock.
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Offered Shares of beneficial interest with $0.01 par value (see page 20).
- ------------------------------------------------------------------------------------------------------------------------------------
Offering At net asset value without sales charge (see page 12). Shares redeemed within six years of purchase are subject
Price to a contingent deferred sales charge under most circumstances (see page 17).
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum Minimum initial investment, $1,000; minimum subsequent investment, $100 (see page 12).
Purchase
- ------------------------------------------------------------------------------------------------------------------------------------
Investment The investment objective of the Fund is to seek a high level of total return on its assets through a combination
Objective of current income and capital appreciation. It seeks to achieve this objective by investing principally in
"convertible securities," that is bonds, notes, debentures, preferred stocks and other securities which are
convertible into common stock.
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund and its wholly-owned
Manager subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory, management and
administrative capacities to ninety investment companies and other portfolios with assets of approximately $69.5
billion at October 31, 1994 (see page 5).
- ------------------------------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.60 of 1% of the Fund's net assets not
Fee exceeding $750 million, scaled down at various asset levels to 0.425 of 1% of the Fund's daily net assets
exceeding $3 billion, determined as of the close of each business day. (see page 5).
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and Income dividends paid quarterly; Capital gains, if any, paid at least once per year. Dividends and capital gains
Capital Gains distributions automatically reinvested in additional shares at net asset value (without sales charge), unless
Distributions the shareholder elects to receive cash. (see page 19).
- ------------------------------------------------------------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor"). The Distributor receives from the Fund a distribution fee,
accrued daily and payable monthly, at the rate of 1% per annum of the lesser of (i) the Fund's average daily
aggregate net sales or (ii) the Fund's average daily net assets. This 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 page 12).
- ------------------------------------------------------------------------------------------------------------------------------------
Redemption-- Shares are redeemable by the shareholder at net asset value. An account may be involuntarily redeemed if the
Contingent total value of the account is less than $100. Although no commission or sales load is imposed upon the purchase
Deferred Sales of shares, a contingent deferred sales charge (scaled down from 5% to 1%) is imposed on any redemption of shares
Charge 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 17-19).
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-Sheltered You can take advantage of tax benefits for personal retirement accounts by investing in the Fund through an IRA
Retirement (Individual Retirement Account) or Custodial Account under Section 403(b) (7) of the Internal Revenue Code (see
Plans page 15).
- ------------------------------------------------------------------------------------------------------------------------------------
Risks The net asset value of the Fund's shares will fluctuate with changes in the market value of its portfolio
securities. Emphasis on convertible securities will result in price fluctuations of the Fund's portfolio
securities with varying interest rates and with changes in the prices of the common stocks associated with their
conversion rights. In addition, the investor is directed to the discussions of corporate fixed-income securities
(certain of which may be lower rated securities commonly known as "junk bonds" or securities which are unrated
by recognized rating agencies), when-issued and delayed delivery securities and forward commitments, when, as
and if issued securities, options, futures contracts, foreign securities, repurchase agreements, and options on
futures (see pages 6 through 10).
- ------------------------------------------------------------------------------------------------------------------------------------
</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
- --------------------------------------------------------------------------------
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 September 30, 1994.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
- ---------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases.............................................. None
Maximum Sales Charge Imposed on Reinvested Dividends................................... None
Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds).... 5.0%
A 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 Fee........................................................................ None
Exchange Fee.......................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------------
Management Fee........................................................................ 0.60%
12b-1 Fees*........................................................................... 1.00%
Other Expenses........................................................................ .33%
Total Fund Operating Expenses......................................................... 1.93%
<FN>
- ------------
* A PORTION OF THE 12B-1 FEE EQUAL TO 0.25% OF THE FUND'S AVERAGE DAILY NET
ASSETS IS CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD") GUIDELINES.
</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:.............................................................. $ 70 $ 91 $ 124 $ 226
You would pay the following expenses on the same investment, assuming
no redemption:....................................................... $ 20 $ 61 $ 104 $ 266
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of 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, 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 SEPTEMBER 30,
-----------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period... $ 10.62 $ 8.92 $ 8.67 $ 7.65 $ 9.68 $ 8.63 $ 12.42 $ 11.22
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment income.. 0.42 0.37 0.34 0.37 0.46 0.48 0.38 0.48
Net realized and
unrealized gain (loss)
on investments........ 0.11 1.67 0.15 1.05 (2.06) 1.20 (2.87) 1.59
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations............ 0.53 2.04 0.49 1.42 (1.60) 1.68 (2.49) 2.07
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Less dividends and
distributions from:
Net investment
income.............. (0.40) (0.34) (0.24) (0.40) (0.43) (0.63) (0.23) (0.46)
Net realized gains on
investments......... -0 - -0 - -0 - -0 - -0 - -0 - (1.07) (0.41)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions......... (0.40) (0.34) (0.24) (0.40) (0.43) (0.63) (1.30) (0.87)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
period................ $ 10.75 $ 10.62 $ 8.92 $ 8.67 $ 7.65 $ 9.68 $ 8.63 $ 12.42
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL INVESTMENT
RETURN+............... 5.02% 23.22% 5.69% 18.93% (16.93)% 20.20% (19.79)% 19.21%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in
thousands)............ $190,395 $207,894 $217,648 $296,844 $413,297 $821,750 $1,073,374 $2,029,462
Ratios to average net
assets:
Expenses............. 1.93% 1.93% 1.92% 1.92% 1.88% 1.76% 1.79% 1.62%
Net investment
income.............. 3.68% 3.44% 3.43% 4.34% 4.96% 4.93% 3.87% 3.85%
Portfolio turnover
rate.................. 184% 221% 145% 133% 92% 167% 472% 572%
<CAPTION>
FOR THE
PERIOD
OCTOBER
31, 1985*
THROUGH
1986
----------
<S> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period... $ 10.00
----------
Net investment income.. 0.76
Net realized and
unrealized gain (loss)
on investments........ 1.22**
----------
Total from investment
operations............ 1.98
----------
Less dividends and
distributions from:
Net investment
income.............. (0.76)
Net realized gains on
investments......... -0 -
----------
Total dividends and
distributions......... (0.76)
----------
Net asset value, end of
period................ $ 11.22
----------
----------
TOTAL INVESTMENT
RETURN+............... 19.91%(1)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (in
thousands)............ $1,488,418
Ratios to average net
assets:
Expenses............. 1.72%(2)
Net investment
income.............. 7.11%(2)
Portfolio turnover
rate.................. 272%
<FN>
- ---------------
</TABLE>
<TABLE>
<C> <S>
* COMMENCEMENT OF OPERATIONS.
** INCLUDES THE EFFECT OF CAPITAL SHARE TRANSACTIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter Convertible Securities Trust (the "Fund") is an open-end
diversified management investment company. The Fund is a trust of the type
commonly known as a "Massachusetts business trust" and was organized under the
laws of Massachusetts on May 21, 1985.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a
balanced financial services organization providing a broad range of nationally
marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to ninety investment companies, thirty of which are
listed on the New York Stock Exchange, with combined total net assets of
approximately $67.5 billion as of October 31, 1994. The Investment Manager also
manages and advises managers of portfolios of pension plans, other institutions
and individuals which aggregated approximately $2.0 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 for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
following annual rates to the Fund's net assets determined as of the close of
each business day: 0.60% of the portion of the daily net assets not exceeding
$750 million, scaled down at various asset levels to 0.425% of the portion of
the daily net assets exceeding $3 billion. For the fiscal year ended September
30, 1994, the Fund accrued total compensation to the Investment Manager
amounting to .60% of the Fund's average daily net assets and the Fund's total
expenses amounted to 1.93% of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to seek a high level of total return
on its assets through a combination of current income and capital appreciation.
There is no assurance that this objective will be achieved. It is a fundamental
policy of the Fund and cannot be changed without shareholder approval. The
following policies may be changed by the Trustees of the Fund without
shareholder approval.
(1) The Fund will normally invest at least 65% of its total assets (taken at
current value) in "convertible securities," i.e., securities (bonds, debentures,
corporate notes, preferred stocks and other securities) which are convertible
into common stock. Securities received upon conversion may be retained in the
Fund's portfolio to permit orderly disposition or to establish long-term holding
periods for federal income tax purposes. The Fund is
5
<PAGE>
not required to sell these securities for the purpose of assuring that 65% of
its assets are invested in convertible securities.
(2) The Fund may invest up to 35% of its total assets (taken at current
value and subject to any restrictions appearing elsewhere in this Prospectus) in
any combination and quantity of the following securities: (a) common stock; (b)
nonconvertible preferred stock; (c) nonconvertible corporate debt securities;
(d) options on debt and equity securities; (e) financial futures contracts and
related options thereon; and (f) money market instruments.
(3) Notwithstanding paragraphs (1) and (2) above, when market conditions
dictate a "defensive" investment strategy, the Fund may invest without limit in
money market instruments, including commercial paper, certificates of deposit,
bankers' acceptances and other obligations of domestic banks or domestic
branches of foreign banks, or foreign branches of domestic banks, in each case
having total assets of at least $500 million, and obligations issued or
guaranteed by the United States Government, or foreign governments or their
respective instrumentalities or agencies.
The Fund may invest in fixed-income securities rated Baa or lower by Moody's
Investors Service, Inc. ("Moody's"), or BBB or lower by Standard & Poor's
Corporation ("S&P"). Fixed-income securities rated Baa by Moody's or BBB by S&P
have speculative characteristics greater than those of more highly rated bonds,
while fixed-income securities rated Ba or BB or lower by Moody's and S&P,
respectively, are considered to be speculative investments. Furthermore, the
Fund does not have any minimum quality rating standard for its investments. As
such, the Fund may invest in securities rated as low as Caa, Ca or C by Moody's
or CCC, CC, C or C1 by S&P. Fixed-income securities rated Caa or Ca by Moody's
may already be in default on payment of interest or principal, while bonds rated
C by Moody's, their lowest bond rating, can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Bonds rated C1 by S&P,
their lowest bond rating, are no longer making interest payments.
Non-rated securities are also considered for investment by the Fund when the
Investment Manager believes that the financial condition of the issuers of such
securities, or the protection afforded by the terms of the securities
themselves, makes them appropriate investments for the Fund.
A general description of Moody's and S&P's ratings is set forth in the
Appendix at the end of this Prospectus.
RISK CONSIDERATIONS
CONVERTIBLE SECURITIES. The Fund will seek to meet its investment objective
by investing primarily in convertible securities in accordance with the
above-stated policies. Investments in these securities can provide a high level
of total return by virtue of their affording current income through interest and
dividend payments and because of the opportunity they provide for capital
appreciation by virtue of their convertibility into common stock. The Fund may
invest in investment grade convertible securities which are rated within the
four highest categories by recognized rating agencies; i.e., S & P and Moody's,
as well as in such securities which are lower rated or which are not rated by
such agencies. See the Statement of Additional Information for a discussion of
S&P and Moody's ratings.
Convertible securities rank senior to common stocks in a corporation's
capital structure and, therefore, entail less risk than the corporation's common
stock. The value of a convertible security is a function of its "investment
value" (its value as if it did not have a conversion privilege), and its
"conversion value" (the security's worth if it were to be exchanged for the
underlying security, at market value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value is greater than
its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when
6
<PAGE>
interest rates fall and decrease when interest rates rise, as with a
fixed-income security (the credit standing of the issuer and other factors may
also have an effect on the convertible security's value). If the conversion
value exceeds the investment value, the price of the convertible security will
rise above its investment value and, in addition, will sell at some premium over
its conversion value. (This premium represents the price investors are willing
to pay for the privilege of purchasing a fixed-income security with a
possibility of capital appreciation due to the conversion privilege.) At such
times the price of the convertible security will tend to fluctuate directly with
the price of the underlying equity security. Convertible securities may be
purchased by the Fund at varying price levels above their investment values
and/or their conversion values in keeping with the Fund's objective.
CORPORATE FIXED-INCOME SECURITIES. In order to generate the current income
needed to achieve its investment objective, the Fund may invest in investment
grade nonconvertible fixed-income securities as well as in such securities which
are in the lower rating categories of S & P and Moody's or which are not rated
by such agencies. Such investments may be deemed speculative in nature.
The ratings of fixed-income securities by Moody's and S & P are a generally
accepted barometer of credit risk. The Investment Manager will primarily rely
upon such ratings in assessing the creditworthiness of the issuers of the
securities it purchases. Nevertheless, the Investment Manager takes into account
in its security selection process the fact that credit ratings evaluate the
safety of a security's continuing payments of principal and interest, rather
than the risk of decline in its market value. Moreover, as credit rating
agencies may fail to make timely changes in their credit ratings to reflect
changing circumstances and events, the Investment Manger will continuously
monitor the issuers of the lower-rated securities held in the Fund's portfolio
to determine whether these issuers have sufficient cash flow and profits to meet
required principal and interest payments.
All fixed-income securities are subject to two types of risks: the credit
risk and the interest rate risk. The credit risk relates to the ability of the
issuer to meet interest or principal payments or both as they come due. The
interest rate risk refers to the fluctuations in net asset value of any
portfolio of fixed-income securities resulting from the inverse relationship
between price and yield of fixed-income securities; that is, when the general
level of interest rates rises, the prices of outstanding fixed-income securities
decline, and when interest rates fall, prices rise.
FOREIGN SECURITIES. The Fund may invest in securities of foreign companies.
However, the Fund will not invest more than 10% of the value of its total
assets, at the time of purchase, in foreign securities (other than securities of
Canadian issuers registered under the Securities Exchange Act of 1934 or
American Depository Receipts, on which there is no such limit). Foreign
securities investments may be affected by changes in currency rates or exchange
control regulations, changes in governmental administration or economic or
monetary policy (in the United States and abroad) or changed circumstances in
dealings between nations. Costs will be incurred in connection with conversions
between various currencies held by the Fund. Investments in foreign securities
will also occasion risks relating to political and economic developments abroad,
including the possibility of expropriations or confiscatory taxation,
limitations on the use or transfer of Fund assets and any effects of foreign
social, economic or political instability.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are negotiated,
the price is fixed at the time of the commitment, but delivery and payment can
take place a month or more after the date of the commitment. While the Fund will
only purchase securities on a when-issued, delayed delivery or forward
com-
7
<PAGE>
mitment 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.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. If the anticipated event does
not occur and the securities are not issued, the Fund will have lost an
investment opportunity. There is no overall limit on the percentage of the
Fund's assets which may be committed to the purchase of securities on a "when,
as and if issued" basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of its net asset value.
PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined to be
liquid pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) These securities are generally referred
to as private placements or restricted securities. Limitations on the resale of
such securities may have an adverse effect on their marketability, and may
prevent the Fund from disposing of them promptly at reasonable prices. The Fund
may have to bear the expense of registering such securities for resale and the
risk of substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. If a restricted security is determined to be "liquid", such security will
not be included within the category "illiquid securities", which under current
policy may not exceed 15% of the Fund's net assets.
RIGHTS AND WARRANTS. The Fund may acquire rights and/or warrants which are
attached to other securities in its portfolio, or which are issued as a
distribution by the issuer of a security held in its portfolio. Rights and/or
warrants are, in effect, options to purchase equity securities at a specific
price, generally valid for a specific period of time, and have no voting rights,
pay no dividends and have no rights with respect to the corporation issuing
them.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of government securities or other securities
from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The agreement provides that the Fund will sell
back to the institution, and that the institution will repurchase, the
underlying security at a specified price and at a fixed time in the future,
usually not more than seven days from the date of purchase. While repurchase
agreements involve certain risks not associated with direct investments in debt
securities, including the risks of default or bankruptcy of the selling
financial institution, the Fund follows procedures to minimize such risks. These
procedures include effecting repurchase transactions only with large,
well-capitalized and well-established financial institutions and maintaining
adequate collateralization.
LOWER-RATED SECURITIES. Because of the special nature of the Fund's
investments in lower rated securities (certain lower rated securities in which
the Fund may invest are commonly known as junk bonds), the Investment Manager
must take account of certain special considerations in assessing the
8
<PAGE>
risks associated with such investments. For example, as the lower rated
securities market is relatively new, its growth had paralleled a long economic
expansion and, until recently, it had not faced adverse economic and market
conditions. Therefore, an economic downturn or increase in interest rates is
likely to have a negative effect on this market and on the value of the lower
rated securities held by the Fund, as well as on the ability of the securities'
issuers to repay principal and interest on their borrowings.
The prices of lower rated securities have been found to be less sensitive to
changes in prevailing interest rates than higher rated investments, but are
likely to be more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely effect their ability to service their principal and interest
payment obligations, to meet their projected business goals or to obtain
additional financing. If the issuer of a fixed-income security owned by the Fund
defaults, the Fund may incur additional expenses to seek recovery. In addition,
periods of economic uncertainty and change can be expected to result in an
increased volatility of market prices of lower rated securities and a
concomitant volatility in the net asset value of a share of the Fund. Moreover,
the market prices of certain of the Fund's portfolio securities which are
structured as zero coupon and payment-in-kind securities are affected to a
greater extent by interest rate changes and thereby tend to be more volatile
than securities which pay interest periodically and in cash (see "Dividends,
Distributions and Taxes" for a discussion of the tax ramifications of
investments in such securities).
The secondary market for lower rated securities may be less liquid than the
markets for higher quality securities and, as such, may have an adverse affect
on the market prices of certain securities. The limited liquidity of the market
may also adversely affect the ability of the Fund's Trustees to arrive at a fair
value for certain lower rated securities at certain times and should make it
difficult for the Fund to sell certain securities. In addition, new laws and
proposed new laws may have an adverse effect upon the value of lower rated
securities and a concomitant negative impact upon the net asset value of a share
of the Fund.
During the fiscal year ended September 30, 1994, the monthly dollar weighted
average ratings of the debt obligations held by the Fund, expressed as a
percentage of the Fund's total investments, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
RATINGS TOTAL INVESTMENTS
- ------------------------- --------------------
<S> <C>
AAA/Aaa.................. 3.1%
AA/Aa.................... 2.5%
A/A...................... 5.6%
BBB/Baa.................. 17.6%
BB/Ba.................... 21.5%
B/B...................... 33.3%
CCC/Caa.................. 1.0%
CC/Ca.................... 0.0%
C/C...................... 0.0%
Unrated.................. 15.4%
</TABLE>
OPTIONS AND FUTURES TRANSACTIONS. The Fund is permitted to enter into call
and put options on U.S. Treasury notes, bonds and bills and equity securities
which are listed on Exchanges and are written in over-the-counter transactions
("OTC options"). Listed options are issued by the Options Clearing Corporation.
OTC options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with the Fund. The Fund
is permitted to write covered call options on portfolio securities, in an amount
not exceeding 20% of the value of its total assets, in order to aid it in
achieving its investment objective.
The Fund may purchase listed and OTC call and put options in amounts
equalling up to 5% of its total assets. The Fund may purchase call options only
in order to close out a covered call position. The Fund may purchase put options
on securities which it holds (or has the right to acquire) in its portfolio only
to protect itself against a decline in the value of the security. The Fund may
also purchase
9
<PAGE>
put options to close out written put positions. There are no other limits on the
Fund's ability to purchase call and put options.
The Fund may purchase and sell financial futures contracts ("futures
contracts") that are traded on U.S. commodity exchanges on such underlying
securities as U.S. Treasury bonds, notes, and bills. The Fund may invest in
financial futures contracts only as a hedge against anticipated interest rate
changes.
The Fund may also purchase and write call and put options on futures
contracts which are traded on an Exchange and enter into closing transactions
with respect to such options to terminate an existing position. The Fund will
purchase and write options on futures contracts for identical purposes to those
set forth above for the purchase of a futures contract and the sale of a futures
contract or to close out a long or short position in futures contracts.
The Fund may not enter into futures contracts or purchase related options
thereon if, immediately thereafter, the amount committed to initial margin plus
the amount paid for premiums for unexpired options on futures contracts exceeds
5% of the value of the Fund's total assets, after taking into account unrealized
gains and unrealized losses on such contracts it has entered into, provided,
however, that in the case of an option that is in-the-money (the exercise price
of the call (put) option is less (more) than the market price of the underlying
security) at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. Moreover, the Fund may only buy and write options which are
listed on national securities exchanges and may not purchase options if, as a
result, the aggregate cost of all outstanding options exceeds 10% of the Fund's
total assets. In addition, the Fund may not purchase or sell futures contracts
or related options thereon if, immediately thereafter, more than one-third of
its net assets would be hedged.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures contract
only if a liquid secondary market exists for options or futures contracts of
that series. There is no assurance that such a market will exist particularly in
the case of OTC options, as such options generally will only be closed out by
entering into a closing purchase transaction with the purchasing dealer. Also,
exchanges may limit the amount by which the price of many futures contracts may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk is that the Investment Manager could be incorrect in its
expectations as to the direction or extent of various interest rate or price
movements or the time span within which the movements take place. For example,
if the Fund sold futures contracts for the sale of securities in anticipation of
an increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the Fund would lose money on the sale. Another risk
which may arise in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities and indices
subject to futures contracts (and thereby the futures contract prices) may
correlate imperfectly with the behavior of the cash prices of the Fund's
portfolio securities. See the Statement of Additional Information for further
discussion of such risks.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
rating agencies, research, analysis and appraisals of brokers and dealers,
including Dean Witter Reynolds
10
<PAGE>
Inc. ("DWR"), a broker-dealer affiliate of InterCapital, the views of Trustees
of the Fund and others regarding economic developments and interest rate trends,
and the Investment Manager's own analysis of factors it deems relevant. The Fund
is managed within InterCapital's Small Capitalization Equities Group, which
manages six funds and fund portfolios with approximately $2.3 billion in assets
at October 31, 1994. Ronald J. Worobel, Senior Vice President of InterCapital
and Michael G. Knox, Senior Portfolio Manager of InterCapital, and members of
InterCapital's Small Capitalization Equities Group, have been the primary
portfolio managers of the Fund since June, 1992 and November, 1994,
respectively. Mr. Worobel has been managing portfolios comprised of equity and
other securities at InterCapital since June, 1992; prior thereto Mr. Worobel
managed portfolios of such securities at MacKay Shields Financial Corp.
(February, 1989-June, 1992) and Rothschild Inc. (June, 1986-February, 1989). Mr.
Knox has been managing portfolios comprised of equity and other securities at
InterCapital since August, 1993; prior thereto he was a portfolio manager and
analyst with Eagle Asset Management, Inc. (February, 1991-August, 1993) and an
assistant portfolio manager and analyst with Heritage Asset Management, Inc.
(July, 1988-February, 1991).
Orders for transactions in portfolio securities are placed for the Fund with
a number of brokers and dealers, including DWR. Pursuant to an order of the
Securities and Exchange Commission, the Fund may effect principal transactions
in certain money market instruments with DWR. In addition, the Fund may incur
brokerage commissions on transactions conducted through DWR.
The portfolio trading engaged in by the Fund may result in its portfolio
turnover rate exceeding 100%. The Fund is expected to incur higher than normal
brokerage commission costs due to its portfolio turnover rate. Short-term gains
and losses taxable at ordinary income rates may result from such portfolio
transactions. See "Dividends, Distributions and Taxes" for a full discussion of
the tax implications of the Fund's trading policy. A more extensive discussion
of the Fund's portfolio brokerage policies is set forth in the Statement of
Additional Information.
Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of the Fund and, as such,
may be changed without shareholder approval.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions that
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the Act.
The Fund may not:
1. Invest more than 5% of the value of its total
assets in the securities of any one issuer (other than obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding
voting securities or any class of securities of any one issuer. For purposes of
compliance with this restriction, the Fund will not invest in the convertible
securities of any one issuer if, upon conversion of such securities, the Fund
would hold more than 10% of the outstanding voting securities of that issuer.
3. Invest more than 25% of the value of its total
assets in securities of issuers in any one industry. This restriction does not
apply to obligations issued or guaranteed by the United States Government or its
agencies or instrumentalities.
11
<PAGE>
4. Invest more than 5% of the value of its total
assets in securities of issuers having a record, together with predecessors, of
less than three years of continuous operation. This restriction shall not apply
to any obligation of the United States Government, its agencies or
instrumentalities.
5. Borrow money, except that the Fund may
borrow from a bank for temporary or emergency purposes in amounts not exceeding
5% (taken at the lower of cost or current value) of the value of its total
assets (not including the amount borrowed).
6. Invest more than 5% of the value of its total
assets in warrants, including not more than 2% of such assets in warrants not
listed on either the New York or American Stock Exchange. However, the
acquisition of warrants attached to other securities is not subject to this
restriction.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers who 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 Convertible Securities
Trust, directly to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box
1040, Jersey City, NJ 07303 or by contacting a DWR or other Selected
Broker-Dealer account executive. 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 a request is made 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").
Shares of the Fund are sold through the Distributor on a normal five
business day settlement basis; that is, payment is due on the fifth business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive dividends and
capital gains distributions if their order is received by the close of business
on the day prior to the record date for such distributions. While no sales
charge is imposed at the time shares are purchased, a contingent deferred sales
charge may be imposed at the time of redemption (see "Redemptions and
Repurchases"). Sales personnel are compensated for selling shares of the Fund at
the time of their sale by the Distributor and/or Selected Broker-Dealer. In
addition, some sales personnel of the Selected Broker-Dealer will receive
various types of non-cash compensation as special sales incentives, including
trips, educational and/or business seminars and
12
<PAGE>
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 1% 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. This 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 0.25% of the Fund's
average daily net assets, is characterized as a service fee within the meaning
of NASD guidelines.
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 distributions 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 September 30, 1994, the Fund accrued payments
under the Plan amounting to $2,002,443, which amount is equal to 1.0% 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 the 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 such excess amounts including the carrying
charge described above, totalled $64,427,485 at September 30, 1994, which was
equal to 33.84% 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 recovered through future distribution fees or
contingent deferred sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time, on each day that the New York Stock Exchange is
13
<PAGE>
open, by taking the value of all assets of the Fund, subtracting its
liabilities, dividing by the number of shares outstanding and adjusting to the
nearest cent. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by the
New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange; if there were no sales that day, the security is valued at the latest
bid price (in cases where a security is traded on more than one exchange, the
security is valued on the exchange designated as the primary market by the
Trustees), and (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest bid price. When
market quotations are not readily available, or when it is determined by the
Investment Manager that sale or bid prices are not reflective of a security's
fair value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision of
the Fund's Trustees.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' fair value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the shareholder
requests that they be paid in cash. Shares so acquired are not subject to the
imposition of a contingent deferred sales charge upon their redemption (see
"Redemptions and Repurchases").
EASYINVEST-TM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund.
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.
14
<PAGE>
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.
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.")
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available through the
Distributor 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 DWR or other Selected Broker-
Dealer account executive or the Transfer Agent.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of other Dean Witter
Funds sold with a contingent deferred sales charge ("CDSC funds"), and for
shares of Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term
Municipal Trust, Dean Witter Short-Term Bond Fund and five Dean Witter Funds
which are money market funds (the foregoing eight non-CDSC funds are hereinafter
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 the net asset value
determined the following business day. Subsequent exchanges between any of the
money market funds and any of the CDSC funds can be effected on the same basis.
No contingent deferred sales charge ("CDSC") is imposed at the time of any
exchange, although any applicable CDSC will be imposed upon ultimate redemption.
Shares of the Fund acquired in exchange for shares of another CDSC fund having a
different CDSC schedule than that of this Fund will be subject to the CDSC
schedule of this Fund, even if such shares are subsequently re-exchanged for
shares of the CDSC fund originally purchased. During the period of time the
shareholder remains in the Exchange Fund (calculated from the last day of the
month in which the 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
15
<PAGE>
attributable to those shares. (Exchange Fund 12b-1 distribution fees, if any,
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 other Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their 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) 526-3143 (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
16
<PAGE>
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 another 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
will be reduced by the amount of any applicable contingent deferred sales
charges (see below). If shares are held in a shareholder's account without a
share certificate, a written request for redemption sent to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are
held by the shareholder(s), the shares may be redeemed by surrendering the
certificate(s) 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 purchased within the six years preceding the redemption; (ii)
the current net asset value of shares purchased more than six years prior to the
redemption; and (iii) the current net asset value of shares purchased through
reinvestment of dividends or distributions and/or shares acquired in exchange
for shares of Dean Witter Funds sold with a front-end sales charge or of other
Dean Witter Funds acquired in exchange for such shares. 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 are attributable to reinvestment
of dividends or distributions from, or the proceeds of, certain Unit Investment
Trusts.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of: (i) redemptions of shares held at the time a shareholder dies or
17
<PAGE>
becomes disabled, only if the shares are (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship, or (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability, and (ii) redemptions in
connection with the following retirement plan distributions: (a) lump-sum or
other distributions from a qualified corporate or self-employed retirement plan
following retirement (or in the case of a "key employee" of a "top heavy" plan,
following attainment of age 59 1/2); (b) distributions from an Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue code following attainment of age 59 1/2; and (c) a tax-free return of an
excess contribution to an IRA. 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. All waivers will be granted only following receipt by the
Distributor of confirmation of the investor'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 or telegraphic 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 upon repurchase by the Fund,
the Distributor, DWR or other Selected Broker-Dealers. The offer by DWR and
other Selected Broker-Dealers to repurchase shares may be suspended without
notice by them at any time. In that event, shareholders may redeem their shares
through the Fund's Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executives regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption or
repurchase in shares of the Fund at the net asset value next determined after a
reinstatement request, together with the proceeds, is received by the Transfer
Agent and receive a pro-rata credit for any CDSC paid in connection with such
redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem, at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Internal Revenue Code) whose shares have a value of
less than $100 or such lesser amount as may be fixed by the Fund's Trustees.
However, before the Fund redeems such shares
18
<PAGE>
and sends the proceeds to the shareholder, it will notify the shareholder that
the value of the shares is less than $100 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 $100 or more before the redemption is processed. No CDSC will
be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay quarterly income
dividends and to distribute net short-term and net long-term gains, if any, at
least once per year. The Fund may, however, determine either to distribute or to
retain all or part of any long-term gains in any year for reinvestment.
All dividends and capital gains distributions will be paid in additional
Fund shares and automatically credited to the shareholder's account without
issuance of a share certificate unless the shareholder requests in writing that
all dividends and/or 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 capital gains to shareholders and otherwise remain
qualified as a regulated investment company under Subchapter M of the Internal
Revenue Code, it is not expected that the Fund will be required to pay any
federal income tax on such income and capital gains. Shareholders who are
required to pay taxes on their income will normally have to pay federal income
taxes, and any state income taxes, on the dividends and distributions they
receive from the Fund. Such dividends and distributions, to the extent they are
derived from net investment income or net short-term capital gains, are taxable
to the shareholder as ordinary dividend income regardless of whether the
shareholder receives such payments in additional shares or in cash.
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax regulations applicable to the Fund may have the effect of causing the Fund
to recognize a gain or loss for tax purposes before that gain or loss is
realized, or to defer recognition of a realized loss for tax purposes.
Recognition, for tax purposes, of an unrealized loss may result in a lesser
amount of the Fund's realized gains being available for annual distribution.
With respect to the Fund's investments in zero coupon and payment-in-kind
bonds, the Fund accrues income prior to any actual cash payments by their
issuers. In order to continue to comply with Subchapter M of the Code and remain
able to forego payment of Federal income tax on its income and capital gains,
the Fund must distribute all of its net investment income, including income
accrued from zero coupon and payment-in-kind bonds. As such, the Fund may be
required to dispose of some of its portfolio securities under disadvantageous
circumstances to generate the cash required for distribution.
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of the Fund's gross income be derived
from gains from the sale or other disposition of securities held for less than
three months. Accordingly, the Fund may be restricted in the writing of options
on securities held for less than three months, in the writing of options which
expire in less than three months, and in effecting closing transactions with
respect to call or put options which have been written or purchased less than
three months prior to such transactions. The Fund may also be restricted in its
ability to engage in transactions involving futures contracts.
After the end of the calendar year, shareholders will receive full
information on their dividends and capital gains distributions for tax purposes.
To avoid
19
<PAGE>
being subject to a 31% federal backup withholding tax on taxable dividends,
capital gains distributions and the proceeds of redemptions and repurchases,
shareholders' taxpayer identification numbers must be furnished and certified as
to their accuracy.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "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 one year, five years, as well as
over the life of the Fund. 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 incurred by shareholders,
for the stated periods. It also assumes reinvestment of all dividends and
distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculations may or may not reflect the
deduction of the contingent deferred sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indices compiled by independent organizations
(such as mutual fund performance rankings of Lipper Analytical Services, Inc.)
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
20
<PAGE>
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's
being unable to meet its obligations is remote and, thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
21
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
BOND RATINGS
<TABLE>
<S> <C>
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards. Together with
the Aaa group they comprise what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat larger than in
Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e., they are
neither highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their future cannot be
considered as well assured. Often the protection of interest and principal payments may
be very moderate, and therefore not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of desirable investments.
Assurance of interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real investment
standing.
</TABLE>
CONDITIONAL RATING: Municipal bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects
22
<PAGE>
under construction, (b) earnings of projects unseasoned in operation experience,
(c) rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
RATING REFINEMENTS: Moody's may apply numerical modifiers, 1, 2 and 3 in
each generic rating classification from Aa through B in its corporate and
municipal bond rating system. The modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and a modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
BOND RATINGS
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
<TABLE>
<S> <C>
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay principal and differs
from the highest-rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay principal although they are
somewhat more susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher-rated categories.
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for debt in this category than for debt in higher-rated
categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated BB has less near-term vulnerability to default than other speculative grade
debt. However, it faces major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to inadequate capacity to meet timely
interest and principal payment.
B Debt rated B has a greater vulnerability to default but presently has the capacity to
meet interest payments and principal repayments. Adverse business, financial or economic
conditions would likely impair capacity or willingness to pay interest and repay
principal.
CCC Debt rated CCC has a current identifiable vulnerability to default, and is dependent upon
favorable business, financial and economic conditions to meet timely payments of interest
and repayments of principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and repay principal.
CC The rating CC is typically applied to debt subordinated to senior debt which is assigned
an actual or implied CCC rating.
C The rating C is typically applied to debt subordinated to senior debt which is assigned
an actual or implied CCC- debt rating.
CI The rating CI is reserved for income bonds on which no interest is being paid.
NR Indicates that no rating has been requested, that there is insufficient information on
which to base a rating or that Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Bonds rated BB, B, CCC, CC and C are regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the addition of a
plus or minus sign to show relative standing within the major ratings categories.
In the case of municipal bonds, the foregoing ratings are sometimes followed by a "p"
which indicates that the rating is provisional. A provisional rating assumes the
successful completion of the project being financed by the bonds being rated and
indicates that payment of debt service requirements is largely or entirely dependent upon
the successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes no comment on
the likelihood or risk of default upon failure of such completion.
</TABLE>
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or
24
<PAGE>
obtained by S&P from other sources it considers reliable. The ratings may be
changed, suspended, or withdrawn as a result of changes in or unavailability of
such information. Ratings are graded into group categories, ranging from "A" for
the highest quality obligations to "D" for the lowest. Ratings are applicable to
both taxable and tax-exempt commercial paper. The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2 and 3 to indicate the relative degree of safety.
<TABLE>
<S> <C>
A-1 indicates that the degree of safety regarding timely payment is very strong.
A-2 indicates capacity for timely payment on issues with this designation is strong. However,
the relative degree of safety is not as overwhelming as for issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying this designation
are, however, somewhat more vulnerable to the adverse effects of changes in circumstances
than obligations carrying the higher designations.
</TABLE>
25
<PAGE>
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26
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS DEAN WITTER RETIREMENT SERIES
Dean Witter Liquid Asset Fund Inc. Liquid Asset Series
Dean Witter Tax-Free Daily Income Trust U.S. Government Money Market Series
Dean Witter U.S. Government Money U.S. Government Securities Series
Market Trust Intermediate Income Securities Series
Dean Witter New York Municipal Money American Value Series
Market Trust Capital Growth Series
Dean Witter California Tax-Free Daily Dividend Growth Series
Income Trust Strategist Series
Utilities Series
EQUITY FUNDS Value-Added Market Series
Dean Witter American Value Fund Global Equity Series
Dean Witter Natural Resource
Development Securities Inc. ASSET ALLOCATION FUNDS
Dean Witter Dividend Growth Securities Dean Witter Managed Assets Trust
Inc. Dean Witter Strategist Fund
Dean Witter Developing Growth
Securities Trust ACTIVE ASSETS ACCOUNT PROGRAM
Dean Witter World Wide Investment Trust Active Assets Money Trust
Dean Witter Value-Added Market Series Active Assets Tax-Free Trust
Dean Witter Utilities Fund Active Assets California Tax-Free Trust
Dean Witter Capital Growth Securities Active Assets Government Securities
Dean Witter European Growth Fund Inc. Trust
Dean Witter Pacific Growth Fund Inc.
Dean Witter Precious Metals and
Minerals Trust
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth
Securities
Dean Witter Global Utilities Fund
Dean Witter International SmallCap Fund
Dean Witter Mid-Cap Growth Fund
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities
Trust
Dean Witter Federal Securities Trust
Dean Witter California Tax-Free Income
Fund
Dean Witter Convertible Securities
Trust
Dean Witter New York Tax-Free Income
Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income
Securities
Dean Witter Global Short-Term Income
Fund Inc.
Dean Witter Multi-State Municipal
Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury
Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal
Trust
Dean Witter Short-Term Bond Fund
Dean Witter National Municipal Trust
Dean Witter High Income Securities
<PAGE>
Dean Witter Dean Witter
Convertible Securities Trust Convertible
Two World Trade Center Securities
New York, New York 10048 Trust
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Ronald J. Worobel [LOGO]
Vice President
Michael G. Knox
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.
11/22/94
PROSPECTUS -- NOVEMBER 22, 1994
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
The fiscal year ended September 30, 1994, began on a positive note with both
the equity and fixed-income markets benefiting from low interest rates, slow
economic growth and low inflation. However, by the mid-point of the fiscal year,
a strong economy, inflationary fears and rising interest rates resulted in
increased volatility and negative performance in both markets.
UNCERTAINTY IN THE FINANCIAL MARKETS
Although the financial markets were volatile and difficult to operate in
during the fiscal year, Dean Witter Convertible Securities Trust clearly
benefited from its portfolio of convertible securities. Since convertibles
generally offer a higher level of income than the underlying common stock, they
may provide better resistance to market declines than a strictly common stock
portfolio. At the same time, a convertible's link to its underlying common stock
allows for capital appreciation potential should the value of the stock rise.
For the 12-month period ended September 30, 1994, the Trust provided a total
return of 5.02%, outperforming both the equity and fixed-income markets. During
the period, the Standard & Poor's 500
Composite Stock Price Index and the Lehman
Brothers Government/Corporate Bond Index
returned 3.69 percent and -4.14 percent,
respectively. During the fiscal year, the
Trust distributed income dividends of
approximately $0.40 per share, including
an extra income dividend of approximately
$0.09 per share, paid to shareholders of
record on December 23, 1993. The
combination of strong performance and
rising income levels resulted in the
Trust's quarterly dividend being increased
to $0.085 per share. The accompanying
chart illustrates the performance of a
$10,000 investment in the Trust since
inception (October 31, 1985) through the
fiscal year ended September 30, 1994, [GRAPHIC]
versus the performance of a similar
investment in the issues represented in
the Goldman Sachs Convertible 100 Index
(the Index). The divergence between the
performance of the Trust and the Index is
attributable to the fact that the 100
issues in the Index are equally weighted
(each one represents one percent), so that
no bond or stock would significantly
impact performance. By contrast, the Trust
is not equally weighted and thus was
affected more acutely than the Index by
the extreme volatility experienced by the
convertible securities market following
the October 19, 1987 stock market crash
and the correction following the Persian
Gulf crisis in 1990. However, since a
restructuring of the portfolio that took
place at the end of June, 1992, the Trust
has more closely tracked the convertible
market and performed admirably against its
peer group. For the 12-month period ended
September 30,
<PAGE>
1994, the Trust ranked #3 out of 24 convertible securities funds, according to
Lipper Analytical Services, Inc., an independent research organization generally
considered to be the leading monitor of the mutual fund industry.
PORTFOLIO ACTIVITY
The convertible market experienced some volatility over the past year along
with the stock and bond markets. The Trust focused on reducing volatility by
diversifying the portfolio across a wide range of industries and by emphasizing
convertible issues with short maturities and good risk/reward characteristics.
These characteristics include a relatively high current yield to support the
convertible in the event of a decline in the underlying stock and a reasonable
conversion premium to ensure participation in any appreciation of the underlying
stock.
The Trust utilizes a value-oriented, bottom-up approach to evaluate
companies and their investment merits, emphasizing companies and industries with
strong underlying fundamentals and solid long-term growth prospects. In
selecting securities for the portfolio, we focus on under-followed, small- and
medium-capitalization companies that issue convertible securities. These issues
offer excellent participation in a rising equity market and solid downside
protection in a declining market. In addition, the Trust may also invest a
portion of its assets in high-coupon, lower-rated debt securities in order to
maintain a minimum income level and in common stocks to help the Trust diversify
into industries and companies not represented in the convertible universe.
Currently, the Trust's portfolio is diversified among a broad range of
industries, including health care, manufacturing, real estate, restaurants, and
retail. Among the Trust's stronger performing holdings during the fiscal year
were Sun Healthcare Group (health care), Raymond Corp. (manufacturing), Western
Company of North America (energy), First Data Corp. (financial services), U.S.
Surgical Corp. (health care), and Peoples Bank Bridgeport Conn. (banking).
LOOKING AHEAD
Over the near term, we expect continued volatility in the financial markets
as investors attempt to assess the economy's strength, the direction of interest
rates and the likelihood of Federal Reserve Board actions. With this scenario in
mind, we will continue to look for investments that will provide investors with
long-term growth potential and income while minimizing share price volatility.
We appreciate your support of Dean Witter Convertible Securities Trust and
look forward to continuing to serve your investment objectives in the future.
Sincerely,
[SIGNTURE]
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (64.7%)
CONVERTIBLE BONDS (60.6%)
AUTO PARTS (3.0%)
$ 3,800 Arvin Industries, Inc........................... 7.50% 9/30/14 $ 3,819,000
2,850 MascoTech, Inc.................................. 4.50 12/15/03 1,959,375
------------
5,778,375
------------
BUILDING MATERIALS (0.8%)
1,500 Cemex S.A. - 144A*.............................. 4.25 11/ 1/97 1,515,000
------------
CHEMICALS (1.6%)
7,500 RPM Inc. Ohio................................... 0.00 9/30/12 3,000,000
------------
ELECTRICAL EQUIPMENT (1.8%)
2,000 Magnetek, Inc................................... 8.00 9/15/01 2,020,000
1,550 Willcox & Gibbs, Inc............................ 7.00 8/ 1/14 1,404,688
------------
3,424,688
------------
ENTERTAINMENT/GAMING (2.2%)
1,000 Argosy Gaming Co................................ 12.00 6/ 1/01 1,090,000
1,800 United Gaming, Inc.............................. 7.50 9/15/03 1,458,000
2,000 United Gaming, Inc. - 144A*..................... 7.50 9/15/03 1,620,000
------------
4,168,000
------------
ENVIRONMENTAL CONTROL (2.4%)
2,000 Air & Water Technologies Corp................... 8.00 5/15/15 1,400,000
3,500 United States Filter Corp....................... 5.00 10/15/00 3,255,000
------------
4,655,000
------------
FINANCIAL SERVICES (3.2%)
2,000 AT&T Latin American Equity - 144A*.............. 0.00 3/30/99 1,980,000
4,000 Fidelity National Financial, Inc................ 0.00 2/15/09 1,440,000
3,500 Waterhouse Investment Services, Inc............. 6.00 12/15/03 2,642,500
------------
6,062,500
------------
FOOD & BEVERAGES (0.5%)
1,000 Giant Group, Ltd................................ 7.00 4/15/06 953,750
------------
HEALTHCARE (3.7%)
2,500 Careline, Inc. - 144A*.......................... 8.00 5/ 1/01 2,118,750
4,300 Sun Healthcare Group............................ 6.00 3/ 1/04 4,853,625
------------
6,972,375
------------
HOME BUILDING (3.1%)
3,100 Toll Corp....................................... 4.75 1/15/04 2,433,500
4,925 US Home Corp.................................... 4.875 11/ 1/05 3,385,938
------------
5,819,438
------------
HOTELS (0.3%)
600 Hospitality Franchise System, Inc............... 4.50 10/ 1/99 621,000
------------
INDUSTRIALS (7.1%)
7,250 Bell Sports Corp................................ 4.25 11/15/00 5,292,500
2,000 Hawley Group, Ltd............................... 6.00 10/ 3/02 2,765,000
1,400 Raymond Corp.................................... 6.50 12/15/03 1,732,500
3,500 Titan Wheel International, Inc.................. 4.75 12/ 1/00 3,710,000
------------
13,500,000
------------
</TABLE>
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
INSURANCE (1.5%)
$ 1,300 Alexander & Alexander Services, Inc............. 11.00% 4/15/07 $ 1,326,000
1,500 Horace Mann Educators Corp...................... 4.00 12/ 1/99 1,455,000
------------
2,781,000
------------
METALS (2.9%)
1,250 Crown Resource Corp............................. 5.75 8/27/01 962,500
5,000 Freeport-McMoran, Inc........................... 6.55 1/15/01 4,562,500
------------
5,525,000
------------
OIL & GAS (1.4%)
2,500 Western Company of North America................ 7.25 1/15/15 2,675,000
------------
OIL SERVICES (1.8%)
11,000 Valhi, Inc...................................... 0.00 10/20/07 3,520,000
------------
PUBLISHING (4.9%)
10,000 Hollinger, Inc.................................. 0.00 10/ 5/13 3,075,000
4,500 Time Warner, Inc................................ 0.00 6/22/13 1,597,500
4,622 Time Warner, Inc................................ 8.75 1/10/15 4,616,223
------------
9,288,723
------------
REAL ESTATE INVESTMENT TRUST (2.2%)
3,000 Alexander Haagen Properties, Inc................ 7.50 1/15/01 2,790,000
1,500 Liberty Property Trust.......................... 8.00 7/ 1/01 1,500,000
------------
4,290,000
------------
RESTAURANTS (3.0%)
2,000 Boston Chicken, Inc............................. 4.50 2/ 1/04 1,710,000
2,075 TPI Enterprises, Inc............................ 8.25 7/15/02 2,272,125
4,000 Shoney's, Inc................................... 0.00 4/11/04 1,750,000
------------
5,732,125
------------
RETAIL (5.1%)
1,500 Carter Hawley Hale Stores, Inc.................. 6.25 12/31/00 1,687,500
1,500 Eagle Hardware & Garden, Inc.................... 6.25 3/15/01 1,181,250
4,500 Federated Department Stores, Inc.+.............. 0.00 2/15/04 4,320,000
1,750 Proffitts, Inc.................................. 4.75 11/ 1/03 1,312,500
2,000 Tops Appliance City, Inc. - 144A*............... 6.50 11/30/03 1,275,000
------------
9,776,250
------------
STEEL (0.5%)
1,275 Nippon Denro, Ltd. - 144A*...................... 3.00 4/ 1/01 1,045,500
------------
TELECOMMUNICATIONS (2.8%)
2,000 Arch Communications Group, Inc. - 144A*......... 6.75 12/ 1/03 2,360,000
1,500 Motorola, Inc................................... 0.00 9/27/13 1,012,500
2,500 Audiovox Corp. - 144A*.......................... 6.25 3/15/01 1,900,000
------------
5,272,500
------------
TEXTILES (1.3%)
2,500 Interface, Inc.................................. 8.00 9/15/13 2,475,000
------------
TRANSPORTATION (1.5%)
2,200 Air Express International Corp.................. 6.00 1/15/03 2,145,000
750 Airborne Freight Corp........................... 6.75 8/15/01 729,375
------------
2,874,375
------------
</TABLE>
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
TRANSPORTATION - INTERNATIONAL (0.3%)
$ 651 Consorcio G. Grupo Dina S.A. de C.V............. 8.00% 8/ 8/04 $ 546,840
------------
WASTE MANAGEMENT (1.7%)
3,000 Laidlaw, Inc. - 144A*........................... 6.00 1/15/99 3,165,000
------------
TOTAL CONVERTIBLE BONDS (IDENTIFIED COST $121,410,016).............. 115,437,439
------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
NON-CONVERTIBLE BONDS (4.1%)
CHEMICALS (1.4%)
2,500 General Chemical Corp........................... 14.00 11/ 1/98 2,650,000
------------
HEALTHCARE (1.6%)
3,000 Healthsouth Rehabilitation Corp................. 9.50 4/ 1/01 2,940,000
------------
RESTAURANTS (1.1%)
2,500 Flagstar Corp................................... 11.375 9/15/03 2,181,250
------------
TOTAL NON-CONVERTIBLE BONDS (IDENTIFIED COST $8,078,575)............ 7,771,250
------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $129,488,591)................ 123,208,689
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- ----------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (18.4%)
AUTO PARTS (0.3%)
36,100 MascoTech, Inc. $1.20................................................. 482,838
------------
BIOTECHNOLOGY (0.4%)
39,600 Liposome, Inc. Series A $1.93......................................... 757,350
------------
BUILDING MATERIALS (0.6%)
25,000 Southdown, Inc. Series D $2.875....................................... 1,056,250
------------
CHEMICALS (1.1%)
40,000 Occidental Petroleum Corp. $3.875 - 144A*............................. 2,097,500
------------
ENTERTAINMENT (1.9%)
147,600 AMC Entertainment, Inc. $1.75......................................... 3,579,300
------------
FINANCIAL SERVICES (0.9%)
40,000 American Express Co. $2.297........................................... 1,780,000
------------
HEALTHCARE (1.1%)
70,000 U.S. Surgical Corp. $2.198............................................ 2,047,500
------------
INDUSTRIALS (1.8%)
30,000 Chiquita Brands, Inc. Series A $2.875................................. 1,477,500
40,000 Corning, Inc. $3.00................................................... 1,990,000
------------
3,467,500
------------
INSURANCE (1.4%)
65,000 Alexander & Alexander Series A $3.625 - 144A*......................... 2,746,250
------------
MACHINERY (1.6%)
135,000 Cooper Industries, Inc. $1.60......................................... 3,206,250
------------
METALS (1.7%)
100,000 Freeport-McMoran Copper & Gold, Inc. $1.25............................ 2,450,000
100,000 Kaiser Aluminum Corp. $.65............................................ 825,000
------------
3,275,000
------------
OIL & GAS (1.0%)
75,000 Kelley Oil Corp. $2.625............................................... 1,912,500
------------
</TABLE>
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
OIL & GAS DRILLING (0.4%)
20,000 McDermott International, Inc. $2.875.................................. $ 833,750
------------
PAPER (0.7%)
52,000 Boise Cascade Corp. $1.58............................................. 1,371,500
------------
REAL ESTATE (1.2%)
50,000 Catellus Development Corp. Series B $3.625 - 144A*.................... 2,275,000
------------
REGIONAL BANKS (1.3%)
27,000 Peoples Bank Bridgeport Conn. Series A $4.25.......................... 2,409,750
------------
TELECOMMUNICATIONS (0.5%)
30,000 Mobile Telecommunications Corp. $2.25 - 144A*......................... 892,500
------------
WASTE MANAGEMENT (0.5%)
45,000 International Technology Corp. $1.75.................................. 894,375
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (IDENTIFIED COST $33,589,360)...... 35,085,113
------------
</TABLE>
<TABLE>
<C> <S> <C>
COMMON STOCKS (9.7%)
ADVERTISING (0.7%)
110,000 DIMAC Corp. (a)....................................................... 1,347,500
------------
AUTO PARTS (0.5%)
74,900 MascoTech, Inc........................................................ 889,437
------------
BUILDING MATERIALS (0.2%)
20,000 Masco Corporation..................................................... 482,500
------------
ENTERTAINMENT/GAMING (0.8%)
57,938 International Game Technology......................................... 1,194,971
42,500 United Gaming, Inc. (a)............................................... 302,812
------------
1,497,783
------------
ENVIRONMENTAL CONTROL (0.3%)
47,700 OHM Corp. (a)......................................................... 548,550
------------
FINANCIAL SERVICES (0.1%)
25,000 Lomas Financial Corp. (a)............................................. 121,875
------------
HEALTHCARE (0.5%)
120,000 Careline, Inc. (a).................................................... 660,000
13,300 Grancare, Inc. (a).................................................... 242,725
------------
902,725
------------
HOME BUILDING (0.2%)
40,000 Toll Brothers, Inc. (a)............................................... 455,000
------------
INDUSTRIALS (0.5%)
50,000 Hanson PLC (ADR)...................................................... 906,250
------------
MACHINERY (0.0%)
2,500 Albany International Corp. (Class A).................................. 44,062
------------
MANUFACTURING (1.1%)
201,000 Foamex International, Inc. (a)........................................ 2,135,625
------------
REAL ESTATE INVESTMENT TRUST (2.9%)
105,555 Alexander Haagen Properties, Inc...................................... 1,794,435
58,100 Avalon Properties, Inc................................................ 1,227,362
50,000 Irvine Apartment Communities, Inc..................................... 893,750
53,600 Merry Land & Investment, Inc.......................................... 1,051,900
25,000 Urban Shopping Centers, Inc........................................... 553,125
------------
5,520,572
------------
</TABLE>
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
RESTAURANTS (0.4%)
65,000 Flagstar Cos., Inc. (a)............................................... $ 552,500
40,000 TPI Enterprises, Inc. (a)............................................. 255,000
------------
807,500
------------
RETAIL (0.7%)
15,000 Dillard Department Stores, Inc. (Class A) (a)......................... 401,250
50,000 Woolworth Corp........................................................ 868,750
------------
1,270,000
------------
TEXTILES (0.1%)
20,000 Interface, Inc. (Class A)............................................. 260,000
------------
TRANSPORTATION (0.7%)
87,555 Consorcio G. Grupo Dina S.A. de C.V. (ADR) (a)........................ 908,383
40,000 Team Rental Group, Inc. (a)........................................... 450,000
------------
1,358,383
------------
TOTAL COMMON STOCKS (IDENTIFIED COST $19,530,731)..................... 18,547,762
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE
- ---------- ------ --------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (7.6%)
COMMERCIAL PAPER (B) (6.3%)
FINANCE - DIVERSIFIED (6.3%)
$ 7,000 Ford Motor Credit Co............................ 4.75% 10/ 5/94 6,996,306
5,000 General Electric Capital Corp................... 4.82 10/ 7/94 4,995,983
------------
TOTAL COMMERCIAL PAPER (AMORTIZED COST $11,992,289)................. 11,992,289
------------
REPURCHASE AGREEMENT (1.3%)
2,365 The Bank of New York (dated 9/30/94; proceeds
$2,365,681; collateralized by $2,473,560 U.S.
Treasury Bond 7.50% due 11/15/16 valued at
$2,411,990) (Identified Cost $2,364,696)...... 5.00 10/ 3/94 2,364,696
------------
TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $14,356,985).......... 14,356,985
------------
TOTAL INVESTMENTS (IDENTIFIED COST $196,965,667)
(C)....................................................... 100.4 % 191,198,549
LIABILITIES IN EXCESS OF OTHER ASSETS.............. (0.4) (803,505)
---------- ------------
NET ASSETS......................................... 100.0 % $190,395,044
---------- ------------
---------- ------------
<FN>
- ----------------
* RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS.
+ PAYMENT IN KIND.
(A) NON-INCOME PRODUCING SECURITY.
(B) COMMERCIAL PAPER WAS PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE
SHOWN HAS BEEN ADJUSTED TO REFLECT A BOND EQUIVALENT YIELD.
(C) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $198,708,168; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $5,545,604 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $13,055,223, RESULTING IN NET UNREALIZED
DEPRECIATION OF $7,509,619.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $196,965,667) (Note
1)..................................... $ 191,198,549
Receivable for:
Investments sold....................... 2,522,531
Interest............................... 1,812,765
Dividends.............................. 262,640
Shares of beneficial interest sold..... 160,987
Prepaid expenses and other assets........ 48,574
--------------
TOTAL ASSETS..................... 196,006,046
--------------
LIABILITIES:
Payable for:
Investments purchased.................. 4,988,734
Plan of distribution fee (Note 3)...... 157,817
Shares of beneficial interest
repurchased.......................... 143,316
Investment management fee (Note 2)..... 94,690
Dividends to shareholders.............. 86,846
Accrued expenses and other payables (Note
4)..................................... 139,599
--------------
TOTAL LIABILITIES................ 5,611,002
--------------
NET ASSETS:
Paid-in-capital.......................... 572,199,462
Net unrealized depreciation on
investments............................ (5,767,118)
Accumulated undistributed net investment
income................................. 3,360,672
Accumulated net realized loss on
investments............................ (379,397,972)
--------------
NET ASSETS....................... $ 190,395,044
--------------
--------------
NET ASSET VALUE PER SHARE, 17,716,079
shares outstanding (unlimited
authorized shares of $.01 par value)...
$10.75
--------------
--------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME
Interest.............................. $ 7,932,911
Dividends (net of $207 foreign
withholding tax).................... 3,313,565
-------------
TOTAL INCOME...................... 11,246,476
-------------
EXPENSES
Plan of distribution fee (Note 3)..... 2,002,443
Investment management fee (Note 2).... 1,201,442
Transfer agent fees and expenses (Note
4).................................. 439,000
Shareholder reports and notices....... 77,656
Professional fees..................... 55,225
Custodian fees........................ 41,225
Trustees' fees and expenses (Note
4).................................. 32,552
Registration fees..................... 11,786
Other................................. 12,074
-------------
TOTAL EXPENSES.................... 3,873,403
-------------
NET INVESTMENT INCOME........... 7,373,073
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 1):
Net realized gain on investments...... 24,216,296
Net change in unrealized depreciation
on investments...................... (21,824,460)
-------------
NET GAIN ON INVESTMENTS........... 2,391,836
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $ 9,764,909
-------------
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30,1994 SEPTEMBER 30, 1993
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................ $ 7,373,073 $ 7,329,034
Net realized gain on investments..................................... 24,216,296 25,935,964
Net change in unrealized appreciation (depreciation) on
investments........................................................ (21,824,460) 11,444,791
------------------ -------------------
Net increase in net assets resulting from operations............. 9,764,909 44,709,789
Dividends to shareholders from net investment income................... (7,325,103) (7,306,204)
Net decrease from transactions in shares of beneficial interest (Note
5).................................................................... (19,938,327) (47,158,302)
------------------ -------------------
Total decrease................................................... (17,498,521) (9,754,717)
NET ASSETS:
Beginning of period.................................................... 207,893,565 217,648,282
------------------ -------------------
END OF PERIOD (including undistributed net investment income of
$3,360,672
and $3,312,702, respectively)........................................ $ 190,395,044 $ 207,893,565
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter Convertible 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 was organized as a Massachusetts business trust on May 21, 1985 and
commenced operations on October 31, 1985.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on
the New York or American Stock Exchange is valued at its latest sale price
on that exchange prior to the time when assets are valued (if there were no
sales that day, the security is valued at the latest bid price); (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest available bid price prior to the
time of valuation; (3) when market quotations are not readily available,
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; (4) certain of the Fund's portfolio securities may be valued
by an outside pricing service approved by the Trustees. The pricing service
utilizes 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, in
determining what it believes is the fair valuation of the portfolio
securities valued by such pricing service; (5) short-term debt securities
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 a similar type, yield, quality and maturity, until sixty days
prior to maturity and thereafter at amortized cost based on their value on
the 61st day. Short-term debt securities having a maturity date of sixty
days or less at the time of purchase are valued at amortized cost and (6)
the value of other assets will be determined in good faith at fair value
procedures established by and under the general supervision of the Trustees.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined on the identified cost
method. Discounts on securities purchased are amortized over the life of the
respective securities. The Fund does not amortize premiums on securities
purchased. Dividend income is recorded on the ex-dividend date. Interest
income is accrued daily except where collection is not expected.
C. REPURCHASE AGREEMENTS -- The Fund's custodian takes possession on behalf
of the Fund of the collateral pledged for investments in repurchase
agreements. It is the policy of the Fund to value the underlying collateral
daily on a mark-to-market basis to determine that the value, including
accrued interest, is at least equal to the repurchase price plus accrued
interest. In the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation.
D. 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.
E. 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
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a management fee, calculated daily and payable
monthly, by applying the following annual rates to the net assets of the Fund
determined as of the close of each business day: 0.60% of the portion of daily
net assets not exceeding $750 million; 0.55% of the portion of daily net assets
exceeding $750 million but not exceeding $1 billion; 0.50% of the portion of
daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.475% of
the portion of daily net assets exceeding $1.5 billion but not exceeding $2
billion; 0.45% of the portion of daily net assets exceeding $2 billion but not
exceeding $3 billion; and 0.425% of the portion of daily net assets exceeding $3
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 all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at an annual rate of 1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
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 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.
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Provided that the Plan continues in effect, any cumulative expenses incurred
by the Distributor but not yet recovered, may be recovered through future
distribution fees from the Fund and contingent deferred sales charges from the
Fund's shareholders.
The Distributor has informed the Fund that for the year ended September 30,
1994, it received approximately $38,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding short-term
investments, for the year ended September 30, 1994 aggregated $342,378,922 and
$367,332,144, respectively.
For the same period, the Fund incurred brokerage commissions of $31,360 with
Dean Witter Reynolds Inc. for transactions executed on behalf of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1994, the Fund had
transfer agent fees and expenses payable of approximately $38,000.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as an independent Trustee 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 September 30, 1994, included in Trustees' fees and expenses in
the Statement of Operations, amounted to $9,479. At September 30, 1994, the Fund
had an accrued pension liability of $45,142 which is included in accrued
expenses in the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold.................................... 2,423,832 $ 26,535,360 1,190,150 $ 11,477,771
Reinvestment of dividends............... 578,431 6,216,691 617,822 6,123,361
---------- ------------ ---------- ------------
3,002,263 32,752,051 1,807,972 17,601,132
Repurchased............................. (4,869,009) (52,690,378) (6,630,391) (64,759,434)
---------- ------------ ---------- ------------
Net decrease............................ (1,866,746) $(19,938,327) (4,822,419) $(47,158,302)
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS -- During the year ended September 30, 1994, the
Fund utilized approximately $24,921,000 of its net capital loss carryovers. At
September 30, 1994, the Fund had net capital loss carryovers to offset future
capital gains to the extent provided by regulations available through September
30 of the following years:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 TOTAL
- ----------- ------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$15,180,000 $218,065,000 $36,349,000 $46,135,000 $62,731,000 $378,460,000
</TABLE>
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
As of September 30, 1994, the Fund had temporary book/tax differences
primarily attributable to capital loss deferral on wash sales and corporate
reorganizations and permanent book/tax differences primarily attributable to
corporate reorganizations. To reflect reclassifications arising from permanent
book/tax differences as of September 30, 1993, accumulated undistributed net
investment income was credited and accumulated net realized loss on investments
was charged $431,384.
1994 FEDERAL TAX NOTICE (UNAUDITED)
During the fiscal year ended September 30, 1994, 48.18% of the income
dividends qualified for dividends received deduction available to
corporations.
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
PERIOD
OCTOBER 31,
FOR THE YEAR ENDED SEPTEMBER 30, 1985*
--------------------------------------------------------------------------------- THROUGH
1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- --------- -------- -------- -------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................... $ 10.62 $ 8.92 $ 8.67 $ 7.65 $ 9.68 $ 8.63 $ 12.42 $ 11.22 $ 10.00
-------- --------- -------- -------- -------- -------- --------- --------- ------------
Net investment income............. 0.42 0.37 0.34 0.37 0.46 0.48 0.38 0.48 0.76
Net realized and unrealized gain
(loss) on investments............ 0.11 1.67 0.15 1.05 (2.06) 1.20 (2.87) 1.59 1.22**
-------- --------- -------- -------- -------- -------- --------- --------- ------------
Total from investment
operations....................... 0.53 2.04 0.49 1.42 (1.60) 1.68 (2.49) 2.07 1.98
-------- --------- -------- -------- -------- -------- --------- --------- ------------
Less dividends and distributions
from:
Net investment income........... (0.40) (0.34) (0.24) (0.40) (0.43) (0.63) (0.23) (0.46) (0.76)
Net realized gains on
investments.................... -0 - -0 - -0 - -0 - -0 - -0 - (1.07) (0.41) -0 -
-------- --------- -------- -------- -------- -------- --------- --------- ------------
Total dividends and
distributions.................... (0.40) (0.34) (0.24) (0.40) (0.43) (0.63) (1.30) (0.87) (0.76)
-------- --------- -------- -------- -------- -------- --------- --------- ------------
Net asset value, end of period.... $ 10.75 $ 10.62 $ 8.92 $ 8.67 $ 7.65 $ 9.68 $ 8.63 $ 12.42 $ 11.22
-------- --------- -------- -------- -------- -------- --------- --------- ------------
-------- --------- -------- -------- -------- -------- --------- --------- ------------
TOTAL INVESTMENT RETURN+.......... 5.02% 23.22% 5.69% 18.93% (16.93)% 20.20% (19.79)% 19.21% 19.91%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)....................... $190,395 $207,894 $217,648 $296,844 $413,297 $821,750 $1,073,374 $2,029,462 $1,488,418
Ratios to average net assets:
Expenses........................ 1.93% 1.93% 1.92% 1.92% 1.88% 1.76% 1.79% 1.62% 1.72%(2)
Net investment income........... 3.68% 3.44% 3.43% 4.34% 4.96% 4.93% 3.87% 3.85% 7.11%(2)
Portfolio turnover rate........... 184% 221% 145% 133% 92% 167% 472% 572% 272%
<FN>
- ------------------------
* COMMENCEMENT OF OPERATIONS.
** INCLUDES THE EFFECT OF CAPITAL SHARE TRANSACTIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter Convertible 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 Convertible Securities
Trust, (the "Fund") at September 30, 1994, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the eight years in
the period then ended and for the period October 31, 1985 (commencement of
operations) through September 30, 1986, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at September 30, 1994, by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
November 10, 1994
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic Dean Witter
Charles A. Fiumefreddo Convertible
Edwin J. Garn Securities
John R. Haire Trust
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Ronald J. Worobel
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT [PHOTO]
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.
Two World Trade Center
New York, New York 10048
This report is submitted for the general
information of shareholders of the Fund.
For more detailed information about the
Fund, its officers and trustees, fees,
expenses and other pertinent information,
please see the prospectus of the Fund.
This report is not authorized for
distribution to prospective investors
in the Fund unless preceded or accompanied Annual Report
by an effective prospectus. September 30, 1994
<PAGE>
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
GROWTH OF $10,000
($ IN THOUSANDS)
DATE TOTAL GOLDMAN SACHS
- ----------------------------------------------------------
- ----------------------------------------------------------
<S> <C> <C>
October 31, 1985 $10,000 $10,000
- ----------------------------------------------------------
- ----------------------------------------------------------
September 30, 1986 $11,991 $12,282
- ----------------------------------------------------------
- ----------------------------------------------------------
September 30, 1987 $14,295 $15,023
- ----------------------------------------------------------
- ----------------------------------------------------------
September 30, 1988 $11,465 $13,998
- ----------------------------------------------------------
- ----------------------------------------------------------
September 30, 1989 $13,781 $15,696
- ----------------------------------------------------------
- ----------------------------------------------------------
September 30, 1990 $11,449 $13,322
- ----------------------------------------------------------
September 30, 1991 $13,615 $16,742
- ----------------------------------------------------------
September 30, 1992 $14,390 $19,756
- ----------------------------------------------------------
September 30, 1993 $17,731 $23,402
- ----------------------------------------------------------
September 30, 1994 $18,621(3) $23,980
- ----------------------------------------------------------
- ----------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS LIFE OF FUND
--------------------------------------
--------------------------------------
<S> <C> <C>
5.02(1) 6.20(1) 7.22(1)
--------------------------------------
0.02(2) 5.89(2) 7.22(2)
--------------------------------------
--------------------------------------
______ Fund ______ Goldman Sachs (4)
--------------------------------------
--------------------------------------
<FN>
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown assumes reinvestment of all distributions and
does not reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and
the deduction of the maximum applicable contingent deferred
sales charge (CDSC) (1 year-5%, 5 years-2%, since inception-0%).
See the Fund's current prospectus for complete details on fees
and sales charges.
(3) Closing value assuming a complete redemption on September
30, 1994.
(4) The Goldman Sachs Convertible 100 Index tracks the
performance of 100 equally weighted convertible issues with
market capitalizations of at least $100 million. The index
does not include any expenses, fees or charges.
</TABLE>
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS
DEAR SHAREHOLDER:
As the fiscal year began on October 1, 1994, the economy still displayed signs
of strength despite a dramatic increase in interest rates. As a result of
sharply higher interest rates, both the fixed-income and equity markets
performed poorly for much of calendar year 1994. By February 1995, however, it
became apparent that the Federal Reserve Board's policy of moderating economic
growth and restraining inflation was working. The financial markets responded
favorably with rallies in both the equity and fixed-income arenas. By the close
of the fiscal year on March 31, 1995, yields on 30-year U.S. Treasury securities
declined to 7.43 percent and the stock markets hit record highs. The recent
rally in the equity market has been primarily driven by large capitalization
stocks and technology issues, however, the convertible market's concentration in
small-capitalization securities and lack of technology issues resulted in
lackluster performance relative in this sector relative to the overall market.
PERFORMANCE AND INVESTMENT STRATEGY
For the six-month period ended March 31, 1995, Dean Witter Convertible
Securities Trust provided a total return of 0.63 percent, compared to a return
of 9.75 percent for the broad-based, capitalization-weighted Standard & Poor's
500 Composite Stock Price Index (S&P 500 Index). The Fund's underperformance
during the reporting period compared to the S&P 500 Index is primarily due to
the Fund's concentration in small-cap issues and limited exposure to the
technology sector. During the same period, small-capitalization stocks, as
measured by the Russell 2000 Index, provided a return of 2.65 percent, while the
Lehman Brothers Government/Corporate Bond Index provided a return of 5.37
percent. The Fund paid dividends from net investment income totaling $.256 per
share during the period, including an extra income dividend of $.086 per share
paid on December 30, 1994.
In selecting securities for the Fund, we use a value-oriented, bottom-up
approach to evaluate companies and their investment merits. The
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
LETTER TO THE SHAREHOLDERS, CONTINUED
Fund's emphasis is on companies and industries with strong underlying
fundamentals and solid long-term growth prospects. We focus on underfollowed,
small and medium capitalization companies that issue convertible securities. In
addition, the Fund's portfolio managers believe that managing volatility is
important and that shareholder value is truly enhanced when a fund provides
strong returns coupled with lower volatility. To control volatility, the Fund
concentrates on issues with short maturities and remains diversified across a
wide range of industries. Also, the Fund searches for convertible securities
with good risk/reward characteristics. These characteristics include a
relatively high yield to support the convertible if the underlying stock
declines and reasonable conversion premium to ensure participation in any
appreciation of the underlying stock.
As of March 31, 1995, the Fund had exposure to a broad range of industries
including financial services (6 percent of assets), health care (5 percent),
industrial (4 percent of assets), real estate (7 percent), restaurants (6
percent) and retailing (8 percent). In addition, a portion of the Fund's assets
were invested in high-coupon securities to maintain a minimum income level,
while 11 percent of its assets were invested in common stocks in order to
diversify the Fund's holdings into industries and companies not represented in
the convertible universe.
Among the Fund's strongest holdings during the reporting period are Cooper
Industries, Western Company of North America, First Data Corp., Savoy Pictures
and Occidental Petroleum.
LOOKING AHEAD
The Federal Reserve Board's policy of slowing the economy and thus restraining
inflation appears to be working. While it appears that most of the Federal
Reserve's tightening is behind us, there remains the possibility of an
additional increase during the second or third quarters of 1995. With this
scenario in mind, we believe convertible securities currently offer exceptional
value with an attractive combination of income and equity exposure.
We appreciate your support of Dean Witter Convertible Securities Trust and look
forward to continuing to serve your investment objectives in the future.
Very truly yours,
[SIG]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (62.7%)
CONVERTIBLE BONDS (60.9%)
AUTO PARTS (1.2%)
$ 900 Arvin Industries, Inc............................. 7.50% 09/30/14 $ 866,844
1,850 MascoTech, Inc.................................... 4.50 12/15/03 1,288,063
------------
2,154,907
------------
AUTO RELATED (1.1%)
1,915 Cooper Industries, Inc............................ 7.05 01/01/15 1,948,512
------------
CHEMICALS (1.8%)
7,500 RPM, Inc.......................................... 0.00 09/30/12 3,112,500
------------
CONSUMER PRODUCTS (1.5%)
3,550 Bell Sports Corp.................................. 4.25 11/15/00 2,582,625
------------
ELECTRICAL EQUIPMENT (1.2%)
2,000 Magnetek, Inc..................................... 8.00 09/15/01 2,049,740
------------
ENTERTAINMENT (1.0%)
2,250 Savoy Pictures Entertainment, Inc................. 7.00 07/01/03 1,704,375
------------
ENTERTAINMENT/GAMING (3.3%)
1,000 Argosy Gaming Co.................................. 12.00 06/01/01 1,002,500
1,900 United Gaming, Inc................................ 7.50 09/15/03 1,291,183
5,200 United Gaming, Inc. - 144A**...................... 7.50 09/15/03 3,533,764
------------
5,827,447
------------
ENVIRONMENTAL CONTROL (2.6%)
2,000 Air & Water Technologies Corp..................... 8.00 05/15/15 1,315,000
3,500 United States Filter Corp......................... 5.00 10/15/00 3,229,310
------------
4,544,310
------------
FINANCIAL SERVICES (5.0%)
2,000 AT&T Latin American Equity - 144A**............... 0.00 03/30/99 1,570,000
14,500 Fidelity National Financial, Inc.................. 0.00 02/15/09 5,292,500
2,500 Waterhouse Investor Services, Inc................. 6.00 12/15/03 1,956,250
------------
8,818,750
------------
FOODS (0.9%)
1,500 Grand Metropolitan PLC - 144A** (United
Kingdom).......................................... 6.50 01/31/00 1,600,275
------------
HEALTHCARE (4.2%)
4,835 Careline, Inc. - 144A**........................... 8.00 05/01/01 4,101,917
2,500 Grancare, Inc..................................... 6.50 01/15/03 2,244,725
1,500 Pharmaceutical Marketing Services, Inc............ 6.25 02/01/03 986,250
------------
7,332,892
------------
HOME BUILDING (2.6%)
2,600 Toll Corp......................................... 4.75 01/15/04 1,978,054
3,925 U.S. Home Corp.................................... 4.875 11/01/05 2,675,280
------------
4,653,334
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
INDUSTRIALS (3.8%)
$ 900 Raymond Corp...................................... 6.50% 12/15/03 $ 1,033,452
7,000 Rite Aid Corp..................................... 0.00 07/24/06 3,298,750
2,000 Titan Wheel International, Inc.................... 4.75 12/01/00 2,395,000
------------
6,727,202
------------
INSURANCE (0.8%)
1,500 Horace Mann Educators Corp........................ 6.50 12/01/99 1,406,250
------------
METALS (4.4%)
1,250 Crown Resources Corp.............................. 5.75 08/27/01 781,250
7,700 Freeport-McMoran Inc.............................. 6.55 01/15/01 7,045,500
------------
7,826,750
------------
OIL & GAS (2.8%)
11,000 Valhi Inc......................................... 0.00 10/20/07 3,685,000
1,000 Western Co. of North America...................... 7.25 01/15/15 1,192,500
------------
4,877,500
------------
PUBLISHING (4.4%)
10,000 Hollinger, Inc.................................... 0.00 10/05/13 2,725,000
4,500 Time Warner, Inc.................................. 0.00 12/17/12 1,445,625
3,622 Time Warner, Inc.................................. 8.75 01/10/15 3,637,864
------------
7,808,489
------------
REAL ESTATE INVESTMENT TRUST (3.9%)
3,000 Alexander Haagen Properties, Inc. (Series A)...... 7.50 01/15/01 2,631,210
2,000 Capstone Capital Corp............................. 10.50 04/01/02 2,025,500
2,200 Liberty Property Trust............................ 8.00 07/01/01 2,142,250
------------
6,798,960
------------
RESTAURANTS (3.7%)
2,000 Boston Chicken Inc................................ 4.50 02/01/04 1,490,000
5,000 Shoney's Inc...................................... 0.00 04/11/04 1,746,250
3,375 TPI Enterprises, Inc.............................. 8.25 07/15/02 3,218,704
------------
6,454,954
------------
RETAIL (5.7%)
3,000 Carter Hawley Hale Stores, Inc. - 144A**.......... 6.25 12/31/00 2,134,590
1,500 Eagle Hardware & Garden Inc....................... 6.25 03/15/01 1,016,250
4,500 Federated Department Stores, Inc.................. 9.72 02/15/04 4,520,340
1,750 Proffitt's, Inc................................... 4.75 11/01/03 1,365,000
2,000 Tops Appliance City Inc. - 144A**................. 6.50 11/30/03 900,000
------------
9,936,180
------------
STEEL (0.4%)
1,275 Nippon Denro Ltd. - 144A** (India)................ 3.00 04/01/01 714,000
------------
TELECOMMUNICATIONS (1.0%)
2,500 Audiovox Corp. - 144A**........................... 6.25 03/15/01 1,725,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXTILES (1.4%)
$ 2,500 Interface, Inc.................................... 8.00% 09/15/13 $ 2,497,200
------------
TRANSPORTATION - INTERNATIONAL (0.3%)
1,651 Consorcio G Grupo S.A. de C.V. (Mexico)........... 8.00 08/08/04 497,463
------------
UTILITIES - ELECTRIC (0.6%)
1,250 California Energy Co., Inc. - 144A**.............. 5.00 07/31/00 1,087,500
------------
WASTE MANAGEMENT (1.3%)
2,000 Laidlaw Inc. - 144A**............................. 6.00 01/15/99 2,223,480
------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST $115,945,859)........................................ 106,910,595
------------
NON-CONVERTIBLE BONDS (1.8%)
HEALTHCARE (0.6%)
1,000 Healthsouth Rehabilitation Corp................... 9.50 04/01/01 1,000,000
------------
RESTAURANTS (1.2%)
2,500 Flagstar Corp..................................... 11.375 09/15/03 2,112,500
------------
TOTAL NON-CONVERTIBLE BONDS
(IDENTIFIED COST $3,442,500).......................................... 3,112,500
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $119,388,359)........................................ 110,023,095
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (13.6%)
AUTO PARTS (0.3%)
36,100 MascoTech, Inc. $1.20................................................. 464,788
------------
BIOTECHNOLOGY (0.3%)
63,500 Gensia, Inc. $3.75 - 144A**........................................... 547,687
------------
CHEMICALS (1.2%)
40,000 Occidental Petroleum Corp. $3.875 - 144A**............................ 2,142,520
------------
ENTERTAINMENT (1.6%)
112,600 AMC Entertainment, Inc. $1.75......................................... 2,857,225
------------
FINANCIAL SERVICES (1.0%)
40,000 American Express Co. $2.297........................................... 1,795,000
------------
FOODS (0.7%)
30,000 Chiquita Brands International, Inc. (Series A) $2.875................. 1,230,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------
<C> <S> <C>
INSURANCE (1.7%)
65,000 Alexander & Alexander Services, Inc. (Series A)
$3.625 - 144A**....................................................... $ 3,014,375
------------
METALS (0.9%)
34,400 Freeport-McMoran Copper & Gold, Inc. $1.25............................ 774,000
100,000 Kaiser Aluminum & Chemical Corp. (Series A) $.65...................... 825,000
------------
1,599,000
------------
OIL & GAS (2.5%)
75,000 Kelley Oil & Gas Corp. $2.625......................................... 1,537,500
65,000 Valero Energy Corp. $3.125............................................ 2,778,750
------------
4,316,250
------------
REAL ESTATE (1.1%)
50,000 Catellus Development Corp. (Series B) $3.625 - 144A**................. 1,887,500
------------
STEEL (1.2%)
25,000 WHX Corp. (Series A) $3.25............................................ 1,093,750
25,000 WHX Corp. (Series B) $3.75............................................ 1,050,000
------------
2,143,750
------------
TELEPHONES (0.7%)
35,000 Sprint Corporation $2.63.............................................. 1,168,125
------------
WASTE MANAGEMENT (0.4%)
45,000 International Technology Corp. $1.75.................................. 714,375
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $24,558,417)......................................... 23,880,595
------------
COMMON STOCKS (10.9%)
ADVERTISING (0.2%)
22,600 DIMAC Corp.*.......................................................... 322,050
------------
AUTO PARTS (0.5%)
74,900 MascoTech, Inc........................................................ 870,712
------------
BUILDING MATERIALS (0.3%)
20,000 Masco Corp............................................................ 552,500
------------
CONSUMER PRODUCTS (0.7%)
200,000 RJR Nabisco Holdings Corp............................................. 1,175,000
------------
ENTERTAINMENT (0.3%)
40,400 AMC Entertainment, Inc.*.............................................. 474,700
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------
<C> <S> <C>
ENTERTAINMENT/GAMING (0.6%)
25,000 Argosy Gaming Co.*.................................................... $ 293,750
57,938 International Game Technology......................................... 782,163
------------
1,075,913
------------
ENVIRONMENTAL CONTROL (0.8%)
143,000 OHM Corp.*............................................................ 1,447,875
------------
HEALTHCARE (0.3%)
76,000 Careline, Inc.*....................................................... 494,000
------------
MANUFACTURING (0.9%)
201,000 Foamex International Inc.*............................................ 1,608,000
------------
REAL ESTATE INVESTMENT TRUST (2.0%)
90,155 Alexander Haagen Properties, Inc...................................... 1,250,901
58,100 Avalon Properties, Inc................................................ 1,140,212
40,000 Irvine Apartment Communities, Inc..................................... 625,000
25,000 Urban Shopping Centers, Inc........................................... 500,000
------------
3,516,113
------------
RESTAURANTS (1.5%)
75,000 Brinker International, Inc.*.......................................... 1,246,875
75,000 Flagstar Companies, Inc.*............................................. 412,500
97,100 Shoney's Inc.*........................................................ 1,043,825
------------
2,703,200
------------
RETAIL (2.6%)
25,000 Dillard Department Stores, Inc. (Class A)............................. 690,625
35,000 Michaels Stores, Inc.*................................................ 1,146,250
83,700 TJX Companies, Inc.................................................... 1,098,563
30,000 Toys "R" Us, Inc.*.................................................... 768,750
50,000 Woolworth Corp........................................................ 918,750
------------
4,622,938
------------
TRANSPORTATION (0.2%)
40,000 Team Rental Group, Inc.*.............................................. 330,000
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $21,765,854)......................................... 19,193,001
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (8.0%)
U.S. GOVERNMENT AGENCIES (a) (6.3%)
$ 5,000 Federal Farm Credit Banks......................... 6.00% 04/07/95 $ 4,995,000
6,000 Federal Home Loan Bank............................ 5.89 04/04/95 5,997,055
------------
10,992,055
------------
REPURCHASE AGREEMENT (1.7%)
2,928 The Bank of New York (dated 03/31/95; proceeds
$2,929,916, collateralized by $3,027,116 U.S.
Treasury Bill 5.76% due 09/07/95 valued at
$2,950,446) (Identified Cost $2,928,482).......... 5.875 04/03/95 2,928,482
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $13,920,537)......................................... 13,920,537
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $179,633,167) (B).......................... 95.2 % 167,017,228
OTHER ASSETS IN EXCESS OF LIABILITIES....................... 4.8 8,411,798
------ ------------
NET ASSETS.................................................. 100.0 % $175,429,026
------ ------------
------ ------------
<FN>
- ---------------------
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) U.S. Government agencies were purchased on a discount basis. The interest
rate shown has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $181,375,668; the
aggregate gross unrealized appreciation is $3,821,174 and the aggregate
gross unrealized depreciation is $18,179,614, resulting in net
depreciation of $14,358,440.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $179,633,167)............................ $ 167,017,228
Receivable for:
Investments sold........................................ 7,926,212
Interest................................................ 1,531,867
Dividends............................................... 150,579
Shares of beneficial interest sold...................... 70,099
Prepaid expenses and other assets........................... 70,592
-------------
TOTAL ASSETS........................................... 176,766,577
-------------
LIABILITIES:
Payable for:
Investments purchased................................... 715,729
Shares of beneficial interest repurchased............... 165,532
Plan of distribution fee................................ 147,476
Investment management fee............................... 88,485
Dividends to shareholders............................... 86,905
Accrued expenses and other payables......................... 133,424
-------------
TOTAL LIABILITIES...................................... 1,337,551
-------------
NET ASSETS:
Paid-in-capital............................................. 560,933,247
Net unrealized depreciation................................. (12,615,941)
Accumulated undistributed net investment income............. 3,377,097
Accumulated net realized loss............................... (376,265,377)
-------------
NET ASSETS............................................. $ 175,429,026
-------------
-------------
NET ASSET VALUE PER SHARE,
16,634,185 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$10.55
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $ 4,761,232
Dividends (net of $2,372 foreign withholding tax)........... 1,307,980
-----------
TOTAL INCOME........................................... 6,069,212
-----------
EXPENSES
Plan of distribution fee.................................... 887,194
Investment management fee................................... 532,316
Transfer agent fees and expenses............................ 190,331
Professional fees........................................... 32,218
Registration fees........................................... 24,255
Shareholder reports and notices............................. 17,068
Trustees' fees and expenses................................. 16,204
Custodian fees.............................................. 7,699
Other....................................................... 10,366
-----------
TOTAL EXPENSES......................................... 1,717,651
-----------
NET INVESTMENT INCOME.................................. 4,351,561
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 3,132,595
Net change in unrealized depreciation....................... (6,848,823)
-----------
NET LOSS............................................... (3,716,228)
-----------
NET INCREASE................................................ $ 635,333
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
MARCH 31, 1995 FOR THE YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 4,351,561 $ 7,373,073
Net realized gain........................................... 3,132,595 24,216,296
Net change in unrealized appreciation/depreciation.......... (6,848,823) (21,824,460)
------------------ ------------------
NET INCREASE........................................... 635,333 9,764,909
------------------ ------------------
Dividends to shareholders from net investment income........ (4,335,136) (7,325,103)
Net decrease from transactions in shares of beneficial
interest.................................................. (11,266,215) (19,938,327)
------------------ ------------------
TOTAL DECREASE......................................... (14,966,018) (17,498,521)
NET ASSETS:
Beginning of period......................................... 190,395,044 207,893,565
------------------ ------------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$3,377,097 AND $3,360,672, RESPECTIVELY)................ $175,429,026 $190,395,044
------------------ ------------------
------------------ ------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Convertible 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 was organized as a
Massachusetts business trust on May 21, 1985 and commenced operations on October
31, 1985.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American Stock Exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued; if there were no sales that
day, the security is valued at the latest bid price (in cases where a security
is traded on more than one exchange, the security is valued on the exchange
designated as the primary market by the Trustees); (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation; (3)
when market quotations are not readily available, including circumstances under
which it is determined by the Investment Manager that sale and bid prices are
not reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Trustees; (4) certain of the Fund's
portfolio securities may be valued by an outside pricing service approved by the
Trustees. The pricing service utilizes 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 portfolio securities valued by such pricing service; and (5) short-term
debt securities having a maturity date of more than sixty days at time of
purchase are valued on a mark-to-market basis until sixty days prior to maturity
and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts on securities purchased are amortized over the life of the respective
securities. The Fund does not amortize premiums on securities. Interest income
is accrued daily.
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995 (UNAUDITED) CONTINUED
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays its Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the Fund's net assets determined as of the close of each
business day: 0.60% to the portion of average daily net assets not exceeding
$750 million; 0.55% to the portion of average daily net assets exceeding $750
million but not exceeding $1 billion; 0.50% to the portion of average daily net
assets exceeding $1 billion but not exceeding $1.5 billion; 0.475% to the
portion of average daily net assets exceeding $1.5 billion but not exceeding $2
billion; 0.45% to the portion of average daily net assets exceeding $2 billion
but not exceeding $3 billion; and 0.425% to the portion of average daily net
assets exceeding $3 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 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.
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995 (UNAUDITED) CONTINUED
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the 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. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees or selected dealers who
engage in or support distribution of the Fund's shares or who service
shareholder accounts, including overhead and telephone expenses, printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered, may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the six months ended March 31,
1995, it received approximately $26,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended March 31, 1995 aggregated
$74,754,616 and $93,868,582, respectively.
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995 (UNAUDITED) CONTINUED
For the same period, the Fund incurred brokerage commissions of $13,935 with DWR
for portfolio transactions executed on behalf of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At March 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $39,000.
The Fund established 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 six months ended March
31, 1995 included in Trustees' fees and expenses in the Statement of Operations
amounted to $4,625. At March 31, 1995, the Fund had an accrued pension liability
of $52,439 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 1995 SEPTEMBER 30, 1994
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold.................................... 693,574 $ 7,194,138 2,423,832 $ 26,535,360
Reinvestment of dividends............... 362,589 3,672,692 578,431 6,216,691
----------- -------------- ----------- ------------
1,056,163 10,866,830 3,002,263 32,752,051
Repurchased............................. (2,138,057) (22,133,045) (4,869,009) (52,690,378)
----------- -------------- ----------- ------------
Net decrease............................ (1,081,894) $ (11,266,215) (1,866,746) $(19,938,327)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
At September 30, 1994, the Fund had net capital loss carryovers available to
offset future capital gains to the extent provided by regulations available
through September 30 of the following years:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- --------------------------------------------------------------------------------
1996 1997 1998 1999 2000 TOTAL
- ----------- ------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$ 15,180 $ 218,065 $ 36,349 $ 46,135 $ 62,731 $ 378,460
- ----------- ------------- ----------- ----------- ----------- -------------
- ----------- ------------- ----------- ----------- ----------- -------------
</TABLE>
As of September 30, 1994, the Fund had temporary book/tax differences primarily
attributable to capital loss deferral on wash sales and corporate
reorganizations and permanent book/tax differences primarily attributable to
corporate reorganizations.
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED
MARCH 31, SEPTEMBER 30
1995 -----------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period............... $ 10.75 $ 10.62 $ 8.92 $ 8.67 $ 7.65 $ 9.68
---------- --------- --------- --------- --------- ---------
Net investment income.............. 0.27 0.42 0.37 0.34 0.37 0.46
Net realized and unrealized gain
(loss)............................ (0.21) 0.11 1.67 0.15 1.05 (2.06)
---------- --------- --------- --------- --------- ---------
Total from investment operations... 0.06 0.53 2.04 0.49 1.42 (1.60)
Dividends from net investment
income............................ (0.26) (0.40) (0.34) (0.24) (0.40) (0.43)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period..... $ 10.55 $ 10.75 $ 10.62 $ 8.92 $ 8.67 $ 7.65
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 0.63%(1) 5.02% 23.22% 5.69% 18.93% (16.93)%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.94%(2) 1.93% 1.93% 1.92% 1.92% 1.88%
Net investment income.............. 4.90%(2) 3.68% 3.44% 3.43% 4.34% 4.96%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $175,429 $190,395 $207,894 $217,648 $296,844 $413,297
Portfolio turnover rate............ 46%(1) 184% 221% 145% 133% 92%
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
Jack F. Bennett DEAN WITTER
Michael Bozic CONVERTIBLE
Charles A. Fiumefreddo SECURITIES
Edwin J. Garn TRUST
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Ronald J. Worobel
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT [PHOTO]
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.
Two World Trade Center
New York, New York 10048
The financial statements included herein have
been taken from the records of the Fund without
examination by the independent accountants and
accordingly they do not express an opinion
thereon.
This report is submitted for the general
information of shareholders of the Fund. For
more detailed information about the Fund, its
officers and trustees, fees, expenses and other
pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution
to prospective investors in the Fund unless
preceded or accompanied by an effective
prospectus.
SEMIANNUAL REPORT
MARCH 31, 1995
<PAGE>
PROSPECTUS
AUGUST 28, 1995
TCW/DW Global Convertible Trust (the "Fund") is an open-end, non-diversified
management investment company, whose investment objective is to attain a high
level of total return through a combination of capital appreciation and current
income. The Fund seeks to achieve its investment objective by investing at least
65% of its total assets in convertible securities of domestic and foreign
issuers rated B or higher by Moody's Investors Service, Inc. or Standard &
Poor's Corporation or, if not rated, determined to be of comparable quality.
There is no assurance that the Fund's investment objective will be achieved. See
"Investment Objective and Policies."
THE FUND MAY INVEST WITHOUT LIMITATION IN CONVERTIBLE AND OTHER FIXED-INCOME
SECURITIES RATED BELOW INVESTMENT GRADE (COMMONLY KNOWN AS "JUNK BONDS").
INVESTMENTS OF THIS TYPE ARE SUBJECT TO GREATER RISK, INCLUDING THE RISK OF
DEFAULT, THAN HIGHER RATED SECURITIES, AND ARE CONSIDERED TO BE SPECULATIVE WITH
REGARD TO THE PAYMENT OF INTEREST AND RETURN OF PRINCIPAL. INVESTORS SHOULD
CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. SEE
"INVESTMENT OBJECTIVE AND POLICIES."
Shares of the Fund will be priced at the net asset value per share next
determined following receipt of an order without imposition of a sales charge.
However, repurchases and/or redemptions of shares 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 "Repurchases and
Redemptions--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 1% 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."
On August 24, 1995, the Board of Trustees of the Fund approved an Agreement and
Plan of Reorganization by and between the Fund and Dean Witter Convertible
Securities Trust ("Convertible Trust"), pursuant to which the assets of the Fund
would be combined with those of Convertible Trust and shareholders of the Fund
would become shareholders of Convertible Trust receiving shares of Convertible
Trust equal to the value of their holdings in the Fund (the "Reorganization").
The Reorganization is subject to the approval of shareholders of the Fund. See
"The Fund and its Management."
TABLE OF CONTENTS
Prospectus Summary/ 2
Summary of Fund Expenses/ 3
Financial Highlights/ 4
The Fund and its Management/ 5
Investment Objective and Policies/ 6
Special Risk Considerations/ 8
Investment Restrictions/ 13
Purchase of Fund Shares/ 14
Shareholder Services/ 16
Repurchases and Redemptions/ 18
Dividends, Distributions and Taxes/ 20
Performance Information/ 21
Additional Information/ 22
Appendix/ 23
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 August 28, 1995, 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.
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.
TCW/DW GLOBAL CONVERTIBLE TRUST
Two World Trade Center
New York, New York 10048
(212) 392-2550 or (800) 869-6397
Dean Witter Distributors Inc.
Distributor
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
THE FUND The Fund is organized as a Trust, commonly known as a
Massachusetts business trust, and is an open-end,
non-diversified management investment company investing
at least 65% of its total assets in convertible
securities of domestic and foreign issuers. On August
24, 1995, the Board of Trustees of the Fund approved an
Agreement and Plan of Reorganization by and between the
Fund and Dean Witter Convertible Securities Trust
pursuant to which the assets of both funds would be
combined (see page 6).
- --------------------------------------------------------------------------------
OFFERING PRICE At net asset value (see page 14). Shares redeemed
within six years of purchase are subject to a
contingent deferred sales charge under most
circumstances (see pages 14 and 18).
- --------------------------------------------------------------------------------
MINIMUM PURCHASE Minimum initial purchase is $1,000. Minimum subsequent
purchase is $100 (see page 14).
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE The investment objective of the Fund is a high level of
total return through a combination of capital
appreciation and current income.
- --------------------------------------------------------------------------------
MANAGER Dean Witter Services Company Inc. (the "Manager"), a
wholly-owned subsidiary of Dean Witter InterCapital
Inc. ("InterCapital"), is the Fund's manager. The
Manager also serves as manager to twelve other
investment companies advised by TCW Funds Management,
Inc. (the "TCW/DW Funds"). The Manager and InterCapital
serve in various investment management, advisory,
management and administrative capacities to a total of
ninety-four investment companies and other portfolios
with assets of approximately $73.2 billion at June 30,
1995.
- --------------------------------------------------------------------------------
ADVISER TCW Funds Management, Inc. (the "Adviser") is the
Fund's investment adviser. In addition to the Fund, the
Adviser serves as investment adviser to twelve other
TCW/DW Funds. As of June 30, 1995, the Adviser and its
affiliates had approximately $50 billion under
management or committed to management in various
fiduciary or advisory capacities, primarily to
institutional investors.
- --------------------------------------------------------------------------------
MANAGEMENT AND The Manager receives a monthly fee at the annual rate
ADVISORY FEES of 0.51% of daily net assets. The Adviser receives a
monthly fee at an annual rate of 0.34% of daily net
assets. (see page 5).
- --------------------------------------------------------------------------------
DIVIDENDS Income dividends are paid quarterly. Capital gains, if
any, will be distributed no less than annually.
Dividends and capital gains distributions are
automatically reinvested in additional shares at net
asset value unless the shareholder elects to receive
cash.
- --------------------------------------------------------------------------------
DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor"). The
Distributor receives from the Fund a distribution fee
accrued daily and payable monthly at the rate of 1% per
annum of the lesser of (i) the average daily aggregate
net sales or (ii) the Fund's average daily net assets.
This fee compensates the Distributor for services
provided in distributing shares of the Fund and for
sales-related expenses. The Distributor also receives
the proceeds of any contingent deferred sales charges
(see pages 14-15).
- --------------------------------------------------------------------------------
REDEMPTION-- Shares are redeemable by the shareholder at net asset
CONTINGENT DEFERRED value. An account may be involuntarily redeemed if the
SALES CHARGE total value of the account is less than $100. Although
no commission or sales load 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 18-20).
- --------------------------------------------------------------------------------
RISK CONSIDERATIONS The net asset value of the Fund's shares will fluctuate
with changes in the market value of the Fund's
portfolio securities. The value of the Fund's
convertible portfolio securities generally increases or
decreases due to economic and market factors affecting
the value of the underlying common stock, as well as
changes in prevailing interest rates. Generally, a rise
in interest rates will result in a decrease in value,
while a drop in interest rates will result in an
increase in value. The high yield, high risk
fixed-income securities in which the Fund may invest
are subject to greater risk of loss of income and
principal than higher rated, lower yielding
fixed-income securities. The prices of high yield, high
risk securities have been found to be less sensitive to
changes in prevailing interest rates than higher rated
investments, but are likely to be more sensitive to
adverse economic changes or individual corporate
developments. The Fund is a non-diversified investment
company and, as such, is not subject to the
diversification requirements of the Investment Company
Act of 1940, as amended. As a result, a relatively high
percentage of the Fund's assets may be invested in a
limited number of issuers. However, the Fund intends to
continue to qualify as a regulated investment company
under the federal income tax laws and, as such, is
subject to the diversification requirements of the
Internal Revenue Code. The Fund invests in the
securities of foreign issuers which entails certain
additional risks. The Fund may also invest in options
and futures transactions and other hedging techniques
in connection with its foreign securities investments
and may purchase securities on a when-issued, delayed
delivery or "when, as and if issued" basis, which
involve certain special risks (see pages 7-13).
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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 ending June 30, 1996.
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:
YEAR SINCE PURCHASE PAYMENT MADE PERCENTAGE
First. . . . . . . . . . . . . . . . . . . . . . . . . . 5.0%
Second . . . . . . . . . . . . . . . . . . . . . . . . . 4.0%
Third. . . . . . . . . . . . . . . . . . . . . . . . . . 3.0%
Fourth . . . . . . . . . . . . . . . . . . . . . . . . . 2.0%
Fifth. . . . . . . . . . . . . . . . . . . . . . . . . . 2.0%
Sixth. . . . . . . . . . . . . . . . . . . . . . . . . . 1.0%
Seventh and thereafter . . . . . . . . . . . . . . . . . None
Redemption Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management and Advisory Fees+. . . . . . . . . . . . . . . . . . . . . 0.85%
12b-1 Fees*+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Other Expenses+. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.65%
Total Fund Operating Expenses**+ . . . . . . . . . . . . . . . . . . . 3.50%
- ---------------
*The 12b-1 fee is accrued daily and payable monthly, at an annual rate of 1.00%
of the lesser of: (a) the average daily aggregate gross sales of the Fund's
shares since inception (not including reinvestment of dividends or
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 daily net assets. A
portion of the 12b-1 fee equal to 0.25% of the Fund's average daily net assets
is characterized as a service fee within the meaning of National Association of
Securities Dealers, Inc. ("NASD") guidelines (see "Purchase of Fund Shares").
** "Total Fund Operating Expenses," as shown above, is based upon the sum of the
12b-1 Fees, Management and Advisory Fees and estimated "Other Expenses," to be
incurred by the Fund for the fiscal year ending June 30, 1996.
+InterCapital had undertaken to assume all operating expenses (except for any
12b-1 and/or brokerage fees) and the Manager had agreed to waive the
compensation provided for in its Management Agreement and the Adviser had
undertaken to waive the compensation provided for in its Advisory Agreement,
until such time as the Fund had $50 million of net assets or until six months
from the date of commencement of the Fund's operations, whichever occurred
first. After this period, InterCapital continued to assume all operating
expenses (except for 12b-1 and/or brokerage fees) and the Manager and the
Adviser continued to waive their respective compensation until August 23,
1995. The fees and expenses disclosed above do not reflect the assumption of
any expenses or the waiver of any compensation other than the assumption of
expenses due to mandatory expense limitation.
EXAMPLE
1 year 3 years
------ -------
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:. . . . . $85 $137
You would pay the following expenses on the same
investment, assuming no redemption: . . . . . . . . . . $35 $107
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 "Repurchases and
Redemptions" in this Prospectus.
Long-term shareholders of the Fund may pay more in sales charges including
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout the period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, notes thereto and the unqualified report of
independent accountants which are contained in the Statement of Additional
Information. Further unaudited 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 PERIOD
OCTOBER 31, 1994*
THROUGH
JUNE 30, 1995
-----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period . . . . . . . . . . $10.00
------
Net investment income. . . . . . . . . . . . . . . . . . 0.27
Net realized and unrealized gain . . . . . . . . . . . . 0.53
------
Total from investment operations . . . . . . . . . . . . 0.80
------
Less dividends from net investment income. . . . . . . . (0.24)
------
Net asset value, end of period . . . . . . . . . . . . . $10.56
------
------
TOTAL INVESTMENT RETURN+ . . . . . . . . . . . . . . . . 7.99%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses . . . . . . . . . . . . . . . . . . . . . . . . 1.00%(2)(3)
Net investment income. . . . . . . . . . . . . . . . . . 4.07%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) . . . . . . . . $18,873
Portfolio turnover rate. . . . . . . . . . . . . . . . . 61%(1)
- ---------------
* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) INTERCAPITAL HAD UNDERTAKEN TO ASSUME ALL OPERATING EXPENSES (EXCEPT FOR
ANY 12b-1 AND/OR BROKERAGE FEES) AND THE MANAGER HAD AGREED TO WAIVE THE
COMPENSATION PROVIDED FOR IN ITS MANAGEMENT AGREEMENT AND THE ADVISER HAD
UNDERTAKEN TO WAIVE THE COMPENSATION PROVIDED FOR IN ITS ADVISORY
AGREEMENT, UNTIL SUCH TIME AS THE FUND HAD $50 MILLION OF NET ASSETS OR
UNTIL SIX MONTHS FROM THE DATE OF COMMENCEMENT OF THE FUND'S OPERATIONS,
WHICHEVER OCCURRED FIRST. INTERCAPITAL WILL CONTINUE TO ASSUME ALL
OPERATING EXPENSES (EXCEPT FOR 12b-1 AND/OR BROKERAGE FEES) AND THE MANAGER
AND THE ADVISER WILL CONTINUE TO WAIVE THEIR RESPECTIVE COMPENSATION UNTIL
SUCH TIME AS THE FUND HAS $50 MILLION OF NET ASSETS OR UNTIL AUGUST 23,
1995, WHICHEVER OCCURS FIRST. IF THE FUND HAD BORNE ALL EXPENSES, AFTER
APPLICATION OF THE EXPENSE LIMITATION, THE ABOVE ANNUALIZED EXPENSE AND NET
INVESTMENT INCOME RATIOS WOULD HAVE BEEN 3.50% AND 1.48%, RESPECTIVELY.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
TCW/DW Global Convertible Trust (the "Fund") is an open-end,
non-diversified management investment company. The Fund is a trust of the type
commonly known as a "Massachusetts business trust" and was organized under the
laws of Massachusetts on June 29, 1994.
Dean Witter Services Company Inc. (the "Manager"), whose address is Two
World Trade Center, New York, New York 10048, is the Fund's Manager. The Manager
is a wholly-owned subsidiary of Dean Witter InterCapital Inc. ("InterCapital").
InterCapital is a wholly-owned subsidiary of Dean Witter, Discover & Co.
("DWDC"), a balanced financial services organization providing a broad range of
nationally marketed credit and investment products.
The Manager acts as manager to twelve other TCW/DW Funds. The Manager and
InterCapital serve in various investment management, advisory, management and
administrative capacities to a total of ninety-four investment companies, thirty
of which are listed on the New York Stock Exchange, with combined assets of
approximately $71 billion as of June 30, 1995. InterCapital also manages and
advises portfolios of pension plans, other institutions and individuals which
aggregated approximately $2.2 billion at such date.
The Fund has retained the Manager to manage its business affairs, supervise
its overall day-to-day operations (other than providing investment advice) and
provide all administrative services.
TCW Funds Management, Inc. (the "Adviser"), whose address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017, is the Fund's
investment adviser. The Adviser was organized in 1987 as a wholly-owned
subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries, including Trust
Company of the West and TCW Asset Management Company, provide a variety of
trust, investment management and investment advisory services. Robert A. Day,
who is Chairman of the Board of Directors of TCW, may be deemed to be a control
person of the Adviser by virtue of the aggregate ownership by Mr. Day and his
family of more than 25% of the outstanding voting stock of TCW. The Adviser
serves as investment adviser to twelve other TCW/DW Funds in addition to the
Fund. As of June 30, 1995, the Adviser and its affiliated companies had
approximately $50 billion under management or committed to management, primarily
from institutional investors.
The Fund has retained the Adviser to invest the Fund's assets.
The Fund's Trustees review the various services provided by the Manager and
the Adviser to ensure that the Fund's general investment policies and programs
are being properly carried out and that administrative services are being
provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Manager, the Fund pays the Manager
monthly compensation calculated daily by applying the annual rate of 0.51% to
the Fund's net assets. As compensation for its investment advisory services, the
Fund pays the Adviser monthly compensation calculated daily by applying an
annual rate of 0.34% to the Fund's net assets. The total fees paid by the Fund
to the Manager and the Adviser are higher than the fees paid by most other
investment companies for similar services.
The Fund's expenses include: the fees of the Manager and the Adviser; the
fee pursuant to the Plan of Distribution (see "Purchase of Fund Shares"); taxes;
legal, transfer agent, custodian and auditing fees; federal and state
registration fees; and printing and other expenses relating to the Fund's
operations which are not expressly assumed by the Manager or Adviser under their
respective Agreements with the Fund. InterCapital had undertaken to assume all
expenses (except for the Plan of Distribution fee and brokerage fees) and the
Manager had undertaken to waive the compensation provided for in its Management
Agreement, and the Adviser had undertaken to waive the compensation provided for
in its Advisory Agreement, until such time as the Fund had $50 million of net
assets or until six months from the date of commencement of operations,
whichever occurred first. After this period, InterCapital continued to assume
all operating expenses (except for 12b-1 and/or brokerage fees) and the
Manager and the Adviser continued to waive their respective compensation
until August 23, 1995.
5
<PAGE>
On August 24, 1995, the Board of Trustees of the Fund approved an Agreement
and Plan of Reorganization by and between the Fund and Dean Witter Convertible
Securities Trust ("Convertible Trust"), pursuant to which the assets of the Fund
would be combined with those of Convertible Trust and shareholders of the Fund
would become shareholders of Convertible Trust receiving shares of Convertible
Trust equal to the value of their holdings in the Fund (the "Reorganization").
The Reorganization is subject to the approval of shareholders of the Fund. A
proxy statement formally detailing the proposal and the reasons for the
Trustees' action, as well as information concerning Convertible Trust, will be
distributed to shareholders of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to attain a high level of total
return through a combination of capital appreciation and current income. This
objective is fundamental and may not be changed without shareholder approval.
There is no assurance that the objective will be achieved.
The Fund seeks to achieve its investment objective by investing under
normal circumstances at least 65% of its total assets in convertible securities
of domestic and foreign issuers. Under normal circumstances, the Fund will
invest in convertible securities of issuers located in at least three countries,
one of which is the United States. The convertible securities in which the Fund
may invest include bonds, debentures, corporate notes, preferred stock or other
similar securities that may be converted into or exchanged for a prescribed
amount of common stock or other equity of the same or different issuer within or
at a particular period of time at a specified price or formula. With respect to
the Fund's policy of investing at least 65% of its total assets in convertible
securities, any common stock or other equity security received as a result of a
conversion of a convertible security will not require elimination from the
Fund's portfolio.
Up to 35% of the Fund's total assets may be invested in any combination and
quantity of domestic or foreign common stock, non-convertible preferred stock,
non-convertible corporate debt securities, options and warrants on debt and
equity securities, financial futures contracts and related options thereon, and
money market instruments.
The Fund will invest at least 25% of its total assets in securities of
United States issuers at all times. In addition, the Fund may invest, from time
to time, more than 25% of its total assets in securities issued by issuers
located in Japan. Any concentration of the Fund's assets in Japanese issuers
would subject the Fund to the risks of adverse social, political or economic
events which occur in Japan. Specifically, investments in the Japanese stock
market may entail a higher degree of risk than investments in other markets as,
by fundamental measures of corporate valuation, such as its high price-earnings
ratios and low dividend yields, the Japanese market as a whole may appear
expensive relative to other world stock markets (I.E., the prices of Japanese
stocks may be relatively high). In addition, the prices of securities traded on
the Japanese markets may be more volatile than many other markets.
The Fund's investments in convertible securities generally will be
determined pursuant to a "bottom-up" approach. That is, the Adviser's principal
emphasis will consist of identifying underpriced opportunities based on
currently observable pricing and terms and according secondary importance to
projections regarding appreciation of the common stocks and equities underlying
the convertible securities and to overall economic and stock market projections.
The Fund may invest in convertible securities and other fixed-income
securities rated below investment grade. Securities below investment grade are
the equivalent of high yield, high risk bonds (commonly known as "junk bonds").
Investment grade is generally considered to be debt securities rated BBB or
higher by Standard & Poor's Corporation ("S&P") or Baa or higher by Moody's
Investors Service, Inc. ("Moody's").
6
<PAGE>
(Convertible and other fixed-income securities rated BBB by S&P or Baa by
Moody's, which generally are regarded as having an adequate capacity to pay
interest and repay principal, have speculative characteristics.) However, the
Fund will not invest in convertible and other fixed-income securities that are
rated lower than B by S&P or Moody's or, if not rated, determined to be of
comparable quality by the Adviser. The Fund will not invest in fixed-income
securities that are in default in payment of principal or interest. A
description of fixed-income securities ratings is contained in the Appendix to
this Prospectus.
Money market instruments in which the Fund may invest are securities issued
or guaranteed by the U.S. Government or its agencies (Treasury bills, notes and
bonds); obligations of banks subject to regulation by the U.S. Government and
having total assets of $1 billion or more; Eurodollar certificates of deposit;
obligations of savings banks and savings and loan associations having total
assets of $1 billion or more; fully insured certificates of deposit; and
commercial paper rated within the two highest grades by Moody's or S&P or, if
not rated, issued by a company having an outstanding debt issue rated AAA by S&P
or Aaa by Moody's.
There may be periods during which, in the opinion of the Adviser, market
conditions warrant reduction of some or all of the Fund's securities holdings.
During such periods, the Fund may adopt a temporary "defensive" posture in which
greater than 35% of its total assets is invested in money market instruments or
cash.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the "Act"), and as such is not
limited by the Act in the proportion of its assets that it may invest in the
obligations of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" under Subchapter
M of the Internal Revenue Code. See "Dividends, Distributions and Taxes." In
order to qualify, among other requirements, the Fund will limit its investments
so that at the close of each quarter of the taxable year, (i) not more than 25%
of the market value of the Fund's total assets will be invested in the
securities of a single issuer, and (ii) with respect to 50% of the market value
of its total assets not more than 5% will be invested in the securities of a
single issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. To the extent that a relatively high percentage
of the Fund's assets may be invested in the securities of a limited number of
issuers, the Fund's portfolio securities may be more susceptible to any single
economic, political or regulatory occurrence than the portfolio securities of a
diversified investment company. The limitations described in this paragraph are
not fundamental policies and may be revised to the extent applicable Federal
income tax requirements are revised.
PORTFOLIO CHARACTERISTICS
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Convertible
securities rank senior to common stocks in a corporation's capital structure
and, therefore, entail less risk than the corporation's common stock. The value
of a convertible security is a function of its "investment value" (its value as
if it did not have a conversion privilege), and its "conversion value" (the
security's worth if it were to be exchanged for the underlying security, at
market value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, will generally sell at some premium over its conversion
value. (This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a
7
<PAGE>
possibility of capital appreciation due to the conversion privilege.) At such
times the price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security.
FOREIGN SECURITIES. As noted above, the Fund may invest in securities of
foreign companies. Such investments may also be in the form of American
Depository Receipts (ADRs), European Depository Receipts (EDRs) or other similar
securities convertible into securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by a United States
bank or trust company evidencing ownership of the underlying securities. EDRs
are European receipts evidencing a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the United States securities markets
and EDRs, in bearer form, are designed for use in European securities markets.
The Fund's investments in unlisted foreign securities are subject to the Fund's
overall policy limiting its investment in illiquid securities to 15% or less of
its net assets.
SPECIAL RISK CONSIDERATIONS
CONVERTIBLE SECURITIES. The net asset value of the Fund's shares will
fluctuate with changes in the market value of the Fund's portfolio securities.
The market value of the Fund's convertible securities will increase or decrease
due to a variety of economic, market and political factors affecting the
underlying common shares, as well as changes in prevailing interest rates, none
of which can be predicted. In addition, see "High Yield, High Risk Securities"
below for a discussion of the risks of investing in convertible and other
fixed-income securities below investment grade.
FOREIGN SECURITIES. Foreign securities investments may be affected by
changes in currency rates or exchange control regulations, changes in
governmental administration or economic or monetary policy (in the United States
and abroad) or changed circumstances in dealings between nations. Fluctuations
in the relative rates of exchange between the currencies of different nations
will affect the value of the Fund's investments denominated in foreign currency.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade. The foreign currency transactions of
the Fund will be conducted on a spot basis or through forward foreign currency
exchange contracts (described below). The Fund will incur certain costs in
connection with these currency transactions.
Investments in foreign securities, particularly in securities of issuers
located in emerging market or developing countries, will also occasion risks
relating to political and economic developments abroad, including the
possibility of expropriations or confiscatory taxation, restrictions on foreign
investment and repatriation of capital, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. Additionally, there may be
less investment community research and coverage with respect to certain foreign
convertible securities. Also, aggregate market indexes to use as benchmarks when
comparing performance are generally not available for foreign convertible
securities.
Additionally, many of the emerging market or developing countries in which
the Fund may invest may be subject to a greater degree of economic, political
and social instability than is the case in the United States, Japan and Western
European countries. Such instability may result from, among other things, the
following: (i) authoritarian governments or
8
<PAGE>
military involvement in political and economic decision-making, including
changes in government through extra-constitutional means; (ii) popular unrest
associated with demands for improved political, economic and social conditions;
(iii) internal insurgencies; (iv) hostile relations with neighboring countries;
and (v) ethnic, religious and racial disaffection. Such social, political and
economic instability could disrupt the principal financial markets in which the
Fund invests and adversely affect the value of the Fund's assets.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of the Fund's trades effected in such markets. As such, the
inability to dispose of portfolio securities due to settlement delays could
result in losses to the Fund due to subsequent declines in value of such
securities and the inability of the Fund to make intended security purchases due
to settlement problems could result in a failure of the Fund to make potentially
advantageous investments. To the extent the Fund purchases Eurodollar
certificates of deposit issued by foreign branches of domestic U.S. banks,
consideration will be given to their domestic marketability, the lower reserve
requirements normally mandated for overseas banking operations, the possible
impact of interruptions in the flow of international currency transactions and
future international political and economic developments which might adversely
affect the payment of principal or interest.
HIGH YIELD, HIGH RISK SECURITIES. Because of the ability of the Fund to
invest in certain high yield, high risk convertible and other fixed-income
securities (commonly known as "junk bonds"), the Adviser must take into account
the special nature of such securities and certain special considerations in
assessing the risks associated with such investments. Although the growth of the
high yield securities market in the 1980s had paralleled a long economic
expansion, since that time many issuers have been affected by adverse economic
and market conditions. It should be recognized that an economic downturn or
increase in interest rates is likely to have a negative effect on the high yield
bond market and on the value of the high yield securities held by the Fund, as
well as on the ability of the securities' issuers to repay principal and
interest on their borrowings.
The prices of high yield securities have been found to be less sensitive to
changes in prevailing interest rates than higher-rated investments but more
sensitive to adverse economic changes or individual corporate developments.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress which would adversely
affect their ability to service their principal and interest payment
obligations, to meet their projected business goals or to obtain additional
financing. If the issuer of a fixed-income security owned by the Fund defaults,
the Fund may incur additional expenses to seek recovery. In addition, periods of
economic uncertainty and change can be expected to result in an increased
volatility of market prices of high yield securities and a concomitant
volatility in the net asset value of a share of the Fund.
The secondary market for high yield securities may be less liquid than the
markets for higher quality securities and, as such, may have an adverse effect
on the market prices of certain securities. The limited liquidity of the market
may also adversely affect the ability of the Fund's Trustees to arrive at a fair
value for certain high yield securities at certain times and could make it
difficult for the Fund to sell certain securities. In addition, new laws and
potential new laws may have an adverse effect upon the value of high yield
securities and a concomitant negative impact upon the net asset value of a share
of the Fund.
OTHER INVESTMENT POLICIES
WARRANTS AND STOCK RIGHTS. The Fund may invest up to 5% of the value of its
net assets in warrants, including not more than 2% in warrants not listed on
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either the New York or American Stock Exchange. The Fund may also invest in
stock rights. Warrants are, in effect, an option to purchase equity securities
at a specific price, generally valid for a specific period of time, and have no
voting rights, pay no dividends and have no rights with respect to the
corporations issuing them. The Fund may acquire warrants and stock rights
attached to other securities without reference to the foregoing limitations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize those risks. See the Statement of Additional Information for a further
discussion of such investments.
PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined to be
liquid pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) These securities are generally referred
to as private placements or restricted securities. Limitations on the resale of
such securities may have an adverse effect on their marketability, and may
prevent the Fund from disposing of them promptly at reasonable prices. The Fund
may have to bear the expense of registering such securities for resale and the
risk of substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Adviser, pursuant to
procedures adopted by the Trustees of the Fund, will make a determination as to
the liquidity of each restricted security purchased by the Fund. If a restricted
security is determined to be "liquid," such security will not be included within
the category "illiquid securities," which under current policy may not exceed
15% of the Fund's net assets.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are negotiated,
the price is fixed at the time of the commitment, but delivery and payment can
take place a month or more after the date of the commitment. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
when-issued, delayed delivery or forward commitment basis may increase the
volatility of the Fund's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to certain notice provisions described in the Statement of
Additional Information), and are at all times secured by cash or money market
instruments, which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least the market value, determined daily,
of the loaned securities. As
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with any extensions of credit, there are risks of delay in recovery and in some
cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans of portfolio securities will only be
made to firms deemed by the Adviser to be creditworthy and when the income which
can be earned from such loans justifies the attendant risks.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on portfolio
securities and on the U.S. dollar or foreign currencies which are or may in the
future be listed on securities exchanges or are written in over-the-counter
transactions ("OTC Options"). Listed options are issued or guaranteed by the
exchange on which they trade or by a clearing corporation such as the Options
Clearing Corporation. OTC options are purchased from or sold (written) to
dealers or financial institutions which have entered into direct agreements with
the Fund. The Fund is permitted to write covered call options on portfolio
securities and the U.S. dollar or foreign currencies, without limit, in order to
aid it in achieving its investment objective. The Fund may also write covered
put options; however, the aggregate value of the obligations underlying the puts
determined as of the date the options are sold will not exceed 50% of the Fund's
net assets.
The Fund may purchase listed and OTC call and put options on securities and
stock indexes in amounts equalling up to 5% of its total assets. The Fund may
purchase call options to close out a covered call position or to protect against
an increase in the price of a security it anticipates purchasing. The Fund may
purchase call options to close out a covered call position or to protect against
an increase in the price of a security it anticipates purchasing. The Fund may
purchase put options on securities which it holds in its portfolio only to
protect itself against a decline in the value of the security. The Fund may also
purchase put options to close out written put positions in a manner similar to
call option closing purchase transactions. There are no other limits on the
Fund's ability to purchase call and put options.
The Fund may also purchase and sell futures contracts that are currently
traded, or may in the future be traded, on U.S. and foreign commodity exchanges
on underlying portfolio securities, on any of the foreign currencies ("currency
futures"), on U.S. or foreign fixed-income securities ("interest rate futures")
and on such indexes of U.S. or foreign equity, fixed-income or convertible
securities as may exist or come into being ("index futures"). The Fund will
purchase or sell interest rate futures contracts for the purpose of hedging its
fixed-income portfolio (or anticipated portfolio) against changes in prevailing
interest rates. The Fund may purchase or sell index futures or currency futures
for the purpose of hedging some or all of its portfolio (or anticipated
portfolio) securities against changes in their prices (or the currency in which
they are denominated).
The Fund, for hedging purposes, also may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any such
futures, options or products as may be developed, to the extent consistent with
its investment objective and applicable regulatory requirements.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures contract,
only if a liquid secondary market exists for options or futures contracts of
that series. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options may generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer. Also,
exchanges may limit the amount by which the price of many futures contracts may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased.
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of
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such instruments. One such risk is that the Adviser could be incorrect in its
expectations as to the direction or extent of various interest rate or price
movements or the time span within which the movements take place. For example,
if the Fund sold futures contracts for the sale of securities in anticipation of
an increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the Fund would lose money on the sale. Another risk
which will arise in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities, currencies
and indexes subject to futures contracts (and thereby the futures contract
prices) may correlate imperfectly with the behavior of the dollar cash prices of
the Fund's portfolio securities and their denominated currencies. See the
Statement of Additional Information for a further discussion of such risks.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts
("forward contracts") in connection with its foreign securities investments.
A forward contract involves an obligation to purchase or sell a currency at
a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
The Fund may enter into forward contracts as a hedge against fluctuations in
future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in" the
price of the security in U.S. dollars or some other foreign currency which the
Fund is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying security
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar or
other currency which is being used for the security purchase (by the Fund or the
counterparty) and the foreign currency in which the security is denominated
during the period between the date on which the security is purchased or sold
and the date on which payment is made or received.
At other times, when, for example, the Adviser believes that the currency
of a particular foreign country may suffer a substantial decline against the
U.S. dollar or some other foreign currency, the Fund may enter into a forward
contract to sell, for a fixed amount of dollars or other currency, the amount of
foreign currency approximating the value of some or all of the Fund's securities
holdings (or securities which the Fund has purchased for its portfolio)
denominated in such foreign currency. Under identical circumstances, the Fund
may enter into a forward contract to sell, for a fixed amount of U.S. dollars or
other currency, an amount of foreign currency other than the currency in which
the securities to be hedged are denominated approximating the value of some or
all of the portfolio securities to be hedged. This method of hedging, called
"cross-hedging," will be selected by the Adviser when it is determined that the
foreign currency in which the portfolio securities are denominated has
insufficient liquidity or is trading at a discount as compared with some other
foreign currency with which it tends to move in tandem.
In addition, when the Adviser anticipates purchasing securities at some
time in the future, and wishes to lock in the current exchange rate of the
currency in which those securities are denominated against the U.S. dollar or
some other foreign currency, the Fund may enter into a forward contract to
purchase an amount of currency equal to some or all of the value of the
anticipated purchase, for a fixed amount of U.S. dollars or other currency.
In all of the above circumstances, if the currency in which the Fund
securities holdings (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Fund will have realized fewer gains than had the Fund not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the secu-
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rities involved will not generally be possible, since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The Fund is not required to enter into
such transactions with regard to its foreign currency- denominated securities
and will not do so unless deemed appropriate by the Adviser. The Fund generally
will not enter into a forward contract with a term of greater than one year,
although it may enter into forward contracts for periods of up to five years.
The Fund may be limited in its ability to enter into hedging transactions
involving forward contracts by the Internal Revenue Code requirements related to
qualification as a regulated investment company (see "Dividends, Distributions,
and Taxes").
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Adviser with a view to
achieving the Fund's investment objective. Robert M. Hanisee, Managing Director
of the Adviser, and Kevin A. Hunter, Senior Vice President of the Adviser, are
the primary portfolio managers of the Fund. Messrs. Hanisee and Hunter have been
primary portfolio managers of the Fund since April, 1995, and have been
portfolio managers with affiliates of The TCW Group, Inc. since 1990 and 1989,
respectively.
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Adviser will rely on information from various sources,
including research, analysis and appraisals of brokers and dealers, including
Dean Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Manager, and
others regarding economic developments and interest rate trends, and the
Adviser's own analysis of factors it deems relevant.
Orders for transactions in portfolio securities and commodities are placed
for the Fund with a number of brokers and dealers, including DWR. The Fund may
incur brokerage commissions on transactions conducted through DWR. It is not
anticipated that the portfolio trading will result in the Fund's portfolio
turnover rate exceeding 100% in any one year. The Fund will incur brokerage
costs commensurate with its portfolio turnover rate.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and thus may be changed
without shareholder approval.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. For purposes
of the following limitations: (i) all percentage limitations apply immediately
after a purchase or initial investment, and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
2. Invest more than 5% of the value of its total assets in
securities of issuers having a record, together with predecessors, of less
than three years of continuous operation. This restriction does not apply
to obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
In addition, as a non-fundamental policy, the Fund may not, as to 75% of
its total assets, purchase more than 10% of the voting securities of any issuer.
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PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares 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 Manager, shares of the Fund are distributed
by the Distributor and offered by DWR and other dealers (which may include TCW
Brokerage Services, an affiliate of the Adviser) who have entered into selected
broker-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 and subsequent purchases of $100 or
more may be made by sending a check, payable to TCW/DW Global Convertible 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. 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 a request is made by the shareholder in writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions.
The offering price will be the net asset value per share next determined
following receipt of an order by the Transfer Agent (see "Determination of Net
Asset Value"). While no sales charge is imposed at the time shares are
purchased, a contingent deferred sales charge may be imposed at the time of
redemption (see "Repurchases and Redemptions"). Sales personnel of a Selected
Broker-Dealer are compensated for selling shares of the Fund at the time of
their sale by the Distributor and/or Selected Broker-Dealer. In addition, some
sales personnel of the Selected Broker-Dealer will receive various types of
non-cash compensation as special sales incentives, including trips, educational
and/or business seminars and merchandise. The Fund and the Distributor reserve
the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 1% 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. This 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 0.25% of the Fund's
average daily net assets, is characterized as a service fee within the meaning
of NASD guidelines. The service fee is a payment 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
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<PAGE>
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 period
ended June 30, 1995, the Fund accrued payments under the Plan amounting to
$111,428, which is equal to 1.0% of the Fund's average daily net assets for the
fiscal period. 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 in distributing shares of the Fund may be
in excess of the total of (i) the payments made by the Fund pursuant to the
Plan, and (ii) the proceeds of contingent deferred sales charges paid by
investors upon the redemption of shares (see "Repurchases and Redemptions--
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 $1,398,806 at June 30,
1995, which was equal to 7.41% 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, such excess amount, if any, 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.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time, on each day that the New York Stock Exchange is open (or,
on days when the New York Stock Exchange closes prior to 4:00 p.m., at such
earlier time), by taking the value of all assets of the Fund, subtracting all
its liabilities, dividing by the number of shares outstanding and adjusting to
the nearest cent. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by the
New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange or quoted by NASDAQ is valued at its latest
sale price on that exchange or quotation service (if there were no sales that
day, the security is valued at the latest bid price); and (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price. When market quotations are not
readily available, including circumstances under which it is determined by the
Adviser 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 Board
of Trustees. For valuation purposes, quotations of foreign portfolio securities,
other assets and liabilities and forward contracts stated in foreign currency
are translated into U.S. dollar equivalents at the prevailing market rates prior
to the close of the New York Stock Exchange. Dividends receivable are accrued as
of the ex-dividend date or as of the time that the relevant ex-dividend date and
amounts become known.
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<PAGE>
Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Trustees determine
such does not reflect the securities' market value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Other short- term debt securities will be valued on a mark-to-market basis
until such time as they reach a remaining maturity of 60 days, whereupon they
will be valued at amortized cost using their value on the 61st day unless the
Trustees determine such does not reflect the securities' market value, in which
case these securities will be valued at their fair value as determined by the
Trustees. All other securities and other assets are valued at their fair value
as determined in good faith under procedures established by and under the
supervision of the Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations, in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
SHAREHOLDER SERVICES
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other TCW/DW Fund),
unless the shareholder requests that they be paid in cash.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value per
share next determined after receipt by the Transfer Agent, by returning the
check or the proceeds to the Transfer Agent within 30 days after the payment
date. Shares so acquired are not subject to the imposition of a contingent
deferred sales charge upon their redemption (see "Repurchases and Redemptions").
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 Fund's 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.
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 "Repurchases and Redemptions--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 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.
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<PAGE>
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 any other TCW/DW Fund
sold with a contingent deferred sales charge ("CDSC Funds"), for shares of
TCW/DW North American Government Income Trust, TCW/DW Income and Growth Fund and
TCW/DW Balanced Fund, TCW/DW North American Intermediate Income Trust, and for
shares of five money market funds for which InterCapital serves as investment
manager: Dean Witter Liquid Asset Fund Inc., Dean Witter U.S. Government Money
Market Trust, Dean Witter Tax-Free Daily Income Trust, Dean Witter California
Tax-Free Daily Income Trust and Dean Witter New York Municipal Money Market
Trust (the foregoing nine funds are hereinafter collectively referred to as the
"Exchange Funds"). Exchanges may be made after the shares of the Fund acquired
by purchase (not by exchange or dividend reinvestment) have been held for thirty
days. There is no waiting period for exchanges of shares acquired by exchange or
dividend reinvestment.
Shareholders utilizing the Fund's Exchange Privilege may subsequently
re-exchange such shares back to the Fund. However, no exchange privilege is
available between the Fund and any other fund managed by the Manager or
InterCapital, other than other TCW/DW Funds and the five money market funds
listed above.
An exchange to another CDSC Fund or to 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 or any other TCW/DW 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 TCW/DW Fund 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. 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 "Repurchases
and Redemptions--Contingent Deferred Sales Charge"). However, in the case of
shares of the Fund exchanged into an Exchange Fund, upon a redemption of shares
which results in a CDSC being imposed, a credit (not to exceed the amount of the
CDSC) will be given in an amount equal to the Exchange Fund 12b-1 distribution
fees which are attributable to those shares. (Exchange Fund 12b-1 distribution
fees are described in the prospectuses for those funds.)
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Manager to be abusive and
contrary to the best interests of the Fund's other shareholders and, at the
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, each of the other TCW/DW
Funds and each of the money market funds may in its 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,
17
<PAGE>
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 other TCW/DW
Funds or money market 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 money market
funds for which the Exchange Privilege is available pursuant to this Exchange
Privilege by contacting their DWR or other Selected Broker-Dealer account
executive (no Exchange Privilege Authorization Form is required). Other
shareholders (and those shareholders who are clients of DWR or another Selected
Broker-Dealer but who wish to make exchanges directly by writing or telephoning
the Transfer Agent) must complete and forward to the Transfer Agent an Exchange
Privilege Authorization Form, copies of which may be obtained from the Transfer
Agent, to initiate an exchange. If the Authorization Form is used, exchanges may
be made in writing or by contacting the Transfer Agent at (800) 869-6397 (toll
free). The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions will also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the New
York Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case in the past with
other funds managed by the the Manager.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REPURCHASES AND REDEMPTIONS
- --------------------------------------------------------------------------------
REPURCHASE. DWR and other Selected 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
or telegraphic request of the shareholder. The repurchase price is the net asset
value per share next
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<PAGE>
computed (see "Purchase of Fund Shares") after such repurchase order is received
by DWR or other Selected Broker-Dealer, reduced by any applicable CDSC (see
below).
The CDSC, if any, will be the only fee imposed by the Fund, the
Distributor, DWR or other Selected Broker-Dealer. The offers by DWR and other
Selected Broker-Dealers to repurchase shares may be suspended without notice by
them at any time. In that event, shareholders may redeem their shares through
the Fund's Transfer Agent as set forth below under "Redemption."
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
will be reduced by the amount of any applicable contingent deferred sales charge
(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 along with any additional documentation required
by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any charge upon redemption.
Shares redeemed sooner than six years after purchase may, however, be subject to
a charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), 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:
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
------------ -------------------
First. . . . . . . . . . . . . . . . 5.0%
Second . . . . . . . . . . . . . . . 4.0%
Third. . . . . . . . . . . . . . . . 3.0%
Fourth . . . . . . . . . . . . . . . 2.0%
Fifth. . . . . . . . . . . . . . . . 2.0%
Sixth. . . . . . . . . . . . . . . . 1.0%
Seventh and thereafter . . . . . . . None
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption; (ii)
the current net asset value of shares purchased more than six years prior to the
redemption; and (iii) the current net asset value of shares purchased through
reinvestment of dividends or distributions. Moreover, in determining whether a
CDSC is applicable it will be assumed that amounts described in (i), (ii) and
(iii) above (in that order) are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of (i) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship, or (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability, and (ii) redemptions in
connection with the following retirement plan distributions: (a) lump-sum or
other distributions from a qualified corporate or self-employed retirement plan
following retirement (or in the case of a "key employee" of a "top heavy" plan,
following attainment of age 59 1/2); (b) distributions from an Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code following attainment of age 59 1/2, and (c) a tax-free return of
an excess contribution to an IRA. For the purpose of
19
<PAGE>
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. All waivers will be granted only
following receipt by the Distributor of confirmation of the investor's
entitlement.
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected 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
repurchased or redeemed and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the repurchase or
redemption, reinstate any portion or all of the proceeds of such repurchase or
redemption in shares of the Fund at the net asset value next determined after a
reinstatement request, together with the proceeds, is received by the Transfer
Agent and receive a pro-rata credit for any CDSC paid in connection with such
repurchase or redemption.
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 or such lesser amount as may
be fixed by the Trustees. However, before the Fund redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the value
of the shares is less than $100 and allow him or her sixty days to make an
additional investment in an amount which will increase the value of his or her
account to $100 or more before the redemption is processed. No CDSC will be
imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay quarterly dividends
and to distribute substantially all of the Fund's net investment income. The
Fund intends to distribute net short-term and net long-term capital gains, if
any, at least once each year. The Fund may, however, determine either to
distribute or to retain all or part of any net long-term capital gains in any
year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's account
without issuance of a share certificate unless the shareholder requests in
writing that all dividends and/or distributions be paid in cash. (See
"Shareholder Services--Automatic Investment of Dividends and Distributions.")
TAXES. Because the Fund intends to distribute all of its net investment
income and capital gains to shareholders and otherwise 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 who are required to pay taxes on their income will normally have to
pay federal income taxes, and any state income taxes, on the dividends and
distributions they receive from the Fund. Such dividends and distributions, to
the extent that they are derived from net investment income or short-term
capital gains, are taxable to the shareholder as ordinary income regardless of
whether the shareholder receives such payments in additional shares or in cash.
Any dividends declared with a record date in the last quarter of any calendar
year which are paid in the
20
<PAGE>
following year prior to February 1 will be deemed received by the shareholder in
the prior year. Dividend payments will be eligible for the federal dividends
received deduction available to the Fund's corporate shareholders only to the
extent the aggregate dividends received by the Fund would be eligible for the
deduction if the Fund were the shareholder claiming the dividends received
deduction. In this regard, a 46-day holding period generally must be met.
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.
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 their accuracy.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and makes the appropriate election with the Internal Revenue Service, the Fund
will report annually to its shareholders the amount per share of such taxes to
enable shareholders to claim United States foreign tax credits or deductions
with respect to such taxes. In the absence of such an election, the Fund would
deduct foreign tax in computing the amount of its distributable income.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "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 one, five and ten years, or the
life of the Fund if less than any of the foregoing. 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 period. 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 $100,000 in shares of the Fund.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations
(such as mutual fund performance rankings of Lipper Analytical Services, Inc.).
21
<PAGE>
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 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 limitation on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
CODE OF ETHICS. The Adviser is subject to a Code of Ethics with respect to
investment transactions in which the Adviser's officers, directors and certain
other persons have a beneficial interest to avoid any actual or potential
conflict or abuse of their fiduciary position. The Code of Ethics, as it
pertains to the TCW/DW Funds, contains several restrictions and procedures
designed to eliminate conflicts of interest including: (a) pre-clearance of
personal investment transactions to ensure that personal transactions by
employees are not being conducted at the same time as the Adviser's clients; (b)
quarterly reporting of personal securities transactions; (c) a prohibition
against personally acquiring securities in an initial public offering, entering
into uncovered short sales and writing uncovered options; (d) a seven day "black
out period" prior or subsequent to a TCW/DW Fund transaction during which
portfolio managers are prohibited from making certain transactions in securities
which are being purchased or sold by a TCW/DW Fund; (e) a prohibition, with
respect to certain investment personnel, from profiting in the purchase and
sale, or sale and purchase, of the same (or equivalent) securities within 60
calendar days; and (f) a prohibition against acquiring any security which is
subject to firm wide or, if applicable, a department restriction of the Adviser.
The Code of Ethics provides that exemptive relief may be given from certain of
its requirements, upon application. The Adviser's Code of Ethics complies with
regulatory requirements and, insofar as it relates to persons associated with
registered investment companies, the Report of the Advisory Group on Personal
Investing of the Investment Company Institute.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or address set forth on the front cover of
this Prospectus.
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<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
RATINGS OF CORPORATE DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
BOND RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times in the future. Uncertainty
of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
RATING REFINEMENTS: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and a modifier 3 indicates that the issue ranks in the lower end if its
generic rating category.
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<PAGE>
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. The ratings apply to Municipal Commercial Paper as well as taxable
Commercial Paper. Moody's employs the following three designations, all judged
to be investment grade, to indicate the relative repayment capacity of rated
issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
BOND RATINGS
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity or willingness to pay interest and repay
principal.
B Debt rated "B" has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
24
<PAGE>
CCC Debt rated "CCC" has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayments of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
CC The rating "CC" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC" rating.
C The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating.
Cl The rating "Cl" is reserved for income bonds on which no interest is being
paid.
D Debt rated "D" is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The 'D' rating also
will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of
speculation and "C" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
Plus (+) or minus (-): The rating from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing with the major
ratings categories.
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by S&P from other sources it considers reliable. The ratings
may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information. Ratings are graded into group categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Ratings are applicable to both taxable and tax-exempt commercial paper. The
categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2, and 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely payment is very
strong.
A-2 indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as
for issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying
this designation are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
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<PAGE>
TCW/DW Global Convertible Trust
Two World Trade Center
New York, New York 10048
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Manuel H. Johnson
Paul Kolton
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Sheldon Curtis
Vice President, Secretary and
General Counsel
Robert M. Hanisee
Vice President
Kevin Hunter
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank, N.A.
Chase Plaza
New York, New York 10005
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
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
TCW/DW GLOBAL CONVERTIBLE TRUST
PROSPECTUS
AUGUST 28, 1995
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
Since inception (October 31, 1994), through June 30, 1995, TCW/DW Global
Convertible Trust, which consists of domestic and foreign convertible
securities, posted a total return of 7.99 percent. For the same period, the
Goldman Sachs Convertible 100 Index and the Morgan Stanley Capital
International World Index returned 13.12 and 4.16 percent, respectively.
Approximately 51 percent of the Fund's assets was invested in
international convertible securities, while the remaining 49 percent was
invested in U.S. convertibles. Given the allocation between the U.S. and
international markets, and the performance of each area respectively, the
Fund performed well over the first eight months of its existence. The Fund's
net asset value stood at $10.56 per share on June 30, 1995 after paying
dividends totaling approximately $0.24 per share since inception. The
accompanying chart illustrates the growth of a $10,000 investment in the Fund
from inception through June 30, 1995, versus the performance of similar
hypothetical investments in the issues that comprise the Goldman Sachs
Convertible 100 Index and the Morgan Stanley Capital International World
Index (unlike the Fund, indexes are unmanaged and not subject to fees and
expenses).
GROWTH OF $10,000
- ----------------------------------
($ IN THOUSANDS)
[GRAPH]
DOMESTIC CONVERTIBLE SECURITIES
U.S. convertible securities represent roughly half of the portfolio, and
have performed admirably since the Fund's inception, returning approximately
15 percent. Convertible securities participated in much of the U.S. market
strength over the last few months, while insulating investors from some of
the market weakness experienced at the end of 1994.
U.S. interest rates started a meaningful decline in February of this year,
as the U.S. economy began to show indications of slowing; long bond yields
fell from 8.00 percent on November 30, 1994 to 6.62 percent on June 30, 1995.
These moves clearly underpinned and increased convertible prices as the value
of their embedded fixed-income components rose.
Overall, the first half of 1995 was characterized by lower interest rates,
good corporate earnings, and higher stock and bond prices. This created an
ideal environment for convertible securities, which enjoyed a sixth straight
monthly gain in June. In fact, the first half of 1995 was the best six-month
period for convertible performance in four years.
The robust increase in the prices of many convertible securities has not
diminished the attractiveness of the market.
<PAGE>
While the degree to which the U.S. convertible market is undervalued has
diminished somewhat since the Fund's inception, the market remains very
attractive. The Fund's investment adviser, TCW Funds Management, Inc.,
continues to find good value and has been active in the new-issue market
where, according to TCW, the terms have generally been the most attractive.
INTERNATIONAL CONVERTIBLE SECURITIES
Since inception through June 30, 1995, the international portion of the
Fund returned approximately 2 percent.
As illustrated below, the U.S. market led the global equity market rally.
In the rest of the world the rally was slower to materialize, and in Japan
still shows little sign of arriving. On the bright side, the market declines
of late 1994 and early 1995 seem to have reversed.
EQUITY MARKET TOTAL RETURNS FOR SELECTED COUNTRIES (%)(US$)
<TABLE>
<CAPTION>
US UK FRANCE HONG KONG THAILAND MALAYSIA JAPAN
------ ------ -------- ----------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Nov 1994 .......... -3.6 -5.8 -0.9 -13.7 -11.8 -8.2 -5.7
Dec 1994 .......... 1.5 -0.5 -3.3 -3.4 -1.7 -3.8 1.4
Q1 1995 ........... 9.7 6.3 11.0 6.4 -10.6 1.8 -3.0
Q2 1995 ........... 9.5 2.4 0.8 3.7 20.5 8.6 -6.9
10/31/94 - 6/30/95 17.6 2.1 7.2 -8.0 -6.5 -2.3 -13.7
</TABLE>
SOURCE: GOLDMAN SACHS
European markets trailed the U.S. because of four developments: (1)
currency appreciation; (2) stagnating growth forecasts; (3) political
uncertainty in France, Spain and the UK; and (4) timid monetary policy.
However, since early March, improved sentiment has driven European market
rallies. As a result, convertible prices have risen as some of the
undervaluation in the markets has been reversed.
Performance in Southeast Asia and Europe has been similar since the Fund
commenced operations in October. During the last part of 1994, these regions
declined significantly before beginning a general recovery in 1995. This
boosted convertible valuations, particularly in the Pacific Rim countries.
The weak economic recovery in Japan has been distinguished by the yen's
strength, as well as several failed attempts to stimulate growth. The strong
currency may have stifled economic growth, but ongoing interest rate cuts led
to a bond market rally. Consumer confidence remains weak in Japan and a
number of bad bank debts hang over the market. The result has been terrible
performance by equities.
Although not directly impacting convertible valuations, fluctuations in
global currencies have had a dramatic influence on overall market movements.
In particular, February, March and April saw a period of sustained U.S.
dollar weakness versus the deutschemark and the yen as the combination of
lower interest rates and the Mexican financial crisis pushed the dollar into
steep declines.
THE PORTFOLIO
On June 30, 1995, the Fund had net assets in excess of $18 million.
Portfolio holdings in both the domestic and international markets are well
diversified by sector, industry and company. In addition, the international
portion is well diversified by country. Since inception, TCW's strategy and
market allocation has enabled the Fund to achieve an attractive level of
total return relative to the global markets. This has been accomplished
through a combination of capital appreciation and current income, which is
unique to convertible securities.
<PAGE>
LOOKING AHEAD
According to TCW, both the domestic and international convertible markets
remain attractive and offer investors a lower-volatility alternative to pure
global equities. While convertible securities are less undervalued than they
were eight months ago, they remain attractive and offer good investment
opportunities.
We appreciate your support of TCW/DW Global Convertible Trust and look
forward to continuing to serve your investment needs.
Very truly yours,
/s/ C. Fiumefreddo
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
- ---------------- -------------------------------------------- --------- ---------- -------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS AND PREFERRED STOCKS (90.8%)
ARGENTINA (1.2%)
BANKING
US$ 340,000 Banco de Galicia y Buenos Aires S.A. ....... 7.00% 08/01/02 $ 233,556
-------------
AUSTRALIA (1.2%)
FINANCIAL SERVICES
US$ 200,000 Lend Lease Finance International Ltd. ...... 4.75 06/01/03 222,000
-------------
BERMUDA (0.5%)
FINANCIAL SERVICES
US$ 105,000 SwissRe Finance - 144A** .................... 2.00 07/06/00 94,566
-------------
CANADA (2.5%)
POLLUTION CONTROL ...........................
US$ 200,000 Laidlaw Inc. - 144A** ....................... 6.00 01/15/99 225,000
BASIC CYCLICALS
CAD 350,000 Magna International, Inc.* .................. 7.25 07/05/05 255,120
-------------
TOTAL CANADA ............................................... 480,120
-------------
CAYMAN ISLANDS (3.0%)
FINANCIAL SERVICES
US$ 175,000 HSH Overseas Finance Ltd. ................... 5.00 01/06/01 155,969
-------------
OIL & GAS
2,100 Parker & Parsley Capital LLC - 144A** $3.12 92,663
REAL ESTATE
US$ 310,000 HD Finance Cayman Ltd. - 144A** ............. 6.75 06/01/00 308,063
-------------
TOTAL CAYMAN ISLANDS ....................................... 556,695
-------------
FINLAND (0.5%)
LEISURE
US$ 100,000 Amer Group Ltd. - 144A** .................... 6.25 06/15/03 92,000
-------------
FRANCE (7.1%)
AUTOMOTIVE
FRF 1,089,000 Peugeot S.A. ................................ 2.00 01/01/01 211,726
-------------
BANKING
ECU 125,000 BCP Bank & Trust ............................ 8.75 05/21/02 173,108
-------------
FINANCIAL SERVICES
FRF 321,250 AXA Midi Assurances S.A. .................... 6.00 01/01/01 77,229
FRF 548,000 Finaxa ...................................... 3.00 01/01/01 113,152
FRF 791,940 Unibail . ................................... 3.75 01/01/04 151,063
-------------
341,444
-------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
FRF 157,500 Saint Louis ................................. 7.00 01/01/00 37,100
-------------
INDUSTRIALS
FRF 289,800 Danone . .................................... 6.60 01/01/00 69,496
-------------
MEDIA GROUP
FRF 373,800 Euro Rscg Worldwide ......................... 2.75 01/01/01 75,419
FRF 475,000 Havas S.A. .................................. 3.00 12/31/97 113,148
-------------
188,567
-------------
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
- ---------------- -------------------------------------------- --------- ---------- -------------
MULTI-INDUSTRY
FRF 607,050 CIE Generale des Eaux ....................... 6.00% 01/01/98 $ 137,870
-------------
TIRE & RUBBER GOODS
FRF 841,500 Michelin France ............................. 2.50 01/01/01 172,859
-------------
TOTAL FRANCE ............................................... 1,332,170
-------------
HONG KONG (4.5%)
CONSTRUCTION PLANT & EQUIPMENT
US$ 125,000 Kumagai Gumi Finance ........................ 4.875 12/08/98 108,750
-------------
ELECTRICAL EQUIPMENT
US$ 120,000 Johnson Electric Holdings, Ltd. ............. 4.50 11/05/00 104,400
-------------
HOTELS/MOTELS
US$ 225,000 Shangri-La Asia Capital ..................... 2.875 12/16/00 176,625
-------------
REAL ESTATE
US$ 80,000 Guangzhou Investment Co. .................... 4.50 10/08/98 69,000
US$ 160,000 Hong Kong Land Co. .......................... 4.00 02/23/01 130,600
US$ 290,000 New World Development ....................... 4.375 12/11/00 258,463
-------------
458,063
-------------
TOTAL HONG KONG ............................................ 847,838
-------------
INDONESIA (0.3%)
PAPER & FOREST PRODUCTS
US$ 50,000 PT International Indorayon Utama ............ 5.50 10/01/02 58,875
-------------
ITALY (0.3%)
COMPUTER SERVICES
ITL 100,000,000 Olivetti International N.V. ................. 3.75 12/31/99 48,466
-------------
JAPAN (5.7%)
AUTOMOTIVE
yen 11,000,000 Toyota Motor Corp. .......................... 1.20 01/28/98 131,323
-------------
BANKING
US$ 125,000 Yasuda Trust & Banking ...................... 2.875 09/30/03 95,000
-------------
COMPUTERS
yen 4,000,000 NEC Corporation ............................. 1.70 03/31/99 49,882
yen 5,000,000 NEC Corporation ............................. 1.90 03/30/01 61,643
-------------
111,525
-------------
CONSUMER PRODUCTS
yen 10,000,000 Sekisui House ............................... 0.80 07/31/01 107,565
-------------
HEALTHCARE
yen 2,000,000 Eisai Co., Ltd. ............................. 4.20 03/31/98 25,531
-------------
INDUSTRIALS
yen 6,000,000 Fujitsu Ltd. ................................ 1.90 03/29/02 71,418
yen 10,000,000 Kawasaki Heavy Industries Ltd. .............. 0.80 09/28/01 107,683
yen 12,000,000 Matsushita Electric Industries .............. 1.40 03/31/04 136,454
yen 5,000,000 Shin-Etsu Chemical Co. ...................... 1.30 03/31/99 59,043
-------------
374,598
-------------
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
- ---------------- -------------------------------------------- --------- ---------- -------------
OIL RELATED
yen 10,000,000 Mitsubishi Oil Co., Ltd. .................... 2.00% 09/29/00 $ 117,021
-------------
TRANSPORTATION
yen 10,000,000 Keihin Electric Express Railway ............. 1.50 03/29/02 113,593
-------------
TOTAL JAPAN ................................................ 1,076,156
-------------
LUXEMBOURG (0.4%)
METALS
ECU 70,000 Arbed S.A. .................................. 5.50 07/07/99 84,822
-------------
MALAYSIA (0.7%)
CONGLOMERATES
US$ 90,000 Renong Berhad - 144A** ...................... 2.00 07/15/05 89,550
-------------
ENTERTAINMENT & LEISURE TIME
US$ 50,000 Technology Resources Industries Berhad ..... 2.75 11/28/04 51,500
-------------
TOTAL MALAYSIA ............................................. 141,050
-------------
MEXICO (0.9%)
BUILDING MATERIALS
US$ 220,000 Cemex S.A. .................................. 4.25 11/01/97 166,650
-------------
NETHERLANDS (0.5%)
INSURANCE
US$ 75,000 Aegon N.V. - 144A** ......................... 4.75 11/01/04 93,892
-------------
TAIWAN (3.3%)
CHEMICALS
US$ 125,000 Formosa Chem & Fibre Corp. .................. 1.75 07/19/01 117,500
-------------
CONSUMER PRODUCTS
US$ 150,000 President Enterprises Corp. ................. 0.00 07/22/01 181,313
-------------
INDUSTRIALS
US$ 100,000 Sampo Corp. ................................. 2.625 11/23/01 108,250
-------------
TEXTILES
US$ 200,000 Far Eastern Textile ......................... 4.00 10/07/06 224,000
-------------
TOTAL TAIWAN ............................................... 631,063
-------------
THAILAND (1.5%)
BANKING
US$ 130,000 Bangkok Bank Public Co. ..................... 3.25 03/03/04 131,950
-------------
INDUSTRIALS
US$ 120,000 Banpu Public Company Ltd. ................... 3.50 08/25/04 146,100
-------------
TOTAL THAILAND ............................................. 278,050
-------------
UNITED KINGDOM (7.6%)
AUTOMOTIVE
ECU 130,000 Investor International PLC .................. 7.25 06/21/01 181,547
-------------
CHEMICALS
pounds
sterling 150,000 Cookson Group ............................... 7.00 11/02/04 230,433
-------------
FINANCIAL SERVICES
pounds
sterling 100,000 Lonhro Finance Public ....................... 6.00 02/27/04 140,073
-------------
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
- ---------------- -------------------------------------------- --------- ---------- -------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
pounds
sterling 70,000 Allied Domecq PLC ........................... 6.75% 07/07/08 $ 109,488
US$ 250,000 Burns, Philp Treasury ....................... 5.50 04/30/04 214,375
US$ 60,000 Grand Metropolitan PLC ...................... 6.50 01/31/00 63,900
pounds
sterling 100,000 Tate & Lyle International Finance PLC ...... 5.75 03/21/01 133,298
-------------
521,061
-------------
INDUSTRIALS
pounds
sterling 80,000 Coats Viyella PLC ........................... 6.25 08/09/03 111,102
-------------
MULTI-INDUSTRY
pounds
sterling 150,000 Hanson PLC .................................. 9.50 01/31/06 243,284
-------------
TOTAL UNITED KINGDOM ....................................... 1,427,500
-------------
UNITED STATES (49.1%)
BUILDING MATERIALS
1,800 Owens-Corning Capital LLC - 144A** $3.25 ... 92,250
-------------
BUSINESS SERVICES
US$ 145,000 Danka Business Systems - 144A** ............. 6.75 04/01/02 147,552
US$ 190,000 Omnicom Group, Inc. - 144A** ................ 4.50 09/01/00 217,550
-------------
365,102
-------------
COMPUTER EQUIPMENT
US$ 105,000 3Com Corp. - 144A** ......................... 10.25 11/01/01 134,007
US$ 145,000 EMC Corp. ................................... 4.25 01/01/01 195,750
US$ 150,000 Storage Technology Corp. .................... 8.00 05/31/15 146,250
US$ 160,000 Unisys Corp. ................................ 8.25 08/01/00 177,600
-------------
653,607
-------------
COMPUTER SERVICES
US$ 350,000 Automatic Data Processing, Inc. ............. 0.00 02/20/12 154,875
US$ 285,000 First Financial Management Corp. ............ 5.00 12/15/99 386,175
4,300 General Motors Corp. $3.25 (Series C) (1) .. 270,900
-------------
811,950
-------------
ELECTRONICS - SEMICONDUCTORS
US$ 90,000 Integrated Device Technology ................ 5.50 06/01/02 93,833
-------------
FINANCIAL SERVICES
1,200 Allstate Corp. (The) $2.30 (2) .............. 48,900
US$ 160,000 Merrill Lynch & Co., Inc. - 144A** (3) ..... 0.00 06/30/99 201,600
2,700 St. Paul Capital LLC $3.00 .................. 141,075
-------------
391,575
-------------
FUNERAL SERVICES
3,300 SCI Finance LLC $3.125 (Series A) ........... 200,475
-------------
HEALTHCARE
US$ 215,000 Elan International Finance Ltd. ............. 0.00 10/16/12 99,975
US$ 130,000 Healthsouth Rehabilitation Corp. ............ 5.00 04/01/01 141,288
US$ 90,000 Multicare Companies, Inc. ................... 7.00 03/15/03 86,850
US$ 105,000 Quantum Health Resources Inc. ............... 4.75 10/01/00 90,300
US$ 130,000 Theratx Inc. - 144A** ....................... 8.00 02/01/02 116,288
-------------
534,701
-------------
HOUSEHOLD PRODUCTS ..........................
US$ 110,000 McKesson Corp. .............................. 4.50 03/01/04 99,000
-------------
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
- ---------------- -------------------------------------------- --------- ---------- -------------
HOTELS/MOTELS
US$ 150,000 Hospitality Franchise Systems, Inc. ........ 4.50% 10/01/99 $ 169,550
-------------
INDUSTRIALS
2,900 Westinghouse Electric Corp. - 144A** $1.30
(Series C) .................................. 43,138
-------------
INSURANCE
1,800 American General Delaware $3.00 (Series A) . 93,375
US$ 90,000 Chubb Capital Corp. ......................... 6.00 05/15/98 92,813
US$ 120,000 Fremont General Corp. ....................... 0.00 10/12/13 45,300
US$ 240,000 USF&G Corp. ................................. 0.00 03/03/09 132,000
-------------
363,488
-------------
LEISURE
US$ 600,000 Coleman Worldwide Corp. ..................... 0.00 05/27/13 174,000
-------------
MACHINERY - DIVERSIFIED
US$ 199,000 Cooper Industries, Inc. ..................... 7.05 01/01/15 205,965
-------------
MEDIA GROUP
US$ 210,000 Comcast Corp. ............................... 3.375 09/09/05 193,200
US$ 655,000 News America Holdings, Inc. ................. 0.00 03/11/13 311,125
US$ 265,000 Time Warner, Inc. ........................... 8.75 01/10/15 275,931
-------------
780,256
-------------
MEDICAL SERVICES
4,000 FHP International Corp. $1.25 (Series A) ... 94,000
US$ 170,000 Integrated Health Services, Inc. ............ 5.75 01/01/01 183,175
-------------
277,175
-------------
METALS
US$ 155,000 Allegheny Ludlum Corp. ...................... 5.875 03/15/02 165,416
-------------
OIL & GAS
US$ 145,000 Apache Corp. ................................ 6.00 01/15/02 161,494
3,000 Occidental Petroleum Corp. $3.00 (Series A) 177,750
2,800 Occidental Petroleum Corp. - 144A** $3.875 . 159,600
US$ 235,000 Pennzoil Co. (4) ............................ 4.75 10/01/03 221,206
US$ 70,000 SFP Pipeline Holdings, Inc. ................. 11.16 08/15/10 89,600
-------------
809,650
-------------
PAPER & FOREST PRODUCTS
US$ 120,000 Riverwood International Corp. ............... 6.75 09/15/03 160,279
-------------
POLLUTION CONTROL
US$ 295,000 Thermo Electron Corp. ....................... 5.00 04/15/01 400,463
US$ 165,000 U.S. Filter Corp. ........................... 5.00 10/15/00 173,250
US$ 213,000 WMX Technologies, Inc. ...................... 2.00 01/24/05 179,186
-------------
752,899
-------------
PUBLISHING
US$ 90,000 Nelson (Thomas), Inc. - 144A** .............. 5.75 11/30/99 103,536
-------------
RESTAURANTS
US$ 430,000 Boston Chicken Inc. ......................... 0.00 06/01/15 97,825
-------------
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
- ---------------- -------------------------------------------- --------- ---------- -------------
RETAIL
US$ 300,000 Office Depot, Inc. .......................... 0.00% 11/01/08 $ 196,500
US$ 85,000 Pep Boys-Manny, Moe & Jack .................. 4.00 09/01/99 78,382
-------------
274,882
-------------
SCIENTIFIC INSTRUMENTS
US$ 175,000 Fisher Scientific International, Inc. ...... 4.75 03/01/03 188,248
-------------
TELECOMMUNICATIONS
1,800 Corning Delaware, L.P. $3.00 ................ 92,025
US$ 135,000 LDDS Communications, Inc. ................... 5.00 08/15/03 130,275
2,100 MFS Communications Company, Inc. $2.68 ..... 72,450
US$ 365,000 Motorola, Inc. .............................. 0.00 09/27/13 298,388
US$ 90,000 U.S. Cellular Corp. ......................... 0.00 06/15/15 27,900
-------------
621,038
-------------
TRANSPORTATION
US$ 305,000 AMR Corp. ................................... 6.125 11/01/24 317,377
US$ 305,000 Delta Air Lines, Inc. ....................... 3.23 06/15/03 293,761
-------------
611,138
-------------
WASTE MANAGEMENT
6,200 Browning-Ferris Industries, Inc. $2.583 .... 226,300
-------------
TOTAL UNITED STATES ................... ................... 9,267,276
-------------
TOTAL INVESTMENTS (IDENTIFIED COST $15,844,627) (A). . 90.8% 17,132,745
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ................... ................... 9.2 1,740,631
----- -------------
NET ASSETS ..................... ..................... 100.0% $18,873,376
===== =============
<FN>
- -------------
* SECURITY WAS PURCHASED ON A WHEN ISSUED BASIS.
** RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS.
(1) EXCHANGEABLE INTO GENERAL MOTORS CORP. CLASS E COMMON STOCK.
(2) EXCHANGEABLE INTO PMI GROUP INC. COMMON STOCK.
(3) EXCHANGEABLE INTO MICROSOFT CORP. COMMON STOCK.
(4) EXCHANGEABLE INTO CHEVRON CORP. COMMON STOCK.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $15,845,477;
THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $1,389,124 AND THE
AGGREGATE GROSS UNREALIZED DEPRECIATION IS $101,856, RESULTING IN NET
UNREALIZED APPRECIATION OF $1,287,268.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 1995:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS DELIVERY APPRECIATION/
TO RECEIVE IN EXCHANGE FOR DATE (DEPRECIATION)
------------------ -- ------------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
CAD 200,000 US$ 145,751 07/05/95 $ 32
CAD 150,000 US$ 109,067 07/05/95 270
US$ 147,992 ECU 112,192 07/18/95 (1,388)
pounds
US$ 1,053,807 sterling 650,097 07/18/95 17,964
US$ 51,627 ITL 83,333,333 07/18/95 (2,429)
US$ 125,043 yen 10,634,907 07/18/95 (1,022)
US$ 107,789 yen 8,920,600 07/18/95 2,045
US$ 300,720 ECU 224,142 08/18/95 2,365
US$ 1,149,893 FRF 5,526,730 10/18/95 10,827
US$ 783,929 yen 62,777,032 10/18/95 30,516
---------------
NET UNREALIZED APPRECIATION... $59,180
===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION JUNE 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- --------------------------------------------- ------------- ------------
<S> <C> <C>
Automotive ................................... $ 524,596 2.78%
Banking ...................................... 633,614 3.36
Basic Cyclicals .............................. 255,120 1.35
Building Materials ........................... 258,900 1.37
Business Services ............................ 365,102 1.94
Chemicals .................................... 347,933 1.84
Computers .................................... 111,525 0.59
Computer Equipment ........................... 653,607 3.46
Computer Services ............................ 860,416 4.56
Conglomerates ................................ 89,550 0.47
Consumer Products ............................ 288,878 1.53
Construction Plant & Equipment ............... 108,750 0.58
Electronics--Semiconductors .................. 93,833 0.50
Electrical Equipment ......................... 104,400 0.55
Entertainment & Leisure Time ................. 51,500 0.27
Financial Services ........................... 1,345,627 7.13
Food, Beverage, Tobacco & Household Products 558,161 2.96
Funeral Services ............................. 200,475 1.06
Healthcare ................................... 560,232 2.97
Hotels/Motels ................................ 346,175 1.83
Household Products ........................... 99,000 0.52
Industrials .................................. 852,684 4.52
Insurance .................................... 457,380 2.42
Leisure ...................................... 266,000 1.41
Machinery--Diversified ....................... 205,965 1.09
Media Group .................................. 968,823 5.13
Medical Services ............................. 277,175 1.47
Metals ....................................... 250,238 1.33
Multi-Industry ............................... 381,154 2.02
Oil & Gas .................................... 902,313 4.78
Oil Related .................................. 117,021 0.62
Paper & Forest Products ...................... 219,154 1.16
Pollution Control ............................ 977,899 5.18
Publishing ................................... 103,536 0.55
Real Estate .................................. 766,126 4.06
Restaurants .................................. 97,825 0.52
Retail ....................................... 274,882 1.46
Scientific Instruments ....................... 188,248 1.00
Telecommunications ........................... 621,038 3.29
Tire & Rubber Goods .......................... 172,859 0.92
Textiles ..................................... 224,000 1.19
Transportation ............................... 724,731 3.84
Waste Management ............................. 226,300 1.20
------------- ------------
$17,132,745 90.78%
============= ============
</TABLE>
SUMMARY OF INVESTMENTS BY TYPE
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- ---------------------------- ------------- ------------
<S> <C> <C>
Convertible Bonds ........... $15,327,844 81.22%
Convertible Preferred Stocks 1,804,901 9.56
------------- ------------
$17,132,745 90.78%
============= ============
</TABLE>
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $15,844,627) ............. $17,132,745
Unrealized appreciation on foreign currency
contracts ................................. 64,019
Cash (including $12,550 in foreign
currency) ................................. 2,186,598
Receivable for:
Interest .................................. 188,547
Investments sold .......................... 20,799
Shares of beneficial interest sold ....... 10,409
Dividends ................................. 8,845
Deferred organizational expenses ........... 156,132
Receivable from investment manager ........ 110,941
Prepaid expenses and other assets .......... 31,583
-------------
TOTAL ASSETS ............................ 19,910,618
-------------
LIABILITIES:
Unrealized depreciation on foreign currency
contracts ................................. 4,839
Payable for:
Investments purchased ..................... 718,992
Plan of distribution fee .................. 14,880
Accrued expenses and other payables ....... 142,399
Organizational expenses .................... 156,132
-------------
TOTAL LIABILITIES ....................... 1,037,242
-------------
NET ASSETS:
Paid-in-capital ............................ 17,938,587
Net unrealized appreciation ................ 1,346,040
Undistributed net investment income ....... 47,052
Net realized loss .......................... (458,303)
-------------
NET ASSETS .............................. $18,873,376
=============
NET ASSET VALUE PER SHARE, 1,787,684 shares
outstanding (unlimited shares authorized
of $.01 par value) ........................ $10.56
=============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 31, 1994* THROUGH JUNE 30, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest (net of $398 foreign
withholding tax) ...................... $ 523,560
Dividends .............................. 41,940
-----------
TOTAL INCOME .......................... 565,500
-----------
EXPENSES
Plan of distribution fee ............... 111,428
Transfer agent fees and expenses ...... 64,014
Management fee ......................... 56,828
Professional fees ...................... 47,665
Investment advisory fee ................ 37,886
Organizational expenses ................ 23,868
Trustees' fees and expenses ............ 21,786
Custodian fees ......................... 20,536
Shareholder reports and notices ....... 7,957
Registration fees ...................... 6,079
Other .................................. 1,993
-----------
Total Expenses Before Amounts
Waived/Assumed ....................... 400,040
Less: Amounts Waived/Assumed .......... (288,612)
-----------
Total Expenses After Amounts
Waived/Assumed ....................... 111,428
-----------
NET INVESTMENT INCOME ................. 454,072
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on:
Investments ............................ (2,922)
Foreign exchange transactions .......... (455,381)
-----------
TOTAL LOSS ............................ (458,303)
-----------
Net unrealized appreciation on:
Investments ............................ 1,288,118
Translation of foreign exchange forward
contracts, other assets and
liabilities denominated in foreign
currencies............................. 57,922
-----------
TOTAL APPRECIATION .................... 1,346,040
-----------
NET GAIN .............................. 887,737
-----------
NET INCREASE .......................... $1,341,809
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD OCTOBER 31, 1994*
THROUGH JUNE 30, 1995
--------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ............................................... $ 454,072
Net realized loss ................................................... (458,303)
Net unrealized appreciation ......................................... 1,346,040
------------
Net increase ....................................................... 1,341,809
------------
Dividends to shareholders from net investment income ................... (407,020)
Net increase from transactions in shares of beneficial interest ....... 17,838,587
------------
Total increase ...................................................... 18,773,376
NET ASSETS:
Beginning of period ................................................... 100,000
------------
END OF PERIOD (including undistributed net investment income of
$47,052)............................................................. $18,873,376
============
<FN>
- ---------
* COMMENCEMENT OF OPERATIONS.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- TCW/DW Global Convertible Trust
(the "Fund") is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a non-diversified, open-end management investment
company. The Fund was organized as a Massachusetts business trust on June 29,
1994 and on July 21, 1994 issued 10,000 shares of beneficial interest for
$100,000 to Dean Witter InterCapital Inc. ("InterCapital"), an affiliate of
Dean Witter Services Company Inc. (the "Manager"), to effect the Fund's
initial capitalization. The Fund commenced operations on October 31, 1994.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on
the New York or American Stock Exchange or other domestic or foreign stock
exchange is valued at its latest sale price on that exchange prior to the
time when assets are valued; if there were no sales that day, the security
is valued at the latest bid price; (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued
at the latest available bid price prior to the time of valuation; (3) when
market quotations are not readily available, including circumstances under
which it is determined by the Adviser 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; (4)
portfolio securities may be valued by an outside pricing service approved
by the Trustees. The pricing service utilizes a matrix system
incorporating security quality, maturity and coupon as the evaluation
model parameters, and/or research and evaluation by its staff, including
review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the portfolio
securities valued by such pricing service; and (5) short-term debt
securities having a maturity date of more than sixty days at time of
purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the 61st
day. Short-term debt securities having a maturity date of sixty days or
less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized
gains and losses on security transactions are determined by the identified
cost method. Discounts on securities purchased are amortized over the life
of the respective securities. Dividend income is recorded on the
ex-dividend date except for certain dividends from foreign securities
which are recorded as soon as the Fund is informed after the ex-dividend
date. Interest income is accrued daily.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market
value of investment securities, other assets and liabilities and forward
contracts are translated at the exchange rates prevailing at the end of
the period; and (2) purchases, sales, income and expenses are translated
at the exchange rates prevailing on the respective dates of such
transactions. The resultant exchange gains and losses are included in the
Statement of Operations as realized and unrealized gain/loss on foreign
exchange transactions. Pursuant to U.S. Federal income tax regulations,
certain foreign exchange gains/losses included in realized and unrealized
gain/loss are included in or are a reduction of ordinary income for
federal income tax purposes. The Fund does not isolate that portion of the
results of operations arising as a result of changes in the foreign
exchange rates from the changes in the market prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant exchange gains and losses are
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
included in the Statement of Operations as unrealized gain/loss on foreign
exchange transactions. The Fund records realized gains or losses on
delivery of the currency or at the time the forward contract is
extinguished (compensated) by entering into a closing transaction prior to
delivery.
E. 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.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records
dividends and distributions to its shareholders on the ex-dividend date.
The amount of dividends and distributions from net investment income and
net realized capital gains are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary
or permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized capital gains. To the
extent they exceed net investment income and net realized capital gains
for tax purposes, they are reported as distributions of paid-in-capital.
G. ORGANIZATIONAL EXPENSES -- InterCapital paid the organizational
expenses of the Fund in the amount of approximately $180,000 which will be
reimbursed for the full amount thereof, exclusive of amounts assumed. Such
costs have been deferred and are being amortized on the straight line
method over a period not to exceed five years from the commencement of
operations.
2. MANAGEMENT AGREEMENT -- Pursuant to a Management Agreement, the Fund pays
its Manager a management fee, accrued daily and payable monthly, by applying
the annual rate of 0.51% to the net assets of the Fund determined as of the
close of each business day.
Under the terms of the Management Agreement, the Manager maintains certain
of the Fund's books and records and furnishes, at its own expense, office
space, facilities, equipment, clerical, bookkeeping and certain legal
services and pays the salaries of all personnel, including officers of the
Fund who are employees of the Manager. The Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory
Agreement with TCW Funds Management, Inc. (the "Adviser"), the Fund pays the
Adviser an advisory fee, accrued daily and payable monthly, by applying the
annual rate of 0.34% to the net assets of the Fund determined as of the close
of each business day.
Under the terms of the Investment Advisory Agreement, the Fund has
retained the Adviser to invest the Fund's assets, including placing orders
for the purchase and sale of portfolio securities. The Adviser 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. In addition, the Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Adviser.
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
InterCapital had undertaken to assume all operating expenses (except for
any 12b-1 and/or brokerage fees) and the Manager had agreed to waive the
compensation provided for in its Management Agreement and the Adviser had
undertaken to waive the compensation provided for in its Advisory Agreement,
until such time as the Fund had $50 million of net assets or until six months
from the date of commencement of the Fund's operations, whichever occurred
first. InterCapital will continue to assume all operating expenses (except
for 12b-1 and/or brokerage fees) and the Manager and the Adviser will
continue to waive their respective compensation until such time as the Fund
has $50 million of net assets or until August 23, 1995, whichever occurs
first.
4. PLAN OF DISTRIBUTION -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Manager. The Fund
has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under
the Act pursuant to which the Fund pays the Distributor compensation, accrued
daily and payable monthly, at an annual rate of 1.0% of the lesser of: (a)
the average daily aggregate gross sales of the Fund's shares since the Fund's
inception (not including reinvestment of dividend 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 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, account executives of Dean Witter
Reynolds Inc., an affiliate of the Manager and Distributor, and other
employees and 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 by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred but not yet recovered may be recovered through future distribution
fees from the Fund and contingent deferred sales charges from the Fund's
shareholders.
The Distributor has informed the Fund that for the period ended June 30,
1995, it received approximately $38,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay
such charges which are not an expense of the Fund.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the period ended June 30, 1995 aggregated
$24,687,787 and $8,880,708, respectively.
Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent.
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD OCTOBER 31,
1994*
THROUGH JUNE 30, 1995
--------------------------
SHARES AMOUNT
----------- -------------
<S> <C> <C>
Sold ...................... 1,939,734 $19,459,412
Reinvestment of dividends.. 30,636 310,550
----------- -------------
1,970,370 19,769,962
Repurchased ............... (192,686) (1,931,375)
----------- -------------
Net increase .............. 1,777,684 $17,838,587
=========== =============
<FN>
- ------------
* Commencement of operations.
</TABLE>
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS -- The
Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio
transactions or to manage foreign currency exposure associated with foreign
currency denominated securities. Additionally, as a hedge against adverse
foreign currency and market risk, the Fund may purchase and write options on
foreign currency ("derivative instruments").
At June 30, 1995, there were open forward contracts used to facilitate
settlement of foreign currency denominated portfolio transactions and manage
foreign currency exposure.
Derivative instruments involve elements of market risk in excess of the
amounts reflected in the Statement of Assets and Liabilities. The Fund bears
the risk of an unfavorable change in the foreign exchange rates underlying
the forward contracts. Risks may also arise upon entering into these
contracts from the potential inability of the counterparties to meet the
terms of their contracts.
8. FEDERAL INCOME TAX STATUS -- Capital and foreign currency 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 and foreign currency losses of
approximately $182,000 and $214,000, respectively, during fiscal 1995. As of
June 30, 1995, the Fund had temporary book/tax differences primarily
attributable to post-October losses and the mark-to-market of open forward
foreign currency exchange contracts.
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
Financial Highlights
- -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31, 1994*
THROUGH
JUNE 30, 1995
-----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 10.00
-----------------
Net investment income .................... 0.27
Net realized and unrealized gain ........ 0.53
-----------------
Total from investment operations ........ 0.80
-----------------
Less dividends from net investment income (0.24)
-----------------
Net asset value, end of period ........... $ 10.56
=================
TOTAL INVESTMENT RETURN+ ................. 7.99%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 1.00%(2)(3)
Net investment income .................... 4.07%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $18,873
Portfolio turnover rate .................. 61%(1)
<FN>
- -------------------
* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) INTERCAPITAL HAD UNDERTAKEN TO ASSUME ALL OPERATING EXPENSES (EXCEPT
FOR ANY 12B-1 AND/OR BROKERAGE FEES) AND THE MANAGER HAD AGREED TO
WAIVE THE COMPENSATION PROVIDED FOR IN ITS MANAGEMENT AGREEMENT AND
THE ADVISER HAD UNDERTAKEN TO WAIVE THE COMPENSATION PROVIDED FOR IN
ITS ADVISORY AGREEMENT, UNTIL SUCH TIME AS THE FUND HAD $50 MILLION
OF NET ASSETS OR UNTIL SIX MONTHS FROM THE DATE OF COMMENCEMENT OF
THE FUND'S OPERATIONS, WHICHEVER OCCURRED FIRST. INTERCAPITAL WILL
CONTINUE TO ASSUME ALL OPERATING EXPENSES (EXCEPT FOR 12B-1 AND/OR
BROKERAGE FEES) AND THE MANAGER AND THE ADVISER WILL CONTINUE TO
WAIVE THEIR RESPECTIVE COMPENSATION UNTIL SUCH TIME AS THE FUND HAS
$50 MILLION OF NET ASSETS OR UNTIL AUGUST 23, 1995, WHICHEVER OCCURS
FIRST. IF THE FUND HAD BORNE ALL EXPENSES, AFTER APPLICATION OF THE
EXPENSE LIMITATION, THE ABOVE ANNUALIZED EXPENSE AND NET INVESTMENT
INCOME RATIOS WOULD HAVE BEEN 3.50% AND 1.48%, RESPECTIVELY.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
To the Shareholders and Trustees of TCW/DW Global Convertible 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 TCW/DW Global
Convertible Trust (the "Fund") at June 30, 1995, and the results of its
operations, the changes in its net assets and the financial highlights for
the period October 31, 1994 (commencement of operations) through June 30,
1995, 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 audit. We conducted our audit 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 audit, which included
confirmation of securities owned at June 30, 1995 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
August 14, 1995
<PAGE>
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Sheldon Curtis
Vice President, Secretary and
General Counsel
Robert M. Hanisee
Vice President
Kevin A. Hunter
Vice President
Thomas F. Caloia
Treasurer
TRANSFER 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
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
This report is submitted for the general information of shareholders of the
Trust. For more detailed information about the Trust, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Trust.
This report is not authorized for distribution to prospective investors in
the Trust unless preceded or accompanied by an effective prospectus.
TCW/DW
GLOBAL
CONVERTIBLE
TRUST
ANNUAL REPORT
JUNE 30, 1995
-------------
<PAGE>
GROWTH OF $10,000
<TABLE>
<CAPTION>
DATE TOTAL MSCI WORLD IX GOLDMAN SACHS
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
October 31, 1994 $10000 $10000 $10000
- -------------------------------------------------------------------------------
November 30, 1994 $ 9900 $ 9550 $ 9649
- -------------------------------------------------------------------------------
December 31, 1994 $ 9817 $ 9627 $ 9579
- -------------------------------------------------------------------------------
January 31, 1995 $ 9777 $ 9466 $ 9768
- -------------------------------------------------------------------------------
February 28, 1995 $ 9978 $ 9588 $10092
- -------------------------------------------------------------------------------
March 31, 1995 $10180 $10033 $10389
- -------------------------------------------------------------------------------
April 30, 1995 $10363 $10365 $10640
- -------------------------------------------------------------------------------
May 31, 1995 $10586 $10437 $10945
- -------------------------------------------------------------------------------
June 30, 1995 $10299(3) $10416 $11312
- -------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS
LIFE OF FUND
- -------------------------------------------------------------------------------
7.99 (1)
2.99 (2)
- -------------------------------------------------------------------------------
_______Fund______MSCI WORLD IX (4)______GOLDMAN SACHS CONVERTIBLE IX(5)
Past performance is not predictive of future returns.
<FN>
________________________________________
(1) Figure shown does not reflect the deduction of any sales charges.
(2) Figure shown assumes the deduction of the maximum applicable contingent
deferred sales charge (CDSC) (Since inception 5%). See the Fund's
current prospectus for complete details on fees and sales charges.
(3) Closing value after the deduction of a 5% CDSC, assuming a complete
redemption on June 30, 1995.
(4) The Morgan Stanley Capital International World Index (MSCI) measures
performance for a diverse range of global stock markets including the
U.S., Canada, Europe, Australia, New Zealand and the Far East. The index
does not include any expenses, fees or charges or reinvestment of
dividends.
(5) The Goldman Sachs Convertible 100 Index tracks the performance of 100
equally weighted convertible issues with market capitalizations of at
least $100 million. The index does not include any expenses, fees or
charges.
</TABLE>
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates to the shares of beneficial
interest of Dean Witter Convertible Securities Trust ("Convertible Trust") to be
issued by Convertible Trust, pursuant to an Agreement and Plan of
Reorganization, dated as of August 24, 1995, between Convertible Trust and Dean
Witter Global Convertible Trust ("Global Convertible") in connection with the
acquisition by Convertible Trust of substantially all of the assets, subject to
stated liabilities, of Global Convertible. This Statement of Additional
Information does not constitute a prospectus. This Statement of Additional
Information does not include all information that a shareholder should consider
before voting on the proposals contained in the Proxy Statement and Prospectus,
and, therefore, should be read in conjunction with the related Proxy Statement
and Prospectus, dated , 1995. A copy of the Proxy Statement and
Prospectus may be obtained without charge by mailing a written request to
Convertible Trust at Two World Trade Center, New York, New York 10048 or by
calling (212) 392-2550 or (800) 526-3143. Please retain this document for future
reference.
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS , 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION..................................................................................................... 3
ADDITIONAL INFORMATION ABOUT CONVERTIBLE TRUST................................................................... 3
FINANCIAL STATEMENTS............................................................................................. 4
</TABLE>
2
<PAGE>
INTRODUCTION
This Statement of Additional Information is intended to supplement the
information provided in the Proxy Statement and Prospectus dated ,
1995 (the "Proxy Statement and Prospectus"). The Proxy Statement and Prospectus
has been sent to Global Convertible shareholders in connection with the
solicitation of proxies by the Board of Trustees of Global Convertible to be
voted at the Special Meeting of Shareholders of Global Convertible to be held on
December 19, 1995. This Statement of Additional Information incorporates by
reference the Statement of Additional Information of Convertible Trust dated
November 22, 1994.
ADDITIONAL INFORMATION ABOUT CONVERTIBLE TRUST
INVESTMENT OBJECTIVES AND POLICIES
For additional information about Convertible Trust's investment objective
and policies, see "Investment Practices and Policies" and "Investment
Restrictions" in Convertible Trust's Statement of Additional Information.
MANAGEMENT
For additional information about the Board of Trustees, officers and
management personnel of Convertible Trust, see "The Fund and Its Management" and
"Trustees and Officers" in Convertible Trust's Statement of Additional
Information.
INVESTMENT ADVISORY AND OTHER SERVICES
For additional information about Convertible Trust's investment manager, see
"The Fund and Its Management" in Convertible Trust's Statement of Additional
Information. For additional information about Convertible Trust's independent
auditors, see "Independent Accountants" in Convertible Trust's Statement of
Additional Information. For additional information about other services provided
to Convertible Trust see "The Distributor," "Custodian and Transfer Agent" and
"Shareholder Services" in Convertible Trust's Statement of Additional
Information.
PORTFOLIO TRANSACTIONS AND BROKERAGE
For additional information about brokerage allocation practices, see
"Portfolio Transactions and Brokerage" in Convertible Trust's Statement of
Additional Information.
DESCRIPTION OF FUND SHARES
For additional information about the voting rights and other characteristics
of the shares of beneficial interest of Convertible Trust, see "Description of
Shares of the Fund" in Convertible Trust's Statement of Additional Information.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For additional information about the purchase and redemption of Convertible
Trust's shares and the determination of net asset value, see "The Distributor,"
"Redemptions and Repurchases," "Financial Statements," and "Shareholder
Services" in Convertible Trust's Statement of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
For additional information about Convertible Trust's policies regarding
dividends and distributions and tax matters affecting Convertible Trust and its
shareholders, see "Dividends, Distributions and Taxes" and "Financial
Statements" in Convertible Trust's Statement of Additional Information.
DISTRIBUTION OF SHARES
For additional information about Convertible Trust's distributor and the
distribution agreement between Convertible Trust and its distributor, see "The
Distributor" in Convertible Trust's Statement of Additional Information.
3
<PAGE>
PERFORMANCE DATA
For additional information about Convertible Trust's performance data, see
"Performance Information" in Convertible Trust's Statement of Additional
Information.
FINANCIAL STATEMENTS
Convertible Trust's most recent audited financial statements are set forth
under "Financial Statements -- September 30, 1994" in Convertible Trust's
Statement of Additional Information dated November 22, 1994. In addition,
Convertible Trust's updated, unaudited financial statements are set forth in its
Semi-Annual Report dated March 31, 1995, a copy of which is attached to and
incorporated by reference in the Proxy Statement and Prospectus.
4
<PAGE>
Dean Witter Convertible Securities Trust
Pro Forma Financial Statements (unaudited)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
<TABLE>
<CAPTION>
TCW/DW
DEAN WITTER GLOBAL
CONVERTIBLE CONVERTIBLE COMBINED
SECURITIES TRUST TRUST (NOTE 1)
---------------- --------------- ----------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (identified cost --
$189,238,079, $15,844,627 and $205,082,706, respectively)........ $ 181,342,455 $ 17,132,745 $ 198,475,200
Cash (including $-0-, $12,550 and $12,550, respectively, in
foreign currency)................................................ 70,001 2,186,598 2,256,599
Receivable for:
Investments sold................................................ 3,255,036 20,799 3,275,835
Interest........................................................ 1,660,707 188,547 1,849,254
Dividends....................................................... 123,152 8,845 131,997
Shares of beneficial interest sold.............................. 50,010 10,409 60,419
Receivable from affiliate......................................... -- 110,941 110,941
Prepaid expenses and other assets................................. 41,666 95,602 137,268
---------------- --------------- ----------------
TOTAL ASSETS.................................................. 186,543,027 19,754,486 206,297,513
---------------- --------------- ----------------
LIABILITIES:
Payable for:
Investments purchased........................................... 6,514,826 718,992 7,233,818
Shares of beneficial interest repurchased....................... 138,213 -- 138,213
Plan of distribution fee........................................ 147,381 14,880 162,261
Investment management fee....................................... 88,429 -- 88,429
Dividends to shareholders....................................... 106,229 -- 106,229
Accrued expenses and other payables............................... 151,980 147,238 299,218
---------------- --------------- ----------------
TOTAL LIABILITIES............................................. 7,147,058 881,110 8,028,168
---------------- --------------- ----------------
NET ASSETS:
Paid-in-capital................................................... 556,015,111 17,938,587 573,953,698
Net unrealized appreciation (depreciation)........................ (7,895,624) 1,346,040 (6,549,584)
Accumulated undistributed net investment income................... 4,123,609 47,052 4,170,661
Accumulated net realized loss..................................... (372,847,127) (458,303) (373,305,430)
---------------- --------------- ----------------
NET ASSETS.................................................... $ 179,395,969 $ 18,873,376 $ 198,269,345
---------------- --------------- ----------------
---------------- --------------- ----------------
NET ASSET VALUE PER SHARE......................................... $ 11.09 $ 10.56 $ 11.09
---------------- --------------- ----------------
---------------- --------------- ----------------
SHARES OUTSTANDING (Notes 1 and 2)................................ 16,178,700 1,787,684 17,880,537
---------------- --------------- ----------------
---------------- --------------- ----------------
</TABLE>
See Notes to Pro Forma Financial Statements
5
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF OPERATIONS
FOR THE EIGHT MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
DEAN WITTER TCW/DW GLOBAL PRO FORMA
CONVERTIBLE CONVERTIBLE ADJUSTMENTS
SECURITIES TRUST TRUST (NOTE 3) COMBINED
---------------- -------------- ---------- -----------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
INCOME
Interest........................................... $ 6,966,983 $ 523,560 $ -- $ 7,490,543
Dividends (net of $-0-, $2,770 and $2,770,
respectively, foreign withholding tax)............ 1,753,966 41,940 -- 1,795,906
---------------- -------------- ---------- -----------
TOTAL INCOME..................................... 8,720,949 565,500 -- 9,286,449
---------------- -------------- ---------- -----------
EXPENSES
Plan of distribution fee........................... 1,175,930 111,428 -- 1,287,358
Management fee..................................... 705,558 56,828 10,030 (2) 772,416
Investment advisory fee............................ -- 37,886 (37,886 )(4) --
Transfer agent fees and expenses................... 251,583 64,014 -- 315,597
Organizational expenses............................ -- 23,868 (23,868 )(3) --
Registration fees.................................. 48,807 6,079 -- 54,886
Custodian fees..................................... 17,617 20,536 (14,953 )(5) 23,200
Professional fees.................................. 42,046 47,665 (30,711 )(1) 59,000
Shareholder reports and notices.................... 38,310 7,957 (826 )(5) 45,441
Trustees' fees and expenses........................ 13,830 21,786 (21,786 )(1) 13,830
Other.............................................. 10,701 1,993 (1,993 )(1) 10,701
---------------- -------------- ---------- -----------
TOTAL EXPENSES BEFORE AMOUNTS WAIVED/ ASSUMED.... 2,304,382 400,040 (121,993 ) 2,582,429
LESS: AMOUNTS WAIVED/ASSUMED (7)................. -- (288,612) 288,612
---------------- -------------- ---------- -----------
TOTAL EXPENSES AFTER AMOUNTS WAIVED/ ASSUMED..... 2,304,382 111,428 166,619 2,582,429
---------------- -------------- ---------- -----------
NET INVESTMENT INCOME............................ 6,416,567 454,072 (166,619 ) 6,704,020
---------------- -------------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain/loss on:
Investments........................................ 6,762,241 (2,922) 6,759,319
Foreign exchange transactions...................... -- (455,381) (455,381)(7)
---------------- -------------- -----------
TOTAL GAIN/LOSS.................................. 6,762,241 (458,303) 6,303,938
---------------- -------------- -----------
Net unrealized appreciation (depreciation) on:
Investments........................................ (2,128,506) 1,288,118 -- (840,388)
Translation of forward foreign exchange contracts,
other assets and liabilities denominated in
foreign currencies................................ -- 57,922 -- 57,922(7)
---------------- -------------- ---------- -----------
TOTAL APPRECIATION (DEPRECIATION)................ (2,128,506) 1,346,040 -- (782,466)
---------------- -------------- ---------- -----------
NET GAIN....................................... 4,633,735 887,737 -- 5,521,472
---------------- -------------- ---------- -----------
NET INCREASE................................. $ 11,050,302 $ 1,341,809 $(166,619 ) $12,225,492
---------------- -------------- ---------- -----------
---------------- -------------- ---------- -----------
<FN>
- ------------------------
(1) Reflects elimination of duplicate services or fees.
(2) Reflects adjustment to investment management fees based on the surviving
Fund's fee schedule.
(3) Prepaid organizational expenses will not be assumed by the surviving Fund.
(4) Surviving Fund does not pay investment advisory fees to TCW Funds
Management, Inc.
(5) Adjustment for estimated expense based on surviving Fund's fees.
(6) Waiver would be eliminated since the Fund's combined net assets as of the
beginning of the period would have been in excess of $50 million.
(7) The combination at the beginning of the period would have resulted in a
different composition of operations for the combined entity.
</TABLE>
See Notes to Pro Forma Financial Statements
6
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF COMBINATION -- The Pro Forma Statement of Assets and Liabilities,
including the Portfolio of Investments and the related Statement of Operations
("Pro Forma Statements"), reflect the accounts of Dean Witter Convertible
Securities Trust ("Convertible") and TCW/DW Global Convertible Trust ("Global
Convertible") at June 30, 1995 and for the period October 31, 1994 (commencement
of operations for Global Convertible) through June 30, 1995.
The Pro Forma Statements give effect to the proposed transfer of all assets
and liabilities of Global Convertible in exchange for shares in Convertible. The
Pro Forma Statements should be read in conjunction with the historical financial
statements of each Fund included in its Prospectus or Statement of Additional
Information.
2. SHARES OF BENEFICIAL INTEREST -- The pro forma net asset value per share
assumes the issuance of additional shares of Convertible which would have been
issued on June 30, 1995 in connection with the proposed reorganization. The
amount of additional shares assumed to be issued (1,701,837) was calculated
based on the June 30, 1995 net assets of Global Convertible ($18,873,376) and
the net asset value per share of Convertible of $11.09.
3. PRO FORMA OPERATIONS -- The Pro Forma Statement of Operations assumes
similar rates of gross investment income for the investments of each Fund.
Accordingly, the combined gross investment income is equal to the sum of each
Fund's gross investment income. Certain expenses have been adjusted to reflect
the expected expenses of the combined entity. Pro forma operating expenses
include the actual expenses of the Funds and the combined Fund based on the fee
schedule in effect for Convertible at the combined level of average net assets
for the eight months ended June 30, 1995. It is intended that the combined Fund
will bear all of its expenses. Pro forma operating expenses do not include the
impact of estimated reorganization costs of approximately $79,500. In accordance
with California Blue Sky expense limitations, if such expenses (exclusive of
taxes, interest, brokerage fees, distribution fees and extraordinary expenses)
exceed 2 1/2% of the first $30,000,000 of average daily net assets, 2% of the
next $70,000,000 of average daily net assets and 1 1/2% of average daily net
assets in excess of $100,000,000, Dean Witter InterCapital Inc., the Investment
Manager, will reimburse the Fund for the amount of such excess. No adjustments
have been made to the combined Fund expenses for possible Blue Sky limitations
because none are expected to be applicable.
7
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
COUPON MATURITY PRINCIPAL PRINCIPAL PRINCIPAL
RATE DATE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------- -------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONVERTIBLE BONDS (58.9%)
AUTO PARTS (2.0%)
Arvin Industries, Inc.... 7.50% 09/30/14 $ 3,900,000 $ 3,870,750 -- $ 3,900,000 $ 3,870,750
----------- ----------- -----------
AUTOMOTIVE (0.3%)
ECU Investor International
PLC (United Kingdom).... 7.25 06/21/01 $ 130,000 $ 181,547 130,000 181,547
FRF Peugot S.A. (France)..... 2.00 01/01/01 1,089,000 211,726 1,089,000 211,726
Y Toyota Motor Corp.
(Japan)................. 1.20 01/28/98 11,000,000 131,323 11,000,000 131,323
----------- ----------- -----------
-- 524,596 524,596
----------- ----------- -----------
BANKING (0.3%)
ECU BCP Bank & Trust
(France)................ 8.75 05/21/02 125,000 173,108 125,000 173,108
US$ Banco de Galicia y Buenos
Aires S.A.
(Argentina)............. 7.00 08/01/02 340,000 233,556 340,000 233,556
US$ Yasuda Trust & Banking
(Japan)................. 2.875 09/30/03 125,000 95,000 125,000 95,000
----------- ----------- -----------
-- 501,664 501,664
----------- ----------- -----------
BASIC CYCLICALS (0.1%)
CAD Magna International,
Inc.* (Canada) (WI)..... 7.25 07/05/05 -- 350,000 255,120 350,000 255,120
----------- ----------- -----------
BUILDING MATERIALS (0.1%)
US$ Cemex S.A. (Mexico)...... 4.25 11/01/97 -- 220,000 166,650 220,000 166,650
----------- ----------- -----------
BUSINESS SERVICES (0.2%)
Danka Business Systems -
144A**.................. 6.75 04/01/02 145,000 147,552 145,000 147,552
McKesson Corp............ 4.50 03/01/04 110,000 99,000 110,000 99,000
Omnicom Group, Inc. -
144A**.................. 4.50 09/01/00 190,000 217,550 190,000 217,550
----------- ----------- -----------
-- 464,102 464,102
----------- ----------- -----------
CHEMICALS (1.9%)
L Cookson Group (United
Kingdom)................ 7.00 11/02/04 150,000 230,433 150,000 230,433
US$ Formosa Chem & Fibre
Corp. (Taiwan).......... 1.75 07/19/01 125,000 117,500 125,000 117,500
RPM, Inc................. 0.00 09/30/12 7,500,000 3,131,250 7,500,000 3,131,250
----------- ----------- -----------
3,131,250 347,933 3,479,183
----------- ----------- -----------
COMPUTER EQUIPMENT (0.3%)
3Com Corp. - 144A**...... 10.25 11/01/01 105,000 134,007 105,000 134,007
EMC Corp................. 4.25 01/01/01 145,000 195,750 145,000 195,750
Storage Technology
Corp.................... 8.00 05/31/15 150,000 146,250 150,000 146,250
Unisys Corp.............. 8.25 08/01/00 160,000 177,600 160,000 177,600
----------- ----------- -----------
-- 653,607 653,607
----------- ----------- -----------
</TABLE>
8
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
COUPON MATURITY PRINCIPAL PRINCIPAL PRINCIPAL
RATE DATE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------- -------- ----------- ----------- ----------- ----------- ----------- -----------
COMPUTER SERVICES (0.3%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Automatic Data
Processing, Inc......... 0.00% 02/20/12 $ 350,000 $ 154,875 $ 350,000 $ 154,875
First Financial
Management Corp......... 5.00 12/15/99 285,000 386,175 285,000 386,175
ITL Olivetti International
N.V. (Italy)............ 3.75 12/31/99 100,000,000 48,466 100,000,000 48,466
----------- ----------- -----------
-- 589,516 589,516
----------- ----------- -----------
COMPUTERS (0.1%)
Y NEC Corporation
(Japan)................. 1.70 03/31/99 4,000,000 49,882 4,000,000 49,882
Y NEC Corporation
(Japan)................. 1.90 03/30/01 5,000,000 61,643 5,000,000 61,643
----------- ----------- -----------
-- 111,525 111,525
----------- ----------- -----------
CONGLOMERATES (0.0%)
US$ Renong Berhad - 144A**
(Malaysia).............. 2.00 07/15/05 -- 90,000 89,550 90,000 89,550
----------- ----------- -----------
CONSTRUCTION PLANT & EQUIPMENT (0.1%)
US$ Kumagai Gumi Finance
(Hong Kong)............. 4.875 12/08/98 -- 125,000 108,750 125,000 108,750
----------- ----------- -----------
CONSUMER PRODUCTS (0.1%)
US$ President Enterprises
Corp. (Taiwan).......... 0.00 07/22/01 150,000 181,313 150,000 181,313
Y Sekisui House (Japan).... 0.80 07/31/01 10,000,000 107,565 10,000,000 107,565
----------- ----------- -----------
-- 288,878 288,878
----------- ----------- -----------
ELECTRICAL EQUIPMENT (1.1%)
US$ Johnson Electric
Holdings, Ltd. (Hong
Kong)................... 4.50 11/05/00 120,000 104,400 120,000 104,400
Magnetek, Inc............ 8.00 09/15/01 $ 2,000,000 $ 2,010,000 2,000,000 2,010,000
----------- ----------- -----------
2,010,000 104,400 2,114,400
----------- ----------- -----------
ELECTRONICS - SEMICONDUCTORS (0.0%)
Integrated Device
Technology.............. 5.50 06/01/02 -- 90,000 93,833 90,000 93,833
----------- ----------- -----------
ENTERTAINMENT (0.8%)
Savoy Pictures
Entertainment, Inc...... 7.00 07/01/03 2,050,000 1,599,000 -- 2,050,000 1,599,000
----------- ----------- -----------
ENTERTAINMENT & LEISURE TIME (0.0%)
US$ Technology Resources
Industries Berhad
(Malaysia).............. 2.75 11/28/04 -- 50,000 51,500 50,000 51,500
----------- ----------- -----------
ENTERTAINMENT/GAMING (3.6%)
Argosy Gaming Co......... 12.00 06/01/01 2,500,000 2,537,500 2,500,000 2,537,500
United Gaming, Inc....... 7.50 09/15/03 1,900,000 1,255,919 1,900,000 1,255,919
United Gaming, Inc. -
144A**.................. 7.50 09/15/03 5,200,000 3,437,252 5,200,000 3,437,252
----------- ----------- -----------
7,230,671 -- 7,230,671
----------- ----------- -----------
</TABLE>
9
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
COUPON MATURITY PRINCIPAL PRINCIPAL PRINCIPAL
RATE DATE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------- -------- ----------- ----------- ----------- ----------- ----------- -----------
ENVIRONMENTAL CONTROL (1.9%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Air & Water Technologies
Corp.................... 8.00% 05/15/15 $ 2,000,000 $ 1,580,000 $ 2,000,000 $ 1,580,000
U.S. Filter Corp......... 5.00 10/15/00 2,000,000 2,100,000 $ 165,000 $ 173,250 2,165,000 2,273,250
----------- ----------- -----------
3,680,000 173,250 3,853,250
----------- ----------- -----------
FINANCIAL SERVICES (4.4%)
AT&T Latin American
Equity - 144A**......... 0.00 03/30/99 2,000,000 1,680,000 2,000,000 1,680,000
FRF AXA Midi Assurances S.A.
(France)................ 6.00 01/01/01 321,250 77,229 321,250 77,229
Fidelity National
Financial, Inc.......... 0.00 02/15/09 12,500,000 5,031,250 12,500,000 5,031,250
FRF Finaxa (France).......... 3.00 01/01/01 548,000 113,152 548,000 113,152
US$ HSH Overseas Finance Ltd.
(Cayman Islands)........ 5.00 01/06/01 175,000 155,969 175,000 155,969
US$ Lend Lease Finance
International Ltd.
(Australia)............. 4.75 06/01/03 200,000 222,000 200,000 222,000
L Lonhro Finance Public
(United Kingdom)........ 6.00 02/27/04 100,000 140,073 100,000 140,073
Merrill Lynch & Co., Inc.
- 144A** (3)............ 0.00 06/30/99 160,000 201,600 160,000 201,600
FRF Unibail (France)......... 3.75 01/01/04 791,940 151,063 791,940 151,063
Waterhouse Investor
Services, Inc........... 6.00 12/15/03 1,000,000 950,000 1,000,000 950,000
----------- ----------- -----------
7,661,250 1,061,086 8,722,336
----------- ----------- -----------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
(0.3%)
L Allied Domecq PLC (United
Kingdom)................ 6.75 07/07/08 70,000 109,488 70,000 109,488
US$ Burns, Philp Treasury
(United Kingdom)........ 5.50 04/30/04 250,000 214,375 250,000 214,375
US$ Grand Metropolitan PLC
(United Kingdom)........ 6.50 01/31/00 60,000 63,900 60,000 63,900
FRF Saint Louis (France)..... 7.00 01/01/00 157,500 37,100 157,500 37,100
L Tate & Lyle International
Finance PLC (United
Kingdom)................ 5.75 03/21/01 100,000 133,298 100,000 133,298
----------- ----------- -----------
-- 558,161 558,161
----------- ----------- -----------
</TABLE>
10
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
COUPON MATURITY PRINCIPAL PRINCIPAL PRINCIPAL
RATE DATE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------- -------- ----------- ----------- ----------- ----------- ----------- -----------
HEALTHCARE (4.2%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Careline, Inc............ 8.00% 05/01/01 $ 4,335,000 $ 4,087,602 $ 4,335,000 $ 4,087,602
Y Eisai Co., Ltd.
(Japan)................. 4.20 03/31/98 $ 2,000,000 $ 25,531 2,000,000 25,531
Elan International
Finance Ltd............. 0.00 10/16/12 215,000 99,975 215,000 99,975
Grancare, Inc............ 6.50 01/15/03 2,900,000 2,494,000 2,900,000 2,494,000
Healthsouth
Rehabilitation Corp..... 5.00 04/01/01 130,000 141,288 130,000 141,288
Multicare Companies,
Inc..................... 7.00 03/15/03 90,000 86,850 90,000 86,850
Pharmaceutical Marketing
Services, Inc........... 6.25 02/01/03 850,000 561,000 850,000 561,000
Pharmaceutical Marketing
Services, Inc. -
144A**.................. 6.25 02/01/03 850,000 561,255 850,000 561,255
Quantum Health Resources
Inc..................... 4.75 10/01/00 105,000 90,300 105,000 90,300
Theratx Inc. - 144A**.... 8.00 02/01/02 130,000 116,288 130,000 116,288
----------- ----------- -----------
7,703,857 560,232 8,264,089
----------- ----------- -----------
HOME BUILDING (2.3%)
Toll Corp................ 4.75 01/15/04 2,300,000 2,138,034 2,300,000 2,138,034
U.S. Home Corp........... 4.875 11/01/05 3,015,000 2,471,396 3,015,000 2,471,396
----------- ----------- -----------
4,609,430 -- 4,609,430
----------- ----------- -----------
HOTELS/MOTELS (0.2%)
Hospitality Franchise
Systems, Inc............ 4.50 10/01/99 150,000 169,550 150,000 169,550
US$ Shangri-La Asia Capital
(Hong Kong)............. 2.875 12/16/00 225,000 176,625 225,000 176,625
----------- ----------- -----------
-- 346,175 346,175
----------- ----------- -----------
INDUSTRIALS (1.8%)
ADT Operations, Inc...... 0.00 07/06/10 4,000,000 1,567,360 4,000,000 1,567,360
US$ Bangkok Bank Public Co.
(Thailand).............. 3.25 03/03/04 130,000 131,950 130,000 131,950
US$ Banpu Public Company Ltd.
(Thailand).............. 3.50 08/25/04 120,000 146,100 120,000 146,100
L Coats Viyella PLC (United
Kingdom)................ 6.25 08/09/03 80,000 111,102 80,000 111,102
FRF Danone (France).......... 6.60 01/01/00 289,800 69,496 289,800 69,496
Y Fujitsu Ltd. (Japan)..... 1.90 03/29/02 6,000,000 71,418 6,000,000 71,418
Y Kawasaki Heavy Industries
Ltd. (Japan)............ 0.80 09/28/01 10,000,000 107,683 10,000,000 107,683
Y Matsushita Electric
Industries (Japan)...... 1.40 03/31/04 12,000,000 136,454 12,000,000 136,454
Raymond Corp............. 6.50 12/15/03 900,000 1,116,000 900,000 1,116,000
US$ Sampo Corp. (Taiwan)..... 2.625 11/23/01 100,000 108,250 100,000 108,250
Y Shin-Etsu Chemical Co.
(Japan)................. 1.30 03/31/99 5,000,000 59,043 5,000,000 59,043
----------- ----------- -----------
2,683,360 941,496 3,624,856
----------- ----------- -----------
</TABLE>
11
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
COUPON MATURITY PRINCIPAL PRINCIPAL PRINCIPAL
RATE DATE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------- -------- ----------- ----------- ----------- ----------- ----------- -----------
INSURANCE (1.4%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
US$ Aegon N.V. - 144A**
(Netherlands)........... 4.75% 11/01/04 $ 75,000 $ 93,892 $ 75,000 $ 93,892
Chubb Capital Corp....... 6.00 05/15/98 90,000 92,813 90,000 92,813
Fremont General Corp..... 0.00 10/12/13 120,000 45,300 120,000 45,300
Horace Mann Educators
Corp.................... 6.50 12/01/99 $ 1,500,000 $ 1,485,000 1,500,000 1,485,000
US$ SwissRe Finance - 144A**
(Bermuda)............... 2.00 07/06/00 1,000,000 900,000 105,000 94,566 1,105,000 994,566
USF&G Corp............... 0.00 03/03/09 240,000 132,000 240,000 132,000
----------- ----------- -----------
2,385,000 458,571 2,843,571
----------- ----------- -----------
LEISURE (0.9%)
US$ Amer Group Ltd. - 144A**
(Finland)............... 6.25 06/15/03 100,000 92,000 100,000 92,000
Coleman Worldwide
Corp.................... 0.00 05/27/13 5,000,000 1,450,000 600,000 174,000 5,600,000 1,624,000
----------- ----------- -----------
1,450,000 266,000 1,716,000
----------- ----------- -----------
MACHINERY - DIVERSIFIED (0.1%)
Cooper Industries,
Inc..................... 7.05 01/01/15 -- 199,000 205,965 199,000 205,965
----------- ----------- -----------
MEDIA GROUP (0.3%)
Comcast Corp............. 3.375 09/09/05 210,000 193,200 210,000 193,200
FRF Euro Rscg Worldwide
(France)................ 2.75 01/01/01 373,800 75,419 373,800 75,419
FRF Havas S.A. (France)...... 3.00 12/31/97 475,000 113,148 475,000 113,148
News America Holdings,
Inc..................... 0.00 03/11/13 655,000 311,125 655,000 311,125
----------- ----------- -----------
-- 692,892 692,892
----------- ----------- -----------
MEDICAL SERVICES (0.1%)
Integrated Health
Services, Inc........... 5.75 01/01/01 -- 170,000 183,175 170,000 183,175
----------- ----------- -----------
METALS (0.6%)
Allegheny Ludlum Corp.... 5.875 03/15/02 155,000 165,416 155,000 165,416
ECU Arbed S.A.
(Luxembourg)............ 5.50 07/07/99 70,000 84,822 70,000 84,822
Crown Resources Corp..... 5.75 08/27/01 1,250,000 912,500 1,250,000 912,500
----------- ----------- -----------
912,500 250,238 1,162,738
----------- ----------- -----------
MULTI-INDUSTRY (0.2%)
FRF CIE Generale des Eaux
(France)................ 6.00 01/01/98 607,050 137,870 607,050 137,870
L Hanson PLC (United
Kingdom)................ 9.50 01/31/06 150,000 243,284 150,000 243,284
----------- ----------- -----------
-- 381,154 381,154
----------- ----------- -----------
OIL RELATED (0.1%)
Y Mitsubishi Oil Co., Ltd.
(Japan)................. 2.00 09/29/00 -- 10,000,000 117,021 10,000,000 117,021
----------- ----------- -----------
OIL & GAS (2.2%)
Apache Corp.............. 6.00 01/15/02 145,000 161,494 145,000 161,494
Pennzoil Co. (4)......... 4.75 10/01/03 235,000 221,206 235,000 221,206
SFP Pipeline Holdings,
Inc..................... 11.16 08/15/10 70,000 89,600 70,000 89,600
Valhi Inc................ 0.00 10/20/07 11,000,000 3,877,500 11,000,000 3,877,500
----------- ----------- -----------
3,877,500 472,300 4,349,800
----------- ----------- -----------
</TABLE>
12
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
COUPON MATURITY PRINCIPAL PRINCIPAL PRINCIPAL
RATE DATE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------- -------- ----------- ----------- ----------- ----------- ----------- -----------
PAPER & FOREST PRODUCTS (0.1%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
US$ PT International
Indorayon Utama
(Indonesia)............. 5.50% 10/01/02 $ 50,000 $ 58,875 $ 50,000 $ 58,875
Riverwood International
Corp.................... 6.75 09/15/03 120,000 160,279 120,000 160,279
----------- ----------- -----------
-- 219,154 219,154
----------- ----------- -----------
POLLUTION CONTROL (0.3%)
Thermo Electron Corp..... 5.00 04/15/01 295,000 400,463 295,000 400,463
WMX Technologies, Inc.... 2.00 01/24/05 213,000 179,186 213,000 179,186
----------- ----------- -----------
-- 579,649 579,649
----------- ----------- -----------
PUBLISHING (3.6%)
Hollinger, Inc........... 0.00 10/05/13 $ 5,000,000 $ 1,550,000 5,000,000 1,550,000
Nelson (Thomas), Inc. -
144A**.................. 5.75 11/30/99 90,000 103,536 90,000 103,536
Time Warner, Inc......... 0.00 12/17/12 4,500,000 1,507,500 4,500,000 1,507,500
Time Warner, Inc......... 8.75 01/10/15 3,622,000 3,771,408 265,000 275,931 3,887,000 4,047,339
----------- ----------- -----------
6,828,908 379,467 7,208,375
----------- ----------- -----------
REAL ESTATE (0.4%)
US$ Guangzhou Investment Co.
(Hong Kong)............. 4.50 10/08/98 80,000 69,000 80,000 69,000
US$ HD Finance Cayman Ltd. -
144A** (Cayman
Islands)................ 6.75 06/01/00 310,000 308,063 310,000 308,063
US$ Hong Kong Land Co. (Hong
Kong)................... 4.00 02/23/01 160,000 130,600 160,000 130,600
New World Development.... 4.375 12/11/00 290,000 258,463 290,000 258,463
----------- ----------- -----------
-- 766,126 766,126
----------- ----------- -----------
REAL ESTATE INVESTMENT TRUST (3.8%)
Alexander Haagen
Properties, Inc. (Series
A)...................... 7.50 01/15/01 2,850,000 2,360,626 2,850,000 2,360,626
Camden Property Trust.... 7.33 04/01/01 3,750,000 3,585,938 3,750,000 3,585,938
Capstone Capital Corp.... 10.50 04/01/02 1,500,000 1,620,000 1,500,000 1,620,000
----------- ----------- -----------
7,566,564 -- 7,566,564
----------- ----------- -----------
RESTAURANTS (4.6%)
Boston Chicken Inc....... 0.00 06/01/15 15,000,000 3,412,500 430,000 97,825 15,430,000 3,510,325
Shoney's Inc............. 0.00 04/11/04 6,000,000 2,460,000 6,000,000 2,460,000
TPI Enterprises, Inc..... 8.25 07/15/02 3,375,000 3,064,196 3,375,000 3,064,196
----------- ----------- -----------
8,936,696 97,825 9,034,521
----------- ----------- -----------
</TABLE>
13
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
COUPON MATURITY PRINCIPAL PRINCIPAL PRINCIPAL
RATE DATE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------- -------- ----------- ----------- ----------- ----------- ----------- -----------
RETAIL (6.6%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ben Franklin Retail
Stores, Inc............. 7.50% 06/01/03 $ 1,250,000 $ 950,000 $ 1,250,000 $ 950,000
Carter Hawley Hale
Stores, Inc. - 144A**... 6.25 12/31/00 3,000,000 1,900,680 3,000,000 1,900,680
Eagle Hardware & Garden
Inc..................... 6.25 03/15/01 1,500,000 1,065,000 1,500,000 1,065,000
Federated Department
Stores, Inc............. 9.72 02/15/04 1,250,000 1,268,750 1,250,000 1,268,750
Office Depot, Inc........ 0.00 11/01/08 $ 300,000 $ 196,500 300,000 196,500
Pep Boys-Manny, Moe &
Jack.................... 4.00 09/01/99 85,000 78,382 85,000 78,382
Rite Aid Corp............ 0.00 07/24/06 7,000,000 3,368,750 7,000,000 3,368,750
Sports & Recreation
Inc..................... 4.25 11/01/00 2,000,000 1,495,000 2,000,000 1,495,000
Tops Appliance City Inc.
- 144A**................ 6.50 11/30/03 2,000,000 760,000 2,000,000 760,000
Waban, Inc............... 6.50 07/01/02 2,150,000 1,940,375 2,150,000 1,940,375
----------- ----------- -----------
12,748,555 274,882 13,023,437
----------- ----------- -----------
SCIENTIFIC INSTRUMENTS (0.1%)
Fisher Scientific
International, Inc...... 4.75 03/01/03 -- 175,000 188,248 175,000 188,248
----------- ----------- -----------
STEEL (0.4%)
Nippon Denro Ltd. -
144A** (India).......... 3.00 04/01/01 1,275,000 771,375 -- 1,275,000 771,375
----------- ----------- -----------
TELECOMMUNICATIONS (1.7%)
Audiovox Corp. -
144A**.................. 6.25 03/15/01 2,500,000 1,450,000 2,500,000 1,450,000
LDDS Communications,
Inc..................... 5.00 08/15/03 135,000 130,275 135,000 130,275
Motorola, Inc............ 0.00 09/27/13 365,000 298,388 365,000 298,388
U.S. Cellular Corp....... 0.00 06/15/15 5,000,000 1,550,000 90,000 27,900 5,090,000 1,577,900
----------- ----------- -----------
3,000,000 456,563 3,456,563
----------- ----------- -----------
TEXTILES (1.7%)
US$ Far Eastern Textile
(Taiwan)................ 4.00 10/07/06 200,000 224,000 200,000 224,000
Interface, Inc........... 8.00 09/15/13 3,250,000 3,185,000 3,250,000 3,185,000
----------- ----------- -----------
3,185,000 224,000 3,409,000
----------- ----------- -----------
TIRE & RUBBER GOODS (0.1%)
FRF Michelin France
(France)................ 2.50 01/01/01 -- 841,500 172,859 841,500 172,859
----------- ----------- -----------
TRANSPORTATION (0.4%)
AMR Corp................. 6.125 11/01/24 305,000 317,377 305,000 317,377
Delta Air Lines, Inc..... 3.23 06/15/03 305,000 293,761 305,000 293,761
Y Keihin Electric Express
Railway (Japan)......... 1.50 03/29/02 10,000,000 113,593 10,000,000 113,593
----------- ----------- -----------
-- 724,731 724,731
----------- ----------- -----------
TRANSPORTATION - INTERNATIONAL (0.3%)
Consorcio G Grupo S.A. de
C.V. (Mexico)........... 8.00 08/08/04 1,651,000 594,360 -- 1,651,000 594,360
----------- ----------- -----------
UTILITIES - ELECTRIC (1.3%)
California Energy Co.,
Inc. - 144A**........... 5.00 07/31/00 2,750,000 2,525,600 -- 2,750,000 2,525,600
----------- ----------- -----------
</TABLE>
14
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
COUPON MATURITY PRINCIPAL PRINCIPAL PRINCIPAL
RATE DATE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------- -------- ----------- ----------- ----------- ----------- ----------- -----------
WASTE MANAGEMENT (1.2%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Laidlaw Inc. - 144A**
(Canada)................ 6.00% 01/15/99 $ 2,000,000 $ 2,250,000 $ 200,000 $ 225,000 $ 2,200,000 $ 2,475,000
----------- ----------- -----------
TOTAL CONVERTIBLE BONDS
(Identified Cost
$106,753,421, $13,114,314,
and $119,867,735,
respectively)............... 101,211,626 15,327,844 116,539,470
----------- ----------- -----------
CORPORATE BOND (1.0%)
RESTAURANT
Flagstar Corp.
(Identified Cost
$2,450,000)............. 11.375 09/15/03 2,500 1,943,750 -- 2,500 1,943,750
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
NO. OF NO. OF NO. OF
SHARES SHARES SHARES
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CONVERTIBLE PREFERRED STOCKS (14.8%)
AUTO PARTS (1.6%)
Federal Mogul Corp. - 144A**........ 28,800 1,611,014 28,800 1,611,014
MascoTech, Inc. $1.20............... 111,100 1,583,175 111,100 1,583,175
----------- ----------- -----------
3,194,189 -- 3,194,189
----------- ----------- -----------
BIOTECHNOLOGY (0.3%)
*Gensia, Inc. $3.75 - 144A**........ 63,500 587,375 -- 63,500 587,375
----------- ----------- -----------
BUILDING MATERIALS (0.0%)
Owens-Corning Capital LLC $3.25 -
144A**............................. -- 1,800 92,250 1,800 92,250
----------- ----------- -----------
CHEMICALS (0.7%)
Occidental Petroleum Corp. $3.875 -
144A**............................. 20,000 1,141,260 2,800 159,600 22,800 1,300,860
----------- ----------- -----------
COMPUTER SERVICES (0.1%)
General Motors Corp. $3.25 (Series
C) (1)............................. -- 4,300 270,900 4,300 270,900
----------- ----------- -----------
COMPUTERS (0.3%)
Ameridata Delaware LLC - 144A**..... 20,000 580,000 -- 20,000 580,000
----------- ----------- -----------
ENTERTAINMENT (1.6%)
AMC Entertainment, Inc. $1.75....... 112,600 3,124,650 -- 112,600 3,124,650
----------- ----------- -----------
FINANCIAL SERVICES (0.1%)
Allstate Corp. (The) $2.30 (2)...... 1,200 48,900 1,200 48,900
St. Paul Capital LLC $3.00.......... 2,700 141,075 2,700 141,075
----------- ----------- -----------
-- 189,975 189,975
----------- ----------- -----------
FUNERAL SERVICES (0.1%)
SCI Finance LLC $3.125 (Series A)... -- 3,300 200,475 3,300 200,475
----------- ----------- -----------
FOODS (0.7%)
Chiquita Brands International,
Inc................................ 30,000 1,320,000 -- 30,000 1,320,000
----------- ----------- -----------
INDUSTRIALS (0.0%)
Westinghouse Electric Corp. $1.30 -
144A** (Series C).................. -- 2,900 43,138 2,900 43,138
----------- ----------- -----------
INSURANCE (0.8%)
Alexander & Alexander Services, Inc.
$3.625 - 144A** (Series A)......... 30,000 1,483,140 30,000 1,483,140
American General Delaware $3.00
(Series A)......................... 1,800 93,375 1,800 93,375
----------- ----------- -----------
1,483,140 93,375 1,576,515
----------- ----------- -----------
MEDICAL SERVICES (0.0%)
FHP International Corp. $1.25
(Series A)......................... -- 4,000 94,000 4,000 94,000
----------- ----------- -----------
</TABLE>
15
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
NO. OF NO. OF NO. OF
SHARES VALUE SHARES VALUE SHARES VALUE
----------- ----------- ----------- ----------- ----------- -----------
METALS (0.7%)
<S> <C> <C> <C> <C> <C> <C>
Freeport-McMoran Copper & Gold,
Inc................................ 16,600 $ 358,975 $ 16,600 $ 358,975
Kaiser Aluminum & Chemical Corp..... 100,000 962,500 100,000 962,500
----------- ----------- -----------
1,321,475 -- 1,321,475
----------- ----------- -----------
OIL & GAS (2.5%)
Kelley Oil & Gas Corp. $2.625....... 75,000 1,762,500 75,000 1,762,500
Occidental Petroleum Corp. $3.00
(Series A)......................... 3,000 177,750 3,000 177,750
Parker & Parsley Capital LLC $3.12 -
144A** (Cayman Islands)............ 2,100 92,663 2,100 92,663
Valero Energy Corp. $3.125.......... 65,000 2,973,750 65,000 2,973,750
----------- ----------- -----------
4,736,250 270,413 5,006,663
----------- ----------- -----------
REAL ESTATE (1.0%)
Catellus Development Corp. -
144A**............................. 50,000 2,050,000 -- 50,000 2,050,000
----------- ----------- -----------
STEEL (1.1%)
WHX Corp. $3.25 (Series A).......... 25,000 1,150,000 25,000 1,150,000
WHX Corp. $3.75 (Series B).......... 25,000 1,090,625 25,000 1,090,625
----------- ----------- -----------
2,240,625 -- 2,240,625
----------- ----------- -----------
TELECOMMUNICATIONS (0.8%)
Corning Delaware, L.P. $3.00........ 1,800 92,025 1,800 92,025
MFS Communications Company, Inc.
$2.68.............................. 40,000 1,380,000 2,100 72,450 42,100 1,452,450
----------- ----------- -----------
1,380,000 164,475 1,544,475
----------- ----------- -----------
TELEPHONES (0.6%)
Sprint Corporation $2.6292.......... 35,000 1,216,250 -- 35,000 1,216,250
----------- ----------- -----------
TIRE AND RUBBER GOODS (0.8%)
Goodrich (B.F.) Co. $3.50........... 30,000 1,530,000 -- 30,000 1,530,000
----------- ----------- -----------
WASTE MANAGEMENT (1.0%)
*Browning-Ferris Industries, Inc.... 25,000 912,500 6,200 226,300 31,200 1,138,800
International Technology Corp....... 45,000 815,625 45,000 815,625
----------- ----------- -----------
1,728,125 226,300 1,954,425
----------- ----------- -----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $26,897,752,
$2,730,313, and $29,628,065,
respectively)........................ 27,633,339 1,804,901 29,438,240
----------- ----------- -----------
COMMON STOCKS (10.0%)
AUTO PARTS (0.3%)
MascoTech, Inc...................... 49,900 617,512 -- 49,900 617,512
----------- ----------- -----------
BIOTECHNOLOGY (0.2%)
*Liposome Co., Inc.................. 27,500 299,062 -- 27,500 299,062
----------- ----------- -----------
ENTERTAINMENT (0.2%)
AMC Entertainment, Inc.............. 28,200 405,375 -- 28,200 405,375
----------- ----------- -----------
ENTERTAINMENT/GAMING (0.6%)
*Argosy Gaming Co................... 20,000 250,000 20,000 250,000
International Game Technology....... 57,938 890,797 57,938 890,797
----------- ----------- -----------
1,140,797 -- 1,140,797
----------- ----------- -----------
ENVIRONMENTAL CONTROL (0.8%)
*OHM Corp........................... 130,000 1,576,250 -- 130,000 1,576,250
----------- ----------- -----------
</TABLE>
16
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
NO. OF NO. OF NO. OF
SHARES VALUE SHARES VALUE SHARES VALUE
----------- ----------- ----------- ----------- ----------- -----------
HEALTHCARE (0.5%)
<S> <C> <C> <C> <C> <C> <C>
*Grancare, Inc...................... 28,900 $ 466,012 28,900 $ 466,012
Sun Healthcare Group, Inc........... 30,000 472,500 30,000 472,500
----------- ----------- -----------
938,512 -- 938,512
----------- ----------- -----------
HOSPITAL MANAGEMENT (0.3%)
*Regency Health Services, Inc....... 50,000 525,000 -- 50,000 525,000
----------- ----------- -----------
HOTELS/MOTELS (0.5%)
Equity Inns Inc..................... 85,000 913,750 -- 85,000 913,750
----------- ----------- -----------
MANUFACTURING (0.7%)
*Foamex International Inc........... 201,000 1,432,125 -- 201,000 1,432,125
----------- ----------- -----------
METALS (0.8%)
Freeport-McMoran, Inc............... 95,115 1,676,402 -- 95,115 1,676,402
----------- ----------- -----------
REAL ESTATE INVESTMENT TRUST (2.3%)
Alexander Haagen Properties, Inc.... 95,155 1,094,283 95,155 1,094,283
Avalon Properties, Inc.............. 58,100 1,154,738 58,100 1,154,738
Camden Property Trust............... 12,000 262,500 12,000 262,500
Irvine Apartment Communities,
Inc................................ 40,000 690,000 40,000 690,000
*Reckson Associates Realty Corp..... 35,000 848,750 35,000 848,750
Urban Shopping Centers, Inc......... 25,000 518,750 25,000 518,750
----------- ----------- -----------
4,569,021 -- 4,569,021
----------- ----------- -----------
RESTAURANTS (1.1%)
Brinker International, Inc.......... 105,000 1,811,250 105,000 1,811,250
*Flagstar Companies, Inc............ 75,000 412,500 75,000 412,500
----------- ----------- -----------
2,223,750 -- 2,223,750
----------- ----------- -----------
RETAIL (1.6%)
*Michaels Stores, Inc............... 35,000 743,750 35,000 743,750
TJX Companies, Inc.................. 83,700 1,109,025 83,700 1,109,025
Toys "R" Us, Inc.................... 20,000 585,000 20,000 585,000
*Waban, Inc......................... 54,500 810,687 54,500 810,687
----------- ----------- -----------
3,248,462 -- 3,248,462
----------- ----------- -----------
TRANSPORTATION (0.1%)
*Team Rental Group, Inc............. 40,000 290,000 -- 40,000 290,000
----------- ----------- -----------
TOTAL COMMON STOCKS
(Identified Cost $22,506,684)...... 19,856,018 -- 19,856,018
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF
DATE WARRANTS
-------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WARRANT (0.0%)
TELECOMMUNICATIONS
*Audiovox Corp. -
144A** (Identified
Cost $-0-)............ 03/15/01 45,000 67,500 -- 45,000 67,500
----------- ----------- -----------
<CAPTION>
COUPON MATURITY PRINCIPAL PRINCIPAL
RATE DATE AMOUNT AMOUNT
------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS (15.4%)
U.S. GOVERNMENT AGENCIES (A) (14.1%)
Federal Home Loan
Banks................. 5.91 % 07/05/95 $ 2,000,000 1,998,687 $ 2,000,000 1,998,687
Federal Home Loan
Mortgage Corp......... 5.89 07/07/95 16,000,000 15,984,293 16,000,000 15,984,293
Federal Home Loan
Mortgage Corp......... 5.90 07/07/95 10,000,000 9,993,444 10,000,000 9,993,444
----------- ----------- -----------
</TABLE>
17
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE TCW/DW GLOBAL
SECURITIES TRUST CONVERTIBLE TRUST PRO FORMA
------------------------ ------------------------ ------------------------
COUPON MATURITY PRINCIPAL PRINCIPAL PRINCIPAL
RATE DATE AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------ -------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL U.S. GOVERNMENT
AGENCIES (Amortized Cost
$27,976,424)............ $27,976,424 $ -- $27,976,424
----------- ----------- -----------
REPURCHASE AGREEMENT (1.3%)
The Bank of New York
(dated 06/30/95;
proceeds $2,655,125;
collateralized by
$2,631,520 U.S. Treasury
Note 6.625% due 03/31/97
valued at $2,706,874)
(Identified Cost
$2,653,798)............. 6.00 % 07/03/95 $ 2,653,798 2,653,798 -- $ 2,653,798 2,653,798
----------- ----------- -----------
TOTAL SHORT-TERM IN-
VESTMENTS (Identified
Cost $30,630,222)....... 30,630,222 -- 30,630,222
----------- ----------- -----------
TOTAL INVESTMENTS (Iden-
tified Cost
$189,238,079,
$15,844,627, and
$205,082,706,
respectively) (b)....... 100.1% 181,342,455 17,132,745 198,475,200
LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS OR
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES... (0.1) (1,946,486) 1,740,631 (205,855)
----------- ----------- ----------- -----------
NET ASSETS............... 100.0% $179,395,969 $18,873,376 $198,269,345
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- ------------------------------
WI Security was purchased on a when issued basis.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(1) Exchangeable into General Motors Corp. Class E Common Stock.
(2) Exchangeable into PMI Group Inc. Common Stock.
(3) Exchangeable into Microsoft Corp. Common Stock.
(4) Exchangeable into Chevron Corp. Common Stock.
(a) Securities were purchased on a discount basis. The interest rates shown have
been adjusted to reflect a money market equivalent yield.
(b)
<TABLE>
<CAPTION>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
- ----------------------------------------------------------
COST FOR
FEDERAL GROSS GROSS NET
INCOME UNREALIZED UNREALIZED UNREALIZED
PURPOSES APPRECIATION DEPRECIATION DEPRECIATION
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 190,980,580 $ 4,288,884 $13,927,009 $(9,638,125)
- ------------- ------------- ------------- -------------
- ------------- ------------- ------------- -------------
<CAPTION>
TCW/DW GLOBAL CONVERTIBLE TRUST
- ----------------------------------------------------------
COST FOR
FEDERAL GROSS GROSS NET
INCOME UNREALIZED UNREALIZED UNREALIZED
PURPOSES APPRECIATION DEPRECIATION APPRECIATION
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
$ 15,845,477 $ 1,389,124 $ 101,856 $ 1,287,268
- ------------- ------------- ------------- -------------
- ------------- ------------- ------------- -------------
</TABLE>
See Notes to Pro Forma Financial Statements
18
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DEAN WITTER
NOVEMBER 22, 1994
CONVERTIBLE
SECURITIES TRUST
- --------------------------------------------------------------------------------
Dean Witter Convertible Securities Trust (the "Fund") is an open-end
diversified management investment company whose investment objective is to seek
a high level of total return on its assets through a combination of current
income and capital appreciation. It seeks to achieve its investment objective by
investing principally in "convertible securities," that is, bonds, notes,
debentures, preferred stocks and other securities which are convertible into
common stocks. (See "Investment Practices and Policies".)
A Prospectus for the Fund dated November 22, 1994, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone number listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Dean Witter
Convertible Securities Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550
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TABLE OF CONTENTS
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The Fund and its Management............................................................ 3
Trustees and Officers.................................................................. 6
Investment Practices and Policies...................................................... 9
Investment Restrictions................................................................ 20
Portfolio Transactions and Brokerage................................................... 21
The Distributor........................................................................ 22
Shareholder Services................................................................... 25
Redemptions and Repurchases............................................................ 30
Dividends, Distributions and Taxes..................................................... 32
Performance Information................................................................ 34
Description of Shares of the Fund...................................................... 35
Custodian and Transfer Agent........................................................... 35
Independent Accountants................................................................ 36
Reports to Shareholders................................................................ 36
Legal Counsel.......................................................................... 36
Experts................................................................................ 36
Registration Statement................................................................. 36
Report of Independent Accountants...................................................... 37
Financial Statements -- September 30, 1994............................................. 43
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THE FUND AND ITS MANAGEMENT
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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
May 21, 1985.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware corporation. In
an internal reorganization which took place in January, 1993, InterCapital
assumed the investment advisory, administrative and management activities
previously performed by the InterCapital Division of Dean Witter Reynolds Inc.
("DWR"), a broker-dealer affiliate of InterCapital. (As hereinafter used in this
Statement of Additional Information, the terms "InterCapital" and "Investment
Manager" refer to DWR's InterCapital Division prior to the internal
reorganization and to Dean Witter InterCapital Inc. thereafter.) The daily
management of the Fund and research relating to the Fund's portfolio are
conducted by or under the direction of officers of the Fund and of the
Investment Manager, subject to review by the Fund's Trustees. In addition,
Trustees of the Fund provide guidance on economic factors and interest rate
trends. Information as to these Trustees and Officers is contained under the
caption "Trustees and Officers."
InterCapital is also the investment manager or investment adviser of the
following management investment companies: Active Assets Money Trust, Active
Assets Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, InterCapital Income Securities Inc., InterCapital
Insured Municipal Bond Trust, InterCapital Insured Municipal Trust, InterCapital
Insured Municipal Income Trust, InterCapital Insured Municipal Securities,
InterCapital California Insured Municipal Income Trust, InterCapital Insured
California Municipal Securities, InterCapital Quality Municipal Investment
Trust, InterCapital Quality Municipal Income Trust, InterCapital Quality
Municipal Securities, InterCapital California Quality Municipal Securities,
InterCapital New York Quality Municipal Securities, High Income Advantage Trust,
High Income Advantage Trust II, High Income Advantage Trust III, Dean Witter
Government Income Trust, Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Tax-Exempt Securities Trust, Dean
Witter Dividend Growth Securities Inc., Dean Witter Natural Resource Development
Securities Inc., Dean Witter American Value Fund, Dean Witter Developing Growth
Securities Trust, Dean Witter U.S. Government Money Market Trust, Dean Witter
Variable Investment Series, Dean Witter World Wide Investment Trust, Dean Witter
Select Municipal Reinvestment Fund, Dean Witter U.S. Government Securities
Trust, Dean Witter World Wide Income Trust, Dean Witter California Tax-Free
Income Fund, Dean Witter New York Tax-Free Income Fund, Dean Witter Convertible
Securities Trust, Dean Witter Federal Securities Trust, Dean Witter Value-Added
Market Series, Dean Witter Utilities Fund, Dean Witter Managed Assets Trust,
Dean Witter California Tax-Free Daily Income Trust, Dean Witter Strategist Fund,
Dean Witter Intermediate Income Securites, Dean Witter Capital Growth
Securities, Dean Witter Precious Metals and Minerals Trust, Dean Witter New York
Municipal Money Market Trust, Dean Witter European Growth Fund Inc., Dean Witter
Global Short-Term Income Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean
Witter Multi-State Municipal Series Trust, Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Premier Income Trust, Dean Witter Diversified Income Trust,
Dean Witter Health Sciences Trust, Dean Witter Retirement Series, Dean Witter
Global Dividend Growth Securities, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter
High Income Securities, Dean Witter National Municipal Trust, Dean Witter
International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter Select
Dimensions Investment Series, Municipal Income Trust, Municipal Income Trust II,
Municipal Income Trust III, Municipal Income Opportunities Trust, Municipal
Income Opportunities Trust II, Municipal Income Opportunities Trust III,
Municipal Premium Income Trust and Prime Income Trust. The foregoing investment
companies, together with the Fund, are collectively referred to as the Dean
Witter Funds.
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In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser: TCW/DW
Core Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Balanced Fund, TCW/DW Global Convertible Trust, TCW/DW Total Return
Trust, TCW/DW Emerging Markets Opportunities Trust, TCW/DW Term Trust 2000,
TCW/DW Term Trust 2002 and TCW/DW Term Trust 2003 (the "TCW/DW Funds").
InterCapital also serves as: (i) sub-adviser to Templeton Global Opportunities
Trust, an open-end investment company; (ii) administrator of The BlackRock
Strategic Term Trust Inc., a closed-end investment company; and (iii)
sub-administrator of MassMutual Participation Investors and Templeton Global
Governments Income Trust, closed-end investment companies.
The Investment Manager also serves as an investment adviser for Dean Witter
World Wide Investment Fund, an investment company organized under the laws of
Luxembourg, shares of which may not be offered in the United States or purchased
by American citizens outside of the United States.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective and policies.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund may
reasonably require in the conduct of its business, including the preparation of
prospectuses, statements of additional information, proxy statements and reports
required to be filed with federal and state securities commissions (except
insofar as the participation or assistance of independent accountants and
attorneys is, in the opinion of the Investment Manager, necessary or desirable).
In addition, the Investment Manager pays the salaries of all personnel,
including officers of the Fund, who are employees of the Investment Manager. The
Investment Manager also bears the cost of telephone service, heat, light, power
and other utilities provided to the Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to the
Fund which were previously performed directly by InterCapital. The foregoing
internal reorganization did not result in any change in the nature or scope of
the administrative services being provided to the Fund or any of the fees being
paid by the Fund for the overall services being performed under the terms of the
existing Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares (see "The Distributor") will be paid
by the Fund. The expenses borne by the Fund include, but are not limited to:
expenses of the Plan of Distribution pursuant to Rule 12b-1 (see "The
Distributor"), charges and expenses of any registrar, custodian, stock transfer
and dividend disbursing agent; brokerage commissions; taxes; engraving and
printing of 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
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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: 0.60% of the portion of
the daily net assets of the Fund not exceeding $750 million and 0.55% of the
portion of the daily net assets exceeding $750 million but not exceeding $1
billion; 0.50% of the portion of the daily net assets of the Fund exceeding $1
billion but not exceeding $1.5 billion; 0.475% of the portion of the Fund's
daily net assets exceeding $1.5 billion but not exceeding $2 billion; 0.45% of
the portion of the Fund's daily net assets exceeding $2 billion but not
exceeding $3 billion; and 0.425% of the portion of the Fund's daily net assets
exceeding $3 billion. Total compensation accrued to the Investment Manager for
the fiscal years ended September 30, 1992, 1993 and 1994 amounted to $1,554,625,
$1,277,276 and $1,201,442, respectively.
Total operating expenses of the Fund are subject to applicable limitations
under rules and regulations of states where the Fund is authorized to sell its
shares. Therefore, operating expenses are effectively subject to the most
restrictive of such limitations as the same may be amended from time to time.
Presently, the most restrictive limitation is as follows. If, in any fiscal
year, the Fund's total operating expenses, exclusive of taxes, interest,
brokerage fees, distribution fees and extraordinary expenses (to the extent
permitted by applicable state securities laws and regulations), exceeds 2 1/2%
of the first $30,000,000 of average daily net assets, 2% of the next $70,000,000
of average daily net assets and 1 1/2% of any excess over $100,000,000, the
Investment Manager will reimburse the Fund for the amount of such excess. Such
amount, if any, will be calculated daily and credited on a monthly basis. The
Fund did not exceed the expense limitation during the fiscal years ended
September 30, 1992, 1993 and 1994.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder, the
Investment Manager is not liable to the Fund or any of its investors for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors. The Agreement in no way restricts the Investment Manager from
acting as investment manager or adviser to others.
The Agreement was initially approved by the Board of Trustees on October 30,
1992 and by the shareholders of the Fund at a Special Meeting of Shareholders
held on January 12, 1993. The Agreement is substantially identical to a prior
investment management agreement which was initially approved by the Trustees on
July 19, 1985 and by DWR as the then sole shareholder on August 8, 1985 and by
the Shareholders of the Fund at a Special Meeting of Shareholders on December
29, 1986. The Agreement took effect on June 30, 1993 upon the spin-off by Sears,
Roebuck & Co. of its remaining shares of DWDC. Under its terms, the Agreement
had an initial term ending April 30, 1994 and provides that it will continue in
effect from year to year thereafter, provided continuance of the Agreement is
approved at least annually by the vote of the holders of a majority, as defined
in the Act, of the outstanding shares of the Fund, or by the Trustees of the
Fund; provided that in either event such continuance is approved annually by the
vote of a majority of the Trustees of the Fund who are not parties to the
Agreement or "interested persons" (as defined in the Act) of any such party (the
"Independent Trustees"), which vote must be cast in person at a meeting called
for the purpose of voting on such approval. At their meeting held on April 8,
1994, the Fund's Board of Trustees, including all of the Independent Trustees,
approved continuation of the Agreement until April 30, 1995.
The Agreement may be terminated at any time, without penalty, on thirty
days' notice by the Trustees of the Fund, by the holders of a majority, as
defined in the Investment Company Act of 1940 (the "Act"), of the outstanding
shares of the Fund, or by the Investment Manager. The Agreement will
automatically terminate in the event of its assignment (as defined in the Act).
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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.
TRUSTEES AND OFFICERS
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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 Dean Witter Funds and the TCW/DW Funds are shown
below.
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NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
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Jack F. Bennett Retired; Director or Trustee of the Dean Witter Funds;
Trustee formerly Senior Vice President and Director of Exxon
141 Taconic Road Corporation (1975-January, 1989) and Under Secretary of
Greenwich, Connecticut the U.S. Treasury for Monetary Affairs (1974-1975);
Director of Philips Electronics N.V., Tandem Computers
Inc. and Massachusetts Mutual Insurance Co.; director or
trustee of various not-for-profit and business
organizations.
Michael Bozic President and Chief Executive Officer of Hills Department
Trustee Stores (since May, 1991); formerly Chairman and Chief
c/o Hills Stores Inc. Executive Officer (January, 1987-August, 1990) and
15 Dan Road President and Chief Operating Officer (August,
Canton, Massachusetts 1990-February, 1991) of the Sears Merchandise Group of
Sears, Roebuck and Co.; Director or Trustee of the Dean
Witter Funds; Director of Harley Davidson Credit Inc., the
United Negro College Fund and Domain Inc. (home decor
retailer).
Charles A. Fiumefreddo* Chairman, Chief Executive Officer and Director of
Chairman of the Board, President, Chief InterCapital, Dean Witter Distributors Inc. ("Distribu-
Executive Officer and Trustee tors") and DWSC; Executive Vice President and Director of
Two World Trade Center DWR; Chairman, Director or Trustee, President and Chief
New York, New York Executive Officer of the Dean Witter Funds; Chairman,
Chief Executive Officer and Trustee of the TCW/DW Funds;
Chairman and Director of Dean Witter Trust Company
("DWTC"); Director and/or officer of various DWDC
subsidiaries; formerly Executive Vice President and
Director of DWDC (until February, 1993).
Edwin J. Garn Director or Trustee of the Dean Witter Funds; formerly
Trustee United States Senator (R-Utah) (1974-1992) and Chairman,
2000 Eagle Gate Tower Senate Banking Committee (1980-1986); formerly Mayor of
Salt Lake City, Utah Salt Lake City, Utah (1971-1974); formerly Astronaut,
Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Chemical Corporation (since January,
1993);
Member of the board of various civic and charitable
organizations.
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NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
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John R. Haire Chairman of the Audit Committee and Chairman of the
Trustee Committee of the Independent Directors or Trustees and
439 East 51st Street Director or Trustee of the Dean Witter Funds; Trustee of
New York, New York 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) and Bowne & Co., Inc.
(printing).
Dr. John E. Jeuck Retired; Director or Trustee of the Dean Witter Funds;
Trustee formerly Robert Law Professor of Business Administration,
70 East Cedar Street Graduate School of Business, University of Chicago;
Chicago, Illinois Business consultant.
Dr. Manuel H. Johnson Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Koch Professor of International Eco-
7521 Old Dominion Drive nomics and Director of the Center for Global Market
Maclean, Virginia Studies at George Mason University (since September,
1990); Co-Chairman and a founder of the Group of Seven
Council (G7C), an international economic commission (since
September, 1990); Director or Trustee of the Dean Witter
Funds; Trustee of the TCW/DW Funds; Director of Greenwich
Capital Markets Inc. (broker-dealer); formerly Vice
Chairman of the Board of Governors of the Federal Reserve
System (February, 1986-August 1990) and Assistant
Secretary of the U.S. Treasury (1982-1986).
Paul Kolton Director or Trustee of the Dean Witter Funds; Chairman of
Trustee the Audit Committee and Chairman of the Committee of the
9 Hunting Ridge Road Independent Trustees and Trustee of the TCW/DW Funds;
Stamford, Connecticut formerly Chairman of the Financial Accounting Standards
Advisory Council and Chairman and Chief Executive Officer
of the American Stock Exchange; Director of UCC Investors
Holding Inc. (Uniroyal Chemical Company, Inc.); director
or trustee of various not-for-profit organizations.
Michael E. Nugent General Partner, Triumph Capital, L.P., a private in-
Trustee vestment partnership (since April, 1988); Director or
237 Park Avenue Trustee of the Dean Witter Funds; Trustee of the TCW/DW
New York, New York Funds; formerly Vice President, Bankers Trust Company and
BT Capital Corporation (September, 1984-March, 1988);
Director of various business organizations.
Philip J. Purcell* Chairman of the Board of Directors and Chief Executive
Trustee Officer of DWDC, DWR and Novus Credit Services Inc.;
Two World Trade Center Director of InterCapital, DWSC and Distributors; Director
New York, New York or Trustee of the Dean Witter Funds; Director and/or
officer of various DWDC subsidiaries.
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NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
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John L. Schroeder Executive Vice President and Chief Investment Officer of
Trustee the Home Insurance Company (since August, 1991); Director
Northgate 3A or Trustee of the Dean Witter Funds; Director of Citizens
Alger Court Utilities Company; formerly Chairman and Chief Investment
Bronxville, New York Officer of Axe-Houghton Management and the Axe-Houghton
Funds (April, 1983-June, 1991) and President of USF&G
Financial Services, Inc. (June, 1990-June, 1991).
Edward R. Telling* Retired; Director or Trustee of the Dean Witter Funds;
Trustee formerly Chairman of the Board of Directors and Chief
Sears Tower Executive Officer (until December, 1985) and President
Chicago, Illinois (from January, 1981-March, 1982 and from February,
1984-August, 1984) of Sears, Roebuck and Co.; formerly
Director of Sears, Roebuck and Co.
Sheldon Curtis Senior Vice President, Secretary and General Counsel of
Vice President, Secretary and General Counsel InterCapital and DWSC; Senior Vice President, Assistant
Two World Trade Center Secretary and Assistant General Counsel of Distributors;
New York, New York Senior Vice President and Secretary of DWTC; Assistant
Secretary of DWDC and DWR; Vice President, Secretary and
General Counsel of the Dean Witter Funds and the TCW/DW
Funds.
Ronald J. Worobel Senior Vice President of InterCapital (since June, 1993);
Vice President Vice President of various Dean Witter
Two World Trade Center Funds; formerly Vice President of InterCapital (June,
New York, New York 1992-June, 1993); formerly Managing Director, Mac-
Kay-Shields Financial Corp. (February, 1989-June, 1992)
and Senior Vice President of Rothschild Inc. (June,
1986-February, 1989).
Michael G. Knox Senior Portfolio Manager of InterCapital (since August,
Vice President 1993); formerly a portfolio manager and analyst with Eagle
Two World Trade Center Asset Management, Inc. (February, 1991-August, 1993) and
New York, New York assistant portfolio manager and analyst with Heritage
Asset Management, Inc. (July, 1988-February, 1991).
Thomas F. Caloia First Vice President (since May, 1991) and Assistant
Treasurer Treasurer (since January, 1993) of InterCapital; First
Two World Trade Center Vice President and Assistant Treasurer of DWSC; Treasurer
New York, New York of the Dean Witter Funds and the TCW/DW Funds; previously
Vice President of InterCapital.
<FN>
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*Denotes Trustees who are "interested persons" of the Fund, as defined in the
Act.
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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, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and Director
of DWTC, and Edmund C. Puckhaber, Executive Vice President of InterCapital and
Director of DWTC and Thomas H. Connelly, Paul D. Vance and Ira N. Ross, Senior
Vice Presidents of InterCapital, are Vice Presidents of the Fund, and Barry Fink
and Marilyn K. Cranney, First Vice Presidents and
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Assistant General Counsels of InterCapital and DWSC, and Lawrence S. Lafer,
LouAnne D. McInnis and Ruth Rossi, Vice Presidents and Assistant General
Counsels of InterCapital and DWSC, are Assistant Secretaries of the Fund.
The Fund pays each Trustee who is not an employee of the Investment Manager
or an affiliated company an annual fee of $1,200 ($1,600 prior to December 31,
1993) plus $50 for each meeting of the Board of Trustees or of any committee of
the Board of Trustees attended by the Trustee in person (the Fund pays the
Chairman of the Audit Committee an additional annual fee of $1,000 ($1,200 prior
to December 31, 1993) and pays the Chairman of the Committee of the Independent
Trustees an additional annual fee of $2,400, in each case inclusive of the
Committee meeting fees). The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are employed by the Investment
Manager or an affiliated company receive no compensation or expense
reimbursement from the Fund.
The Fund has adopted a retirement program under which an Independent Trustee
who retires after a minimum required period of service would be entitled to
retirement payments upon reaching the eligible retirement age (normally, after
attaining age 72) based upon length of service and computed as a percentage of
one-fifth of the total compensation earned by such Trustee for service to the
Fund in the five-year period prior to the date of the Trustee's retirement. For
the fiscal year ended September 30, 1994, the Fund accrued a total of $42,031
for Trustees' fees, expenses and benefits under the above-described retirement
program. As of the date of this Statement of Additional Information, the
aggregate shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than one percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
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CONVERTIBLE SECURITIES. A convertible security entitles the holder to
exchange it for a fixed number of shares of common stock or other equity
security, usually of the same company, at fixed prices within a specified period
of time. As such, a convertible security entitles the holder to receive the
fixed income of a bond or the dividend preference of a preferred stock until the
holder elects to exercise the conversion privilege.
A convertible security's position in a company's capital structure depends
upon its particular provisions. In the case of subordinated convertible
debentures, the holders' claims on assets and earnings are subordinated to the
claims of other creditors, and are senior to the claims of preferred and common
shareholders. In the case of convertible preferred stock, the holders' claims on
assets and earnings are subordinated to the claims of all creditors and are
senior to the claims of common shareholders.
Every convertible security may be valued, on a theoretical basis, as if it
did not have a conversion privilege. Such theoretical value is determined by the
yield it provides in comparison with the yields of other securities of
comparable character and quality which do not have a conversion privilege. This
theoretical value, which will change with prevailing interest rates, the credit
standing of the issuer and other pertinent factors, is often referred to as the
"investment value," and represents the security's theoretical price support
level.
"Conversion value" is the amount a convertible security would be worth in
market value if it were to be exchanged for the underlying equity security
pursuant to its conversion privilege. Conversion value fluctuates directly with
the price of the underlying equity security, usually common stock. If, because
of low prices for the common stock, the conversion value is substantially below
the investment value, the price of the convertible security is governed
principally by the factors described in the preceding paragraph. If the
conversion value rises near or above its investment value, the price of the
convertible security generally will rise above its investment value and, in
addition, will sell at some premium over its
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conversion value. This premium represents the price investors are willing to pay
for the privilege of purchasing a fixed-income security with a possibility of
capital appreciation due to the conversion privilege. If this appreciation
potential is not realized, this premium may not be recovered.
To the degree that the price of a convertible security rises above its
investment value because of a rise in price of the common stock, it is
influenced more by price fluctuations of the common stock and less by its
investment value. The price of a convertible security that is supported
principally by its conversion value will rise along with any increase in the
price of the common stock, and such price generally will decline along with any
decline in the price of the common stock except that the security will receive
additional support as its price approaches investment value. A convertible
security purchased or held at a time when its price is influenced by its
conversion value will produce a lower yield than nonconvertible senior
securities with comparable investment values. Convertible securities may be
purchased by the Fund at varying price levels above their investment values
and/or their conversion values in keeping with the Fund's investment objectives.
CORPORATE FIXED-INCOME SECURITIES. As discussed in the Prospectus, in order
to generate the current income needed to achieve its investment objective, the
Fund may invest in investment grade non-convertible fixed-income securities as
well as in such securities which are in the lower rating categories of
recognized rating agencies (Standard & Poor's Corporation and Moody's Investors
Service, Inc.) or which are not rated by such agencies. The Investment Manager
will perform its own credit analyses in addition to using recognized rating
agencies and other sources. In making such credit analyses, substantial
consideration will be given to a determination of value based upon, among other
things, anticipated cash flows, interest or dividend coverage, asset coverage,
earnings, experience of the issuer, responsiveness to changes in interest rates
and business conditions and liquidation value relative to the market price.
WHEN, AS AND IF ISSUED SECURITIES. As discussed in the Prospectus, the Fund
may purchase securities on a "when, as and if issued" basis under which the
issuance of the security depends upon the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization, leveraged buyout or debt
restructuring. The commitment for the purchase of any such security will not be
recognized in the portfolio of the Fund until the Investment Manager determines
that issuance of the security is probable. At such time, the Fund will record
the transaction and, in determining its net asset value, will reflect the value
of the security daily. At such time, the Fund will also establish a segregated
account with its custodian bank in which it will maintain cash or cash
equivalents or other high grade debt portfolio securities equal in value to
recognized commitments for such securities. Once a segregated account has been
established, if the anticipated event does not occur and the securities are not
issued, the Fund will have lost an investment opportunity. The value of the
Fund's commitments to purchase the securities of any one issuer, together with
the value of all securities of such issuer owned by the Fund, may not exceed 5%
of the value of the Fund's total assets at the time the initial commitment to
purchase such securities is made (see "Investment Restrictions"). Subject to the
foregoing restrictions, the Fund may purchase securities on such basis without
limit. An increase in the percentage of the Fund's assets committed to the
purchase of securities on a "when, as and if issued" basis may increase the
volatility of its net asset value. The Investment Manager and the Trustees do
not believe that the net asset value of the Fund will be adversely affected by
its purchase of securities on such basis. The Fund may also sell securities on a
"when, as and if issued" basis provided that the issuance of the security will
result automatically from the exchange or conversion of a security owned by the
Fund at the time of sale.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may write covered call options against securities held in its
portfolio and covered put options on eligible portfolio securities and purchase
options of the same series to effect closing transactions, and may hedge against
potential changes in the market value of investments (or anticipated
investments) and facilitate the reallocation of the Fund's assets into and out
of equities and fixed-income securities by purchasing put and call options on
portfolio (or eligible portfolio) securities and engaging in transactions
involving futures contracts and options on such contracts.
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Call and put options on U.S. Treasury notes, bonds and bills and equity
securities are listed on Exchanges (currently the Chicago Board Options
Exchange, American Stock Exchange, New York Stock Exchange, Pacific Stock
Exchange and Philadelphia Stock Exchange) and are written in over-the-counter
transactions ("OTC Options"). Listed options are issued by the Options Clearing
Corporation ("OCC"). Ownership of a listed call option gives the Fund the right
to buy from the OCC the underlying security covered by the option at the stated
exercise price (the price per unit of the underlying security) by filing an
exercise notice prior to the expiration date of the option. The writer (seller)
of the option would then have the obligation to sell to the OCC the underlying
security at that exercise price prior to the expiration date of the option,
regardless of its then current market price. Ownership of a listed put option
would give the Fund the right to sell the underlying security to the OCC at the
stated exercise price. Upon notice of exercise of the put option, the writer of
the put would have the obligation to purchase the underlying security from the
OCC at the exercise price.
OPTIONS ON TREASURY BONDS AND NOTES. Because trading interest in options
written on Treasury bonds and notes tends to center on the most recently
auctioned issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options on particular issues. Instead, the expirations introduced at the
commencement of options trading on a particular issue will be allowed to run
their course, with the possible addition of a limited number of new expirations
as the original ones expire. Options trading on each issue of bonds or notes
will thus be phased out as new options are listed on more recent issues, and
options representing a full range of expirations will not ordinarily be
available for every issue on which options are traded.
OPTIONS ON TREASURY BILLS. Because a deliverable Treasury bill changes from
week to week, writers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of the
option, the position may be hedged from a risk standpoint by the writing of a
call option. For so long as the call option is outstanding, the Fund will hold
the Treasury bills in a segregated account with its Custodian, so that they will
be treated as being covered.
OTC OPTIONS. Exchange-listed options are issued by the OCC which assures
that all transactions in such options are properly executed. OTC options are
purchased from or sold (written) to dealers or financial institutions which have
entered into direct agreements with the Fund. With OTC options, such variables
as expiration date, exercise price and premium will be agreed upon between the
Fund and the transacting dealer, without the intermediation of a third party
such as the OCC. If the transacting dealer fails to make or take delivery of the
securities underlying an option it has written, in accordance with the terms of
that option, the Fund would lose the premium paid for the option as well as any
anticipated benefit of the transaction. The Fund will engage in OTC option
transactions only with primary U.S. Government securities dealers recognized by
the Federal Reserve Bank of New York.
COVERED CALL WRITING. The Fund is permitted to write covered call options
on portfolio securities, without limit, in order to aid in achieving its
investment objective. Generally, a call option is "covered" if the Fund owns, or
has the right to acquire, without additional cash consideration (or for
additional cash consideration held for the Fund by its Custodian in a segregated
account) the underlying security subject to the option except that in the case
of call options on U.S. Treasury bills, the Fund might own U.S. Treasury bills
of a different series from those underlying the call option, but with a
principal amount and value corresponding to the exercise price and a maturity
date no later than that of the securities deliverable under the call option. A
call option is also covered if the Fund holds a call on the same security as the
underlying security of the written option, where the exercise price of the call
used for coverage is equal to or less than the exercise price of the call
written or greater than the exercise price of the call written if the
mark-to-market difference is maintained by the Fund in cash, U.S. Government
securities or other high grade debt obligations which the Fund holds in a
segregated account maintained with its Custodian.
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The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these premiums
may better enable the Fund to achieve a greater total return than would be
realized from holding the underlying securities alone. Moreover, the premium
received will offset a portion of the potential loss incurred by the Fund if the
securities underlying the option are ultimately sold by the Fund at a loss. The
premium received will fluctuate with varying economic market conditions. If the
market value of the portfolio securities upon which call options have been
written increases, the Fund may receive less total return from the portion of
its portfolio upon which calls have been written than it would have had such
calls not been written.
As regards listed options and certain over-the-counter ("OTC") options,
during the option period, the Fund may be required, at any time, to deliver the
underlying security against payment of the exercise price on any calls it has
written (exercise of certain listed options may be limited to specific
expiration dates). This obligation is terminated upon the expiration of the
option period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit on
an outstanding call option to prevent an underlying security from being called,
to permit the sale of an underlying security or to enable the Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. Also, effecting a closing purchase transaction
will permit the cash or proceeds from the concurrent sale of any securities
subject to the option to be used for other investments by the Fund. The Fund may
realize a net gain or loss from a closing purchase transaction depending upon
whether the amount of the premium received on the call option is more or less
than the cost of effecting the closing purchase transaction. Any loss incurred
in a closing purchase transaction may be wholly or partially offset by
unrealized appreciation in the market value of the underlying security.
Conversely, a gain resulting from a closing purchase transaction could be offset
in whole or in part or exceeded by a decline in the market value of the
underlying security.
If a call option expires unexercised, the Fund realizes a gain in the amount
of the premium on the option less the commission paid. Such a gain, however, may
be offset by depreciation in the market value of the underlying security during
the option period. If a call option is exercised, the Fund realizes a gain or
loss from the sale of the underlying security equal to the difference between
the purchase price of the underlying security and the proceeds of the sale of
the security plus the premium received on the option less the commission paid.
Options written by a Fund normally have expiration dates of from up to nine
months (equity securities) to eighteen months (fixed-income securities) from the
date written. The exercise price of a call option may be below, equal to or
above the current market value of the underlying security at the time the option
is written. See "Risks of Options Transactions," below.
COVERED PUT WRITING. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period, at
the purchaser's election (certain listed put options written by the Fund will be
exercisable by the purchaser only on a specific date). A put is "covered" if the
Fund maintains, in a segregated account maintained on its behalf at the Fund's
Custodian, cash, U.S. Government securities or other high grade debt obligations
in an amount equal to at least the exercise price of the option, at all times
during the option period. Similarly, a written put position could be covered by
the Fund by its purchase of a put option on the same security as the underlying
security of the written option, where the exercise price of the purchased option
is equal to or more than the exercise price of the put written or less than the
exercise price of the put written if the mark-to-market difference is maintained
by the Fund in cash, U.S. Government securities or other high grade debt
obligations which the Fund holds in a segregated account maintained at its
Custodian. In writing puts, the Fund assumes the risk of loss should the market
value of the underlying security decline below the exercise price of the option
(any loss being decreased by the receipt of the premium on the option written).
During the option period, the
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Fund may be required, at any time, to make payment of the exercise price against
delivery of the underlying security. The operation of and limitations on covered
put options in other respects are substantially identical to those of call
options.
The Fund will write put options for two purposes: (1) to receive the income
derived from the premiums paid by purchasers; and (2) when the Investment
Manager wishes to purchase the security underlying the option at a price lower
than its current market price, in which case it will write the covered put at an
exercise price reflecting the lower purchase price sought. The potential gain on
a covered put option is limited to the premium received on the option (less the
commissions paid on the transaction) while the potential loss equals the
difference between the exercise price of the option and the current market price
of the underlying securities when the put is exercised, offset by the premium
received (less the commissions paid on the transaction).
PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed call and put
options in amounts equalling up to 10% of its total assets. The Fund may
purchase call options only in order to close out a covered call position (see
"Covered Call Writing" above). The call purchased is likely to be on the same
securities and have the same terms as the written option. The option would
generally be acquired from the dealer or financial institution which purchased
the call written by the Fund.
The Fund may purchase put options on securities which it holds (or has the
right to acquire) in its portfolio only to protect itself against a decline in
the value of the security. If the value of the underlying security were to fall
below the exercise price of the put purchased in an amount greater than the
premium paid for the option, the Fund would incur no additional loss. The Fund
may also purchase put options to close out written put positions in a manner
similar to call options closing purchase transactions. In addition, the Fund may
sell a put option which it has previously purchased prior to the sale of the
securities underlying such option. Such a sale would result in a net gain or
loss depending on whether the amount received on the sale is more or less than
the premium and other transaction costs paid on the put option when it was
purchased. Any such gain or loss could be offset in whole or in part by a change
in the market value of the underlying security. If a put option purchased by the
Fund expired without being sold or exercised, the premium would be lost.
RISKS OF OPTIONS TRANSACTIONS. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price should the market price of the
underlying security increase, but has retained the risk of loss should the price
of the underlying security decline. The secured put writer also retains the risk
of loss should the market value of the underlying security decline below the
exercise price of the option less the premium received on the sale of the
option. In both cases, the writer has no control over the time when it may be
required to fulfill its obligation as a writer of the option. Once an option
writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must
deliver or receive the underlying securities at the exercise price.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction it cannot sell
the underlying security until the option expires or the option is exercised.
Accordingly, a covered call option writer may not be able to sell an underlying
security at a time when it might otherwise be advantageous to do so. A covered
put option writer who is unable to effect a closing purchase transaction would
continue to bear the risk of decline in the market price of the underlying
security until the option expires or is exercised. In addition, a covered put
writer would be unable to utilize the amount held in cash or U.S. Government or
other high grade short-term debt obligations as cover for the put option for
other investment purposes until the exercise or expiration of the option.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist. However, the Fund may be
able to purchase an offsetting option which does not close out its position as a
writer but constitutes an asset of equal value to the obligation under the
option written. If the Fund is not able to either enter into a closing purchase
transaction or purchase an offsetting position, it will be
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required to maintain the securities subject to the call, or the collateral
underlying the put, even though it might not be advantageous to do so, until a
closing transaction can be entered into (or the option is exercised or expires).
In addition, in the event of the bankruptcy of a broker through which the Fund
engages in transactions in options, the Fund could experience delays and/or
losses in liquidating open positions purchased or sold through the broker and/or
incur a loss of all or part of its margin deposits with the broker.
Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an Exchange; (v) inadequacy of the facilities of an Exchange or
the Options Clearing Corporation ("OCC") to handle current trading volume; or
(vi) a decision by one or more Exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would generally continue to be
exercisable in accordance with their terms.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the Fund,
the Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by the Fund only with brokers or financial
institutions deemed creditworthy by the Investment Manager.
Each of the Exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different Exchanges or are held or written on
one or more accounts or through one or more brokers). An Exchange may order the
liquidation of positions found to be in violation of these limits and it may
impose other sanctions or restrictions. These position limits may restrict the
number of listed options which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
FUTURES CONTRACTS. The Fund may purchase and sell futures contracts that
are traded on U.S. commodity exchanges on such underlying securities as U.S.
Treasury bonds, notes and bills. As a futures contract purchaser, the Fund
incurs an obligation to take delivery of a specified amount of the obligation
underlying the contract at a specified time in the future for a specified price.
As a seller of a futures contract, the Fund incurs an obligation to deliver the
specified amount of the underlying obligation at a specified time in return for
an agreed upon price.
Although most futures contracts call for actual delivery or acceptance of
securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. A futures contract sale is closed out
by effecting a futures contract purchase for the same aggregate amount of the
specific type of security and the same delivery date. If the sale price exceeds
the offsetting purchase price, the seller would be paid the difference and would
realize a gain. If the offsetting purchase price exceeds the sale price, the
seller would pay the difference and would realize a loss. Similarly, a futures
contract purchase is closed out by effecting a futures contract sale for the
same aggregate amount of the specific type of security and the same delivery
date. If the offsetting sale price exceeds the purchase price, the purchaser
would realize a gain, whereas if the purchase price exceeds the offsetting sale
price, the purchaser would realize a loss. There is no assurance that the Fund
will be able to enter into a closing transaction.
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When the Fund enters into a futures contract, it is initially required to
deposit with the Fund's Custodian, in a segregated account in the name of the
broker performing the transaction, an "initial margin" of cash or U.S.
Government securities or other high grade short-term obligations equal to
approximately 2% of the contract amount. Initial margin requirements are
established by the Exchanges on which futures contracts trade and may, from time
to time, change. In addition, brokers may establish margin deposit requirements
in excess of those required by the Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a brokers' client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are mark-to-market daily and the Fund
may be required to make subsequent deposits of cash or U.S. Government
securities called "variation margin", with the Fund's futures contract clearing
broker, which are reflective of price fluctuations in the futures contract.
Currently, interest rate futures contracts can be purchased on debt securities
such as U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities
between 6 1/2 and 10 years, GNMA Certificates and Bank Certificates of Deposit.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts which are traded on an Exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid), to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract at the time of exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the Investment
Manager wished to protect against an increase in interest rates and the
resulting negative impact on the value of a portion of its fixed-income
portfolio, it might write a call option on an interest rate futures contract,
the underlying security of which correlates with the portion of the portfolio
the Investment Manager seeks to hedge. Any premiums received in the writing of
options on futures contracts may, of course, augment the total return of the
Fund and thereby provide a further hedge against losses resulting from price
declines in portions of the Fund's portfolio.
The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
However, there is no overall limitation on the percentage of the Fund's assets
which may be subject to a hedge position. In addition, in accordance with the
regulations of the Commodity Futures Trading Commission ("CFTC") under which the
Fund is exempted from registration as a commodity pool operator, the Fund may
only enter into futures contracts and options on futures contracts transactions
for purposes of hedging a part or all of its portfolio. If the CFTC changes its
regulations so that the Fund would be permitted to write
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options on futures contracts for purposes other than hedging the Fund's
investments without CFTC registration, the Fund may engage in such transactions
for those purposes. Except as described above, there are no other limitations on
the use of futures and options thereon by the Fund.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. As stated
in the Prospectus, the Fund may sell a futures contract to protect against the
decline in the value of securities held by the Fund. However, it is possible
that the futures market may advance and the value of securities held in the
portfolio of the Fund may decline. If this occurred, the Fund would lose money
on the futures contract and also experience a decline in value of its portfolio
securities. However, while this could occur for a very brief period or to a very
small degree, over time the value of a diversified portfolio will tend to move
in the same direction as the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Investment Manager may determine not to invest in the
securities as planned and will realize a loss on the futures contract that is
not offset by a reduction in the price of the securities.
In order to assure that the Fund is entering into transactions in futures
contracts for hedging purposes as such is defined by the Commodities Futures
Trading Commission either: 1) a substantial majority (i.e., approximately 75%)
of all anticipatory hedge transactions (transactions in which the Fund does not
own at the time of the transaction, but expects to acquire, the securities
underlying the relevant futures contract) involving the purchase of futures
contracts will be completed by the purchase of securities which are the subject
of the hedge or 2) the underlying value of all long positions in futures
contracts will not exceed the total value of: a) all short-term debt obligations
held by the Fund; b) cash held by the Fund; c) cash proceeds due to the Fund on
investments within thirty days; d) the margin deposited on the contracts; and e)
any unrealized appreciation in the value of the contracts.
If the Fund maintains a short position in a futures contract or has sold a
call option on a futures contract, it will cover this position by holding, in a
segregated account maintained at its Custodian, cash, U.S. Government securities
or other high grade debt obligations equal in value (when added to any initial
or variation margin on deposit) to the market value of the securities underlying
the futures contract or the exercise price of the option. Such a position may
also be covered by owning the securities underlying the futures contract, or by
holding a call option permitting the Fund to purchase the same contract at a
price no higher than the price at which the short position was established.
In addition, if the Fund holds a long position in a futures contract or has
sold a put option on a futures contract, it will hold cash, U.S. Government
securities or other high grade debt obligations equal to the purchase price of
the contract or the exercise price of the put option (less the amount of initial
or variation margin on deposit) in a segregated account maintained for the Fund
by its Custodian. Alternatively, the Fund could cover its long position by
purchasing a put option on the same futures contract with an exercise price as
high or higher than the price of the contract held by the Fund.
Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to take or make delivery of the instruments underlying futures contracts it
holds at a time when it is disadvantageous to do so. The inability to close out
options and futures positions could also have an adverse impact on the Fund's
ability to effectively hedge its portfolio. In addition, in the event of the
bankruptcy of a broker through which the Fund engages in transactions in futures
or options thereon, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker.
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In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by the Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by the Fund only with brokers
or financial institutions deemed creditworthy by the Investment Manager.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities is that the prices of securities
and indexes subject to futures contracts (and thereby the futures contract
prices) may correlate imperfectly with the behavior of the cash prices of the
Fund's portfolio securities. Another such risk is that prices of futures
contracts may not move in tandem with the changes in prevailing interest rates
against which the Fund seeks a hedge. A correlation may also be distorted by the
fact that the futures market is dominated by short-term traders seeking to
profit from the difference between a contract or security price objective and
their cost of borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
There may exist an imperfect correlation between the price movements of
futures contracts purchased by the Fund and the movements in the prices of the
securities which are the subject of the hedge. If participants in the futures
market elect to close out their contracts through offsetting transactions rather
than meet margin deposit requirements, distortions in the normal relationship
between the debt securities and futures markets could result. Price distortions
could also result if investors in futures contracts opt to make or take delivery
of underlying securities rather than engage in closing transactions due to the
resultant reduction in the liquidity of the futures market. In addition, due to
the fact that, from the point of view of speculators, the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market could cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and because of the imperfect correlation between movements in the
prices of securities and movements in the prices of futures contracts, a correct
forecast of interest rate trends by the Investment Manager may still not result
in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Fund may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position, and in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures contracts
are traded may compel or prevent the Fund from closing out a contract which may
result in reduced gain or increased loss to the Fund. The absence of a liquid
market in futures contracts might cause the Fund to make or take delivery of the
underlying securities at a time when it may be disadvantageous to do so.
The extent to which the Fund may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the Fund's
intention to qualify as such (see "Dividends, Distributions and Taxes" in the
Prospectus).
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund
notwithstanding that the purchase or sale of a futures contract would not result
in a loss, as in the instance where there is no movement in the prices of the
futures contract or underlying securities.
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The Investment Manager has substantial experience in the use of the
investment techniques described above under the heading "Options and Futures
Transactions," which techniques require skills different from those needed to
select the portfolio securities underlying various options and futures
contracts.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund (subject to notice
provisions described below), and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least the market value, determined daily,
of the loaned securities. The advantage of such loans is that the Fund continues
to receive the income on the loaned securities while at the same time earning
interest on the cash amounts deposited as collateral, which will be invested in
short-term obligations. The Fund will not lend its portfolio securities if such
loans are not permitted by the laws or regulations of any state in which its
shares are qualified for sale and will not lend more than 25% of the value of
its total assets.
A loan may be terminated by the borrower on one business day's notice, or by
the Fund on two business days' notice. If the borrower fails to deliver the
loaned securities within two days after receipt of notice, the Trust could use
the collateral to replace the securities while holding the borrower liable for
any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail financially.
However, these loans of portfolio securities will only be made to firms deemed
by the Fund's management to be creditworthy and when the income which can be
earned from such loans justifies the attendant risks. Upon termination of the
loan, the borrower is required to return the securities to the Fund. Any gain or
loss in the market price during the loan period would inure to the Fund. The
creditworthiness of firms to which the Fund lends its portfolio securities will
be monitored on an ongoing basis by the Investment Manager pursuant to
procedures adopted and reviewed, on an ongoing basis, by the Trustees of the
Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative
and custodial fees in connection with a loan of its securities. However, the
Fund did not lend any of its portfolio securities during the fiscal year ended
September 30, 1994 and it has no intention of doing so in the foreseeable
future.
REPURCHASE AGREEMENTS
When cash may be available for only a few days, it may be invested by the
Fund in repurchase agreements until such time as it may otherwise be invested or
used for payments of obligations of the Fund. These agreements, which may be
viewed as a type of secured lending by the Fund, typically involve the
acquisition by the Fund of debt securities from a selling financial institution
such as a bank, savings and loan association or broker-dealer. The agreement
provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral"), which is
held by the Fund's Custodian, at a specified price and at a fixed time in the
future, usually not more than seven days from the date of purchase. The Fund
will receive interest from the institution until the time when the repurchase is
to occur. Although such date is deemed by the Fund to be the maturity date of a
repurchase agreement, the maturities of securities subject to repurchase
agreements are not subject to any limits and may exceed one year. While
repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions, whose
financial condition will be continually monitored by the Investment Manager
subject to procedures established by the Trustees. In addition, the value of the
collateral
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<PAGE>
underlying the repurchase agreement will always be at least equal to the
repurchase price, including any accrued interest earned on the repurchase
agreement. In the event of a default or bankruptcy by a selling financial
institution, the Fund will seek to liquidate such collateral. However, the
exercising of the Fund's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase were less than the repurchase price, the
Fund could suffer a loss. It is the current policy of the Fund not to invest in
repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts to
more than 10% of its total assets. The Fund's investments in repurchase
agreements may at times be substantial when, in the view of the Investment
Manager, liquidity or other considerations warrant. The Fund did not enter into
any repurchase agreements during the fiscal year ended September 30, 1994, in an
amount greater than 5% of its net assets.
WARRANTS
The Fund may invest up to 5% of its net assets in warrants, but not more
than 2% of such assets in warrants not listed on either the New York or American
Stock Exchange. However, the acquisition of warrants attached to other
securities is not subject to this limitation. For the fiscal year ended
September 30, 1994, the Fund's investments in warrants did not exceed 5% of its
net assets.
FOREIGN SECURITIES
The Fund may invest in securities of foreign companies. However, the Fund
will not invest more than 10% of the value of its total assets, at the time of
purchase, in foreign securities (other than securities of Canadian issuers
registered under the Securities Exchange Act of 1934 or American Depository
Receipts, on which there is no such limit). Investments in certain Canadian
issuers may be speculative due to certain political risks and may be subject to
substantial price fluctuations. Foreign securities investments may be affected
by changes in currency rates or exchange control regulations, changes in
governmental administration or economic or monetary policy (in the United States
and abroad) or changed circumstances in dealings between nations. Costs may be
incurred in connection with conversions between various currencies held by the
Fund.
The Fund may invest in securities of foreign companies. Dividends paid by
foreign issuers may be subject to withholding and other foreign taxes which may
decrease the net return on such investments as compared to dividends paid to the
Fund by domestic corporations. It should be noted that there may be less
publicly available information about foreign issuers than about domestic
issuers, and foreign issuers are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those of domestic
issuers. Securities of some foreign issuers are less liquid and more volatile
than securities of comparable domestic issuers and foreign brokerage commissions
are generally higher than in the United States. Foreign securities markets may
also be less liquid, more volatile and less subject to government supervision
than those in the United States. The Fund may be affected either unfavorably or
favorably by fluctuations in the relative rates of exchange as between the
currencies of different nations and exchange control regulations. Investments in
foreign countries could be affected by other factors not present in the United
States, including expropriation, confiscatory taxation and potential
difficulties in enforcing contractual obligations. Securities purchased on
foreign exchanges will be held in custody by a foreign branch of a domestic
bank. During the fiscal year ended September 30, 1994, the Fund did not purchase
any foreign securities in an amount greater than 5% of its net assets.
PORTFOLIO TURNOVER
The Fund 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. As a result, the Fund's portfolio turnover rate may exceed 100%. A
100% turnover rate would occur, for example, if 100% of the securities held in
the Fund's portfolio (excluding all securities whose maturities at acquisition
were one year or less) were sold and replaced within one year. During the fiscal
year ended September 30, 1994 the Fund's portfolio turnover rate was 184%.
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<PAGE>
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus, the
investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at a
meeting of shareholders, if the holders of 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Fund.
The Fund may not:
1. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer, or trustee/ director of the Fund or of the Investment Manager
owns more than 1/2 of 1% of the outstanding securities of such issuer, and
such officers and trustees/directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuer.
2. Purchase or sell real estate or interests therein, although the Fund
may purchase securities of issuers which engage in real estate operations
and securities secured by real estate or interests therein.
3. Purchase or sell commodities except that the Fund may purchase
financial futures contracts and related options thereon.
4. Purchase oil, gas or other mineral leases, rights or royalty
contracts, or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
5. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
6. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. (For the purpose of this restriction,
collateral arrangements with respect to the writing of options and
collateral arrangements with respect to initial and variation margin for
futures are not deemed to be pledges of assets and such arrangements are not
deemed to be the issuance of a senior security as set forth in restriction
(7).)
7. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of: (a)
entering into any repurchase agreement; (b) borrowing money in accordance
with restrictions described above and in the Prospectus; (c) purchasing any
securities on a when-issued or delayed delivery basis; or (d) lending
portfolio securities.
8. Make loans of money or securities, except: (a) by the purchase of
debt obligations in which the Fund may invest consistent with its investment
objectives and policies; (b) by investment in repurchase agreements; or (c)
by lending its portfolio securities.
9. Make short sales of securities or maintain a short position, unless
at all times when a short position is open it either owns an equal amount of
such securities or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the
same issue as, and equal in amount to, the securities sold short.
10. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the purchase
of a security on margin.
11. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security.
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<PAGE>
12. Invest for the purpose of exercising control or management of any
other issuer.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
The Investment Manager is responsible for decisions to buy and sell
securities and futures contracts for the Fund, the selection of brokers and
dealers to effect the transactions and the negotiation of brokerage commissions,
if any. Purchases and sales of securities on a stock exchange are effected
through brokers who charge a commission for their services. In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer.
Option and futures transactions will usually be effected through a broker and a
commission will be charged.
The Fund also expects that securities will be purchased at times in
underwritten offerings where the price includes a fixed amount of compensation,
generally referred to as the underwriter's concession or discount. On occasion,
the Fund may also purchase certain money market instruments directly from an
issuer, in which case no commissions or discounts are paid.
The Investment Manager currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, the main
factors considered are the respective investment objectives, the relative size
of portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of the Fund and
other client accounts.
The aggregate amount of brokerage commissions paid by the Fund during the
fiscal years ended September 30, 1992, 1993 and 1994 was $288,676, $331,205 and
$401,973, respectively.
The policy of the Fund regarding purchases and sales of securities and
futures contracts for its portfolio is that primary consideration will 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 price and execution are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Investment Manager. Such services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the management fee paid to the Investment
Manager is not reduced by any amount that may be attributable to the value of
such services. During the fiscal year ended September 30, 1994, the Fund
directed payment of $334,991 in brokerage commissions in connection with
transactions in the aggregate amount of $131,009,750 to brokers because of
research services provided.
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<PAGE>
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (I.E., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers.
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 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. During the fiscal years ended September 30, 1992, 1993 and
1994, the Fund paid a total of $74,330, $20,207 and $31,360 respectively, in
brokerage commissions to DWR. The Fund does not reduce the management fee it
pays to the Investment Manager by any amount of the brokerage commissions it may
pay to DWR. During the fiscal year ended September 30, 1994, the brokerage
commissions paid to DWR represented approximately 7.80% of the total brokerage
commissions paid by the Fund during the year and were paid on account of
transactions having an aggregate dollar value equal to approximately 0.22% of
the aggregate dollar value of all portfolio transactions of the Fund during the
year for which commissions were paid.
THE DISTRIBUTOR
- --------------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization,
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of DWDC. The Trustees of the
Fund, including a majority of the Trustees who are not and were not, at the time
they voted, 'interested persons' of the Fund (as defined in the Act) at their
meeting held on October 30, 1992, approved 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. The current Distribution Agreement is substantively identical to the
Fund's previous distribution agreements. The Distribution Agreement took effect
on June 30, 1993 upon the spin-off by Sears, Roebuck and Co. of its remaining
shares of DWDC. By its terms, the Distribution Agreement had an initial term
ending April 30, 1994, and provides that it will remain in effect from year to
year thereafter if approved by the Board. At their meeting held on April 8,
1994, the Trustees, including all of the Independent Trustees, approved the
continuation of the Agreement until April 30, 1995.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto to prospective shareholders. The Fund 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
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<PAGE>
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
of omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
To compensate the Distributor for the services provided and the expenses
borne by the Distributor or any selected dealer under the Distribution
Agreement, the Fund has adopted a Plan of Distribution pursuant to Rule 12b-1
under the Act (the "Plan") pursuant to which the Fund pays the Distributor
compensation accrued daily and payable monthly at the annual rate of 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's shares
since the inception of the Fund (not including reinvestment 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 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
$327,000, $76,000 and $38,000 in contingent deferred sales charges for the
fiscal years ended September 30, 1992, 1993 and 1994, respectively, none of
which was retained by the Distributor.
The Distributor has informed the Fund that a portion of the fees payable by
the Fund each year pursuant to the Plan equal to 0.25% of the Fund's average
daily net assets is characterized as a "service fee" under the Rules of Fair
Practice of the National Association of Securities Dealers, 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.
Under its terms, the Plan had an initial term ending December 31, 1985, and
provides that it will remain in effect from year to year thereafter, provided
such continuance is approved annually by a vote of the Trustees, including a
majority of the Trustees 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"). The Plan was submitted
to and approved by the shareholders at the Annual Meeting of Shareholders on
December 29, 1986. Continuation of the Plan was most recently approved by the
Trustees, including a majority of the Independent 12b-1 Trustees, on April 8,
1994 at a meeting called for the purpose of voting on such Plan. At that meeting
the Trustees and the Independent 12b-1 Trustees, after evaluating all the
information they deemed necessary to make an informed determination of whether
the Plan should be continued, approved the continuation of the Plan until April
30, 1995. The determination was based upon the conclusion of the Trustees that
the Plan provides an effective means of stimulating sales of shares of the Fund
and of reducing or avoiding net redemptions and the potentially adverse effects
that may occur therefrom.
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 a meeting held on April 28, 1993, the
Trustees, including a majority of the Independent 12b-1 Trustees, approved
certain technical amendments to the Plan in connection with recent amendments
adopted by the National Association of Securities Dealers, Inc. to its Rules of
Fair Practice.
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<PAGE>
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. The Fund accrued amounts payable to the
Distributor, under the Plan, during the fiscal year ended September 30, 1994, of
$2,002,443. This amount is equal to payments required to be paid monthly by the
Fund which were computed at the annual rate of 1.0% of the average daily net
assets of the Fund for the fiscal year and was calculated pursuant to clause (b)
of the compensation formula 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 5% of the amount sold and an annual
residual commission of up to 0.25 of 1% of the current value (not including
reinvested dividends or distributions) of the amount sold. The gross sales
credit is a charge which reflects commissions paid by DWR to its account
executives and DWR's Fund associated distribution-related expenses, including
overhead and sales compensation. 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 DWR's 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 charge 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 $2,002,443 accrued under the Plan for the fiscal
year ended September 30, 1994 to the Distributor. The Distributor and DWR
estimate that they have spent, pursuant to the Plan, $152,785,485 on behalf of
the Fund since the inception of the Fund. It is estimated that this amount was
spent in approximately the following ways: (i) 1.25% ($1,902,347) -- advertising
and promotional expenses; (ii) 0.32% ($493,122) printing of prospectuses for
distribution to other than current shareholders; and (iii) 98.43% ($150,390,016)
- -- other expenses, including the gross sales credit and the carrying charge, of
which 22.98% ($34,566,489) represents carrying charges, 31.95% ($48,043,599)
represents commission credits to DWR branch offices for payments of commissions
to account executives and 45.07% ($67,779,928) represents overhead and other
branch office distribution-related expenses. The term "overhead and other branch
office distribution-related expenses" represents (a) the expenses of operating
DWR's branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies, (b) the costs of client sales seminars, (c) travel expenses of mutual
fund sales coordinators to promote the sale of Fund shares and (d) other
expenses relating to branch promotion of Fund sales.
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 $64,427,485 as of September 30, 1994.
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
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<PAGE>
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 and 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.
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 stated in the Prospectus, short-term securities with remaining maturities
of sixty days or less at the time of purchase are valued at amortized cost,
unless the Trustees determine such does not reflect the securities' market
value, in which case these securities will be valued at their fair value as
determined by the Trustees. Other short-term debt securities will be valued on a
mark-to-market basis until such time as they reach a remaining maturity of sixty
days, whereupon they will be valued at amortized cost using their value on the
61st day unless the Trustees determine such does not reflect the securities'
market value, in which case these securities will be valued at their fair value
as determined by the Trustees. Listed options on debt securities are valued at
the latest sale price on the exchange on which they are listed unless no sales
of such options have taken place that day, in which case they will be valued at
the mean between their latest bid and asked prices. Unlisted options on debt
securities and all options on equity securities are valued at the mean between
their latest bid and asked prices. Futures are valued at the latest sale price
on the commodities exchange on which they trade unless the Trustees determine
such price does not reflect their market value, in which case they will be
valued at their fair value as determined by the Trustees. All other securities
and other assets are valued at their fair value as determined in good faith
under procedures established by and under the supervision of the Trustees.
The net asset value per share of the Fund is determined once daily at 4:00
p.m. New York time on each day that the New York Stock Exchange is open and on
each other day in which there is a sufficient degree of trading in the Fund's
investments to affect the net asset value, except that the net asset value may
not be computed on a day on which no orders to purchase, or tenders to sell or
redeem, Fund shares have been received, by taking the value of all assets of the
Fund, subtracting its liabilities, dividing by the number of shares outstanding
and adjusting to the nearest cent. The New York Stock Exchange currently
observes the following holidays: New Year's Day; President's Day; Good Friday;
Memorial Day; Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.
SHAREHOLDER SERVICES
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Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund and maintained by 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
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must be requested in writing for each transaction. Certificates are issued only
for full shares and may be redeposited in the account at any time. There is no
charge to the investor for issuance of a certificate. Whenever a shareholder
instituted transaction takes place in the Shareholder Investment Account, the
shareholder will be mailed a confirmation of the transaction from the Fund or
from DWR or other selected broker-dealer.
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of the
Fund is made upon the condition that the Transfer Agent is thereby automatically
appointed as agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and distributions
will be paid, at the net asset value per share, in shares of the Fund (or in
cash if the shareholder so requests) as of the close of business on the record
date. At any time an investor may request the Transfer Agent, in writing, to
have subsequent dividends and/or capital gains distributions paid to him or her
in cash rather than shares. To assure sufficient time to process the change,
such request should be received by the Transfer Agent at least five business
days prior to the record date of the dividend or distribution. In the case of
recently purchased shares for which registration instructions have not been
received on the record date, cash payments will be made to DWR or other selected
broker-dealer, and will be forwarded to the shareholder, upon the receipt of
proper instructions.
TARGETED DIVIDENDS.-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 Convertible 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 selected Dean Witter Fund as of the close of business on the
payment date of the dividend or distribution and will begin to earn dividends,
if any, in the selected Dean Witter Fund the next business day. To participate
in the Targeted Dividends program, shareholders should contact their DWR or
other selected broker-dealer account executive or the Transfer Agent.
Shareholders of the Fund must be shareholders of the Dean Witter Fund targeted
to receive investments from dividends at the time they enter the Targeted
Dividends program. Investors should review the prospectus of the targeted Dean
Witter Fund before entering the program.
EASYINVEST.-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. Any shareholder
who receives a cash payment representing a dividend or distribution may invest
such dividend or distribution at the 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
proceeds by the Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon the
then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount, not
less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable contingent deferred sales charge will be
imposed on shares redeemed under the Withdrawal Plan (see
26
<PAGE>
"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.
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 concurrently with purchases of additional
shares may be inadvisable because of the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six years
(see "Redemption and Repurchases -- Contingent Deferred Sales Charge").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her account executive or by written notification to the Transfer Agent.
In addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature guarantees
required in the manner described above. The shareholder may also terminate the
Withdrawal Plan at any time by written notice to the Transfer Agent. In the
event of such termination, the account will be continued as a regular
shareholder investment account. The shareholder may also redeem all or part of
the shares held in the Withdrawal Plan account (see "Redemptions and
Repurchases" in the Prospectus) at any time. Shareholders wishing to enroll in
the Withdrawal Plan should contact their account executive or the Transfer
Agent.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Dean Witter
Convertible 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 determined after receipt of the check or purchase payment by the
Transfer Agent. The shares so purchased will be credited to the investor's
account.
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 DWR or other selected
broker-dealer account executive or the Transfer Agent.
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
27
<PAGE>
sold with a contingent deferred sales charge ("CDSC funds"), and for shares of
Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund and five Dean Witter Funds which are
money market funds (the foregoing eight non-CDSC funds are hereinafter 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 exchanged
into an Exchange Fund on or after April 23, 1990, upon a redemption of shares
which results in a CDSC being imposed, a credit (not to exceed the amount of the
CDSC) will be given in an amount equal to the Exchange Fund 12b-1 distribution
fees incurred on or after that date which are attributable to those shares.
Shareholders acquiring shares of an Exchange Fund pursuant to this exchange
privilege may exchange those shares back into a CDSC fund from the Exchange
Fund, with no charge 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 time of the exchange which were (i) purchased more than three or
six years (depending on the CDSC schedule applicable to the shares) prior to the
exchange, (ii) originally acquired through reinvestment of dividends or
distributions and (iii) acquired in exchange for shares of front-end sales
charge funds, or for shares of other Dean Witter Funds for which shares of
front-end sales charge funds have been exchanged (all such shares called "Free
Shares"), will be exchanged first. Shares of Dean Witter American Value Fund
28
<PAGE>
acquired prior to April 30, 1984, shares of Dean Witter Dividend Growth
Securities Inc. and Dean Witter Natural Resource Development Securities Inc.
acquired prior to July 2, 1984, and shares of Dean Witter Strategist Fund
acquired prior to November 8, 1989, are also considered Free Shares and will be
the first Free Shares to be exchanged. After an exchange, all dividends earned
on shares in an Exchange Fund will be considered Free Shares. If the exchanged
amount exceeds the value of such Free Shares, an exchange is made, on a
block-by-block basis, of non-Free Shares held for the longest period of time
(except that if shares held for identical periods of time but subject to
different CDSC schedules are held in the same Exchange Privilege account, the
shares of that block which 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.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of other
fund shares. In the absence of negligence on its part, neither the Transfer
Agent nor the Fund shall be liable for any redemption of Fund shares caused by
unauthorized telephone instructions. Accordingly, in such event the investor
shall bear the risk of loss. The staff of the Securities and Exchange Commission
is currently considering the propriety of such a policy.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. 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 investment for Dean
Witter Short-Term U.S. Treasury Trust is $10,000, although that fund, in its
discretion, may accept initial purchases as low as $5,000. The minimum initial
investment for all other Dean Witter Funds for which the Exchange Privilege is
available is $1,000.) Upon exchange into an Exchange Fund, the shares of that
fund will be held in a special
29
<PAGE>
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 Exchange
Funds pursuant to this Exchange Privilege and provided further that the Exchange
Privilege may be terminated or materially revised without notice at times (a)
when the New York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on that Exchange is restricted, (c) when an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable 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 objectives, policies and restrictions.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss. However, the ability to deduct capital losses on
an exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. As stated in the Prospectus, shares of the Fund can be redeemed
for cash at any time at the net asset value per share next determined; however,
such redemption proceeds may be reduced by the amount of any applicable
contingent deferred sales charges (see below). If shares are held in a
shareholder's account without a share certificate, a written request for
redemption to the Fund's Transfer Agent at P.O. Box 983, Jersey City, NJ 07303
is required. If certificates are held by the shareholder, the shares may be
redeemed by surrendering the certificates with a written request for redemption.
The share certificate, or an accompanying stock power, and the request for
redemption, must be signed by the shareholder or shareholders exactly as the
shares are registered. Each request for redemption, whether or not accompanied
by a share certificate, must be sent to the Fund's Transfer Agent, which will
redeem the shares at their net asset value next computed (see "Purchase of Fund
Shares" in the Prospectus) after it receives the request, and certificate, if
any, in good order. Any redemption request received after such computation will
be redeemed at the next determined net asset value. The term "good order" means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent. If
redemption is requested by a corporation, partnership, trust or fiduciary, the
Transfer Agent may require that written evidence of authority acceptable to the
Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address,
30
<PAGE>
signatures must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A stock power may be obtained from any dealer or commercial bank.
The Fund may change the signature guarantee requirements from time to time upon
notice to shareholders, which may be by means of a new prospectus.
CONTINGENT DEFERRED SALES CHARGE. As stated in the Prospectus, a contingent
deferred sales charge ("CDSC") will be imposed on any redemption by an investor
if after such redemption the current value of the investor's shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Fund shares during the preceding six years. However, no CDSC will be
imposed to the extent that the net asset value of the shares redeemed does not
exceed: (a) the current net asset value of shares purchased more than six years
prior to the redemption, plus (b) the current net asset value of shares
purchased through reinvestment of dividends or distributions of the Fund or
another Dean Witter Fund (see "Shareholder Services -- Targeted Dividends"),
plus (c) the current net asset value of shares acquired in exchange for (i)
shares of Dean Witter front-end sales charge funds, or (ii) shares of other Dean
Witter Funds for which shares of front-end sales charge funds have been
exchanged (see "Shareholder Services -- Exchange Privilege"), plus (d) increases
in the net asset value of the investor's shares above the total amount of
payments for the purchase of Fund shares made during the preceding six years.
The CDSC will be paid to the Distributor. In addition, no CDSC will be imposed
on redemptions of shares which are attributable to reinvestment of dividends or
distributions from, or the proceeds of, certain Unit Investment Trusts.
In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will be
the amount which represents the net asset value of the investor's shares
purchased more than six years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions and/or shares acquired in
exchange for shares of Dean Witter front-end sales charge funds, or for shares
of other Dean Witter funds for which shares of front-end sales charge funds have
been exchanged. A portion of the amount redeemed which exceeds an amount which
represents both such increase in value and the value of shares purchased more
than six years prior to the redemption and/or shares purchased through
reinvestment of dividends or distributions and/or shares acquired in the
above-described exchanges will be subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years from
the time of any payment for the purchase of shares, all payments made during a
month will be aggregated and deemed to have been made on the last day of the
month. The following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ----------------------------------- --------------------
<S> <C>
First.............................. 5.0%
Second............................. 4.0%
Third.............................. 3.0%
Fourth............................. 2.0%
Fifth.............................. 2.0%
Sixth.............................. 1.0%
Seventh and thereafter............. None
</TABLE>
In determining the rate of the CDSC it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable six-year period. This will result in any such CDSC being imposed at
the lowest possible rate. Accordingly, shareholders may redeem, without
31
<PAGE>
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 account.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the contingent deferred sales charge or free of such charge
(and with regard to the length of time shares subject to the charge have been
held), any transfer involving less than all of the shares in an account will be
made on a pro-rata basis (that is, by transferring shares in the same proportion
that the transferred shares bear to the total shares in the account immediately
prior to the transfer). The transferred shares will continue to be subject to
any applicable contingent deferred sales charge as if they had not been so
transferred.
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within thirty days after the date of
redemption or repurchase reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund at the net asset value next
determined after the reinstatement request, together with such 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 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
32
<PAGE>
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 state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from net
investment income or short-term capital gains, are taxable to the shareholder as
ordinary income regardless of whether the shareholder receives such payments in
additional shares or in cash. Any dividends declared in the last calendar
quarter of any year to shareholder of record for that period 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 the 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 capital 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.
The Fund has qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986 (the
"Code"). If so qualified, the Fund will not be subject to federal income tax on
its net investment income and net short-term capital gains, if any, realized
during any fiscal year in which it distributes such income and capital gains to
its shareholders.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
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 dividend or distribution record date.
Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent the
aggregate dividends received by the Fund would be eligible for the deduction if
the Fund were the shareholder claiming the dividends received deduction. The
amount of dividends paid by the Fund which may qualify for the dividends
received deduction is limited to the aggregate amount of qualifying dividends
which the Fund derives from its portfolio investments which the Fund has held to
a minimum period, usually 46 days. Any distributions made by the Fund will not
be eligible for the dividends received deduction with respect to shares which
are held by the shareholder for 45 days or less. Any long-term capital gain
distributions will also not be eligible for the dividends received deduction.
The ability to take the dividends received deduction will also be limited in the
case of a Fund shareholder which incurs or continues indebtedness which is
directly attributable to its investment in the Fund.
After the end of the year, shareholders will be sent full information on
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income,
33
<PAGE>
the portion taxable as long-term capital gains and the portion eligible for the
dividends received deduction. To avoid being subject to a 31% federal backup
withholding tax on taxable dividends, capital gains distributions and the
proceeds of redemptions and repurchases, shareholders' taxpayer identification
numbers must be furnished and certified as to their accuracy.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"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 and/or
dividend income for each security in the Fund's portfolio is determined in
accordance with regulatory requirements; the total for the entIre portfolio
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
September 30, 1994, the Fund's yield, calculated pursuant to the formula
described above, was 5.47%.
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 return of
the Fund for the fiscal year ended September 30, 1994, for the five years ended
September 30, 1994 and for the period from October 31, 1985 (commencement of
operations) through September 30, 1994 was 0.02%, 5.89% and 7.22%, 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. Based on this calculation,
the average annual total return of the Fund for the fiscal year ended September
30, 1994, for the five years ended September 30, 1994 and for the period from
October 31, 1985 through September 30, 1994 was 5.02%, 35.12% and 86.21%,
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 fiscal year ended September 30,
1994, for the five years ended September 30, 1994 and for the period from
October 31, 1985 through September 30, 1994 was 5.02%, 6.20% and 7.22%,
respectively.
34
<PAGE>
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 extent of any applicable contingent deferred sales charge) and
multiplying by $10,000, $50,000 or $100,000, as the case may be. Investments of
$10,000, $50,000 or $100,000 in the Fund at inception would have grown to
$18,621, $93,105 and $186,210, respectively, at September 30, 1994.
The Fund may advertise, from time to time, its performance relative to
certain performance rankings and indices compiled by independent organizations.
DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the shareholders of the Fund are entitled to
a full vote for each full share held. The Trustees 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. The Trustees themselves have the power to alter
the number and the terms of office of the Trustees, and they may at any time
lengthen or shorten their own terms or make their terms of unlimited duration
and appoint their own successors, provided that always at least a majority of
the Trustees has been elected by the shareholders of the Fund. Under certain
circumstances, the Trustees may be removed by action of the Trustees. The
shareholders also have the right, under certain circumstances, to remove the
Trustees. The voting rights of shareholders are not cumulative, so that holders
of more than 50 percent of the shares voting can, if they choose, elect all
Trustees being selected, while the holders of the remaining shares would be
unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances). However, the Trustees have not authorized
any such additional series or classes of shares.
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 a rise 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 is authorized to issue an unlimited number of shares of beneficial
interest. The Trust shall be of unlimited duration, subject to the provisions in
the Declaration of Trust concerning termination by action of the shareholders or
the Trustees.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager and Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend
35
<PAGE>
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 September 30. 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 Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund 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.
36
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter Convertible 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 Convertible Securities
Trust, (the "Fund") at September 30, 1994, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the eight years in
the period then ended and for the period October 31, 1985 (commencement of
operations) through September 30, 1986, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at September 30, 1994, by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
November 10, 1994
37
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- -------- -------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (64.7%)
CONVERTIBLE BONDS (60.6%)
AUTO PARTS (3.0%)
$ 3,800 Arvin Industries, Inc............................. 7.50% 9/30/14 $ 3,819,000
2,850 MascoTech, Inc.................................... 4.50 12/15/03 1,959,375
------------
5,778,375
------------
BUILDING MATERIALS (0.8%)
1,500 Cemex S.A. - 144A*................................ 4.25 11/ 1/97 1,515,000
------------
CHEMICALS (1.6%)
7,500 RPM Inc. Ohio..................................... 0.00 9/30/12 3,000,000
------------
ELECTRICAL EQUIPMENT (1.8%)
2,000 Magnetek, Inc..................................... 8.00 9/15/01 2,020,000
1,550 Willcox & Gibbs, Inc.............................. 7.00 8/ 1/14 1,404,688
------------
3,424,688
------------
ENTERTAINMENT/GAMING (2.2%)
1,000 Argosy Gaming Co.................................. 12.00 6/ 1/01 1,090,000
1,800 United Gaming, Inc................................ 7.50 9/15/03 1,458,000
2,000 United Gaming, Inc. - 144A*....................... 7.50 9/15/03 1,620,000
------------
4,168,000
------------
ENVIRONMENTAL CONTROL (2.4%)
2,000 Air & Water Technologies Corp..................... 8.00 5/15/15 1,400,000
3,500 United States Filter Corp......................... 5.00 10/15/00 3,255,000
------------
4,655,000
------------
FINANCIAL SERVICES (3.2%)
2,000 AT&T Latin American Equity - 144A*................ 0.00 3/30/99 1,980,000
4,000 Fidelity National Financial, Inc.................. 0.00 2/15/09 1,440,000
3,500 Waterhouse Investment Services, Inc............... 6.00 12/15/03 2,642,500
------------
6,062,500
------------
FOOD & BEVERAGES (0.5%)
1,000 Giant Group, Ltd.................................. 7.00 4/15/06 953,750
------------
HEALTHCARE (3.7%)
2,500 Careline, Inc. - 144A*............................ 8.00 5/ 1/01 2,118,750
4,300 Sun Healthcare Group.............................. 6.00 3/ 1/04 4,853,625
------------
6,972,375
------------
HOME BUILDING (3.1%)
3,100 Toll Corp......................................... 4.75 1/15/04 2,433,500
4,925 US Home Corp...................................... 4.875 11/ 1/05 3,385,938
------------
5,819,438
------------
HOTELS (0.3%)
600 Hospitality Franchise System, Inc................. 4.50 10/ 1/99 621,000
------------
INDUSTRIALS (7.1%)
7,250 Bell Sports Corp.................................. 4.25 11/15/00 5,292,500
2,000 Hawley Group, Ltd................................. 6.00 10/ 3/02 2,765,000
1,400 Raymond Corp...................................... 6.50 12/15/03 1,732,500
3,500 Titan Wheel International, Inc.................... 4.75 12/ 1/00 3,710,000
------------
13,500,000
------------
</TABLE>
38
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- -------- -------- ------------
<C> <S> <C> <C> <C>
INSURANCE (1.5%)
$ 1,300 Alexander & Alexander Services, Inc............... 11.00% 4/15/07 $ 1,326,000
1,500 Horace Mann Educators Corp........................ 4.00 12/ 1/99 1,455,000
------------
2,781,000
------------
METALS (2.9%)
1,250 Crown Resource Corp............................... 5.75 8/27/01 962,500
5,000 Freeport-McMoran, Inc............................. 6.55 1/15/01 4,562,500
------------
5,525,000
------------
OIL & GAS (1.4%)
2,500 Western Company of North America.................. 7.25 1/15/15 2,675,000
------------
OIL SERVICES (1.8%)
11,000 Valhi, Inc........................................ 0.00 10/20/07 3,520,000
------------
PUBLISHING (4.9%)
10,000 Hollinger, Inc.................................... 0.00 10/ 5/13 3,075,000
4,500 Time Warner, Inc.................................. 0.00 6/22/13 1,597,500
4,622 Time Warner, Inc.................................. 8.75 1/10/15 4,616,223
------------
9,288,723
------------
REAL ESTATE INVESTMENT TRUST (2.2%)
3,000 Alexander Haagen Properties, Inc.................. 7.50 1/15/01 2,790,000
1,500 Liberty Property Trust............................ 8.00 7/ 1/01 1,500,000
------------
4,290,000
------------
RESTAURANTS (3.0%)
2,000 Boston Chicken, Inc............................... 4.50 2/ 1/04 1,710,000
2,075 TPI Enterprises, Inc.............................. 8.25 7/15/02 2,272,125
4,000 Shoney's, Inc..................................... 0.00 4/11/04 1,750,000
------------
5,732,125
------------
RETAIL (5.1%)
1,500 Carter Hawley Hale Stores, Inc.................... 6.25 12/31/00 1,687,500
1,500 Eagle Hardware & Garden, Inc...................... 6.25 3/15/01 1,181,250
4,500 Federated Department Stores, Inc.+................ 0.00 2/15/04 4,320,000
1,750 Proffitts, Inc.................................... 4.75 11/ 1/03 1,312,500
2,000 Tops Appliance City, Inc. - 144A*................. 6.50 11/30/03 1,275,000
------------
9,776,250
------------
STEEL (0.5%)
1,275 Nippon Denro, Ltd. - 144A*........................ 3.00 4/ 1/01 1,045,500
------------
TELECOMMUNICATIONS (2.8%)
2,000 Arch Communications Group, Inc. - 144A*........... 6.75 12/ 1/03 2,360,000
1,500 Motorola, Inc..................................... 0.00 9/27/13 1,012,500
2,500 Audiovox Corp. - 144A*............................ 6.25 3/15/01 1,900,000
------------
5,272,500
------------
TEXTILES (1.3%)
2,500 Interface, Inc.................................... 8.00 9/15/13 2,475,000
------------
TRANSPORTATION (1.5%)
2,200 Air Express International Corp.................... 6.00 1/15/03 2,145,000
750 Airborne Freight Corp............................. 6.75 8/15/01 729,375
------------
2,874,375
------------
</TABLE>
39
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- -------- -------- ------------
<C> <S> <C> <C> <C>
TRANSPORTATION - INTERNATIONAL (0.3%)
$ 651 Consorcio G. Grupo Dina S.A. de C.V............... 8.00% 8/ 8/04 $ 546,840
------------
WASTE MANAGEMENT (1.7%)
3,000 Laidlaw, Inc. - 144A*............................. 6.00 1/15/99 3,165,000
------------
TOTAL CONVERTIBLE BONDS (IDENTIFIED COST $121,410,016)................ 115,437,439
------------
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
NON-CONVERTIBLE BONDS (4.1%)
CHEMICALS (1.4%)
2,500 General Chemical Corp............................. 14.00 11/ 1/98 2,650,000
------------
HEALTHCARE (1.6%)
3,000 Healthsouth Rehabilitation Corp................... 9.50 4/ 1/01 2,940,000
------------
RESTAURANTS (1.1%)
2,500 Flagstar Corp..................................... 11.375 9/15/03 2,181,250
------------
TOTAL NON-CONVERTIBLE BONDS (IDENTIFIED COST $8,078,575).............. 7,771,250
------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $129,488,591).................. 123,208,689
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- ----------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (18.4%)
AUTO PARTS (0.3%)
36,100 MascoTech, Inc. $1.20................................................. 482,838
------------
BIOTECHNOLOGY (0.4%)
39,600 Liposome, Inc. Series A $1.93......................................... 757,350
------------
BUILDING MATERIALS (0.6%)
25,000 Southdown, Inc. Series D $2.875....................................... 1,056,250
------------
CHEMICALS (1.1%)
40,000 Occidental Petroleum Corp. $3.875 - 144A*............................. 2,097,500
------------
ENTERTAINMENT (1.9%)
147,600 AMC Entertainment, Inc. $1.75......................................... 3,579,300
------------
FINANCIAL SERVICES (0.9%)
40,000 American Express Co. $2.297........................................... 1,780,000
------------
HEALTHCARE (1.1%)
70,000 U.S. Surgical Corp. $2.198............................................ 2,047,500
------------
INDUSTRIALS (1.8%)
30,000 Chiquita Brands, Inc. Series A $2.875................................. 1,477,500
40,000 Corning, Inc. $3.00................................................... 1,990,000
------------
3,467,500
------------
INSURANCE (1.4%)
65,000 Alexander & Alexander Series A $3.625 - 144A*......................... 2,746,250
------------
MACHINERY (1.6%)
135,000 Cooper Industries, Inc. $1.60......................................... 3,206,250
------------
METALS (1.7%)
100,000 Freeport-McMoran Copper & Gold, Inc. $1.25............................ 2,450,000
100,000 Kaiser Aluminum Corp. $.65............................................ 825,000
------------
3,275,000
------------
OIL & GAS (1.0%)
75,000 Kelley Oil Corp. $2.625............................................... 1,912,500
------------
</TABLE>
40
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
OIL & GAS DRILLING (0.4%)
20,000 McDermott International, Inc. $2.875.................................. $ 833,750
------------
PAPER (0.7%)
52,000 Boise Cascade Corp. $1.58............................................. 1,371,500
------------
REAL ESTATE (1.2%)
50,000 Catellus Development Corp. Series B $3.625 - 144A*.................... 2,275,000
------------
REGIONAL BANKS (1.3%)
27,000 Peoples Bank Bridgeport Conn. Series A $4.25.......................... 2,409,750
------------
TELECOMMUNICATIONS (0.5%)
30,000 Mobile Telecommunications Corp. $2.25 - 144A*......................... 892,500
------------
WASTE MANAGEMENT (0.5%)
45,000 International Technology Corp. $1.75.................................. 894,375
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (IDENTIFIED COST $33,589,360)...... 35,085,113
------------
</TABLE>
<TABLE>
<C> <S> <C>
COMMON STOCKS (9.7%)
ADVERTISING (0.7%)
110,000 DIMAC Corp. (a)....................................................... 1,347,500
------------
AUTO PARTS (0.5%)
74,900 MascoTech, Inc........................................................ 889,437
------------
BUILDING MATERIALS (0.2%)
20,000 Masco Corporation..................................................... 482,500
------------
ENTERTAINMENT/GAMING (0.8%)
57,938 International Game Technology......................................... 1,194,971
42,500 United Gaming, Inc. (a)............................................... 302,812
------------
1,497,783
------------
ENVIRONMENTAL CONTROL (0.3%)
47,700 OHM Corp. (a)......................................................... 548,550
------------
FINANCIAL SERVICES (0.1%)
25,000 Lomas Financial Corp. (a)............................................. 121,875
------------
HEALTHCARE (0.5%)
120,000 Careline, Inc. (a).................................................... 660,000
13,300 Grancare, Inc. (a).................................................... 242,725
------------
902,725
------------
HOME BUILDING (0.2%)
40,000 Toll Brothers, Inc. (a)............................................... 455,000
------------
INDUSTRIALS (0.5%)
50,000 Hanson PLC (ADR)...................................................... 906,250
------------
MACHINERY (0.0%)
2,500 Albany International Corp. (Class A).................................. 44,062
------------
MANUFACTURING (1.1%)
201,000 Foamex International, Inc. (a)........................................ 2,135,625
------------
REAL ESTATE INVESTMENT TRUST (2.9%)
105,555 Alexander Haagen Properties, Inc...................................... 1,794,435
58,100 Avalon Properties, Inc................................................ 1,227,362
50,000 Irvine Apartment Communities, Inc..................................... 893,750
53,600 Merry Land & Investment, Inc.......................................... 1,051,900
25,000 Urban Shopping Centers, Inc........................................... 553,125
------------
5,520,572
------------
</TABLE>
41
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
RESTAURANTS (0.4%)
65,000 Flagstar Cos., Inc. (a)............................................... $ 552,500
40,000 TPI Enterprises, Inc. (a)............................................. 255,000
------------
807,500
------------
RETAIL (0.7%)
15,000 Dillard Department Stores, Inc. (Class A) (a)......................... 401,250
50,000 Woolworth Corp........................................................ 868,750
------------
1,270,000
------------
TEXTILES (0.1%)
20,000 Interface, Inc. (Class A)............................................. 260,000
------------
TRANSPORTATION (0.7%)
87,555 Consorcio G. Grupo Dina S.A. de C.V. (ADR) (a)........................ 908,383
40,000 Team Rental Group, Inc. (a)........................................... 450,000
------------
1,358,383
------------
TOTAL COMMON STOCKS (IDENTIFIED COST $19,530,731)..................... 18,547,762
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE
- ---------- -------- --------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (7.6%)
COMMERCIAL PAPER (B) (6.3%)
FINANCE - DIVERSIFIED (6.3%)
$ 7,000 Ford Motor Credit Co.............................. 4.75% 10/ 5/94 6,996,306
5,000 General Electric Capital Corp..................... 4.82 10/ 7/94 4,995,983
------------
TOTAL COMMERCIAL PAPER (AMORTIZED COST $11,992,289)................... 11,992,289
------------
REPURCHASE AGREEMENT (1.3%)
2,365 The Bank of New York (dated 9/30/94; proceeds
$2,365,681; collateralized by $2,473,560 U.S.
Treasury Bond 7.50% due 11/15/16 valued at
$2,411,990) (Identified Cost $2,364,696)........ 5.00 10/ 3/94 2,364,696
------------
TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $14,356,985)............ 14,356,985
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (IDENTIFIED COST $196,965,667)
(C)....................................................... 100.4 % 191,198,549
LIABILITIES IN EXCESS OF OTHER ASSETS.............. (0.4) (803,505)
---------- ------------
NET ASSETS......................................... 100.0 % $190,395,044
---------- ------------
---------- ------------
<FN>
- ----------------
* RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS.
+ PAYMENT IN KIND.
(A) NON-INCOME PRODUCING SECURITY.
(B) COMMERCIAL PAPER WAS PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE
SHOWN HAS BEEN ADJUSTED TO REFLECT A BOND EQUIVALENT YIELD.
(C) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $198,708,168; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $5,545,604 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $13,055,223, RESULTING IN NET UNREALIZED
DEPRECIATION OF $7,509,619.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $196,965,667) (Note
1)..................................... $ 191,198,549
Receivable for:
Investments sold....................... 2,522,531
Interest............................... 1,812,765
Dividends.............................. 262,640
Shares of beneficial interest sold..... 160,987
Prepaid expenses and other assets........ 48,574
--------------
TOTAL ASSETS..................... 196,006,046
--------------
LIABILITIES:
Payable for:
Investments purchased.................. 4,988,734
Plan of distribution fee (Note 3)...... 157,817
Shares of beneficial interest
repurchased.......................... 143,316
Investment management fee (Note 2)..... 94,690
Dividends to shareholders.............. 86,846
Accrued expenses and other payables (Note
4)..................................... 139,599
--------------
TOTAL LIABILITIES................ 5,611,002
--------------
NET ASSETS:
Paid-in-capital.......................... 572,199,462
Net unrealized depreciation on
investments............................ (5,767,118)
Accumulated undistributed net investment
income................................. 3,360,672
Accumulated net realized loss on
investments............................ (379,397,972)
--------------
NET ASSETS....................... $ 190,395,044
--------------
--------------
NET ASSET VALUE PER SHARE, 17,716,079
shares outstanding (unlimited
authorized shares of $.01 par value)...
$10.75
--------------
--------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME
Interest.............................. $ 7,932,911
Dividends (net of $207 foreign
withholding tax).................... 3,313,565
-------------
TOTAL INCOME...................... 11,246,476
-------------
EXPENSES
Plan of distribution fee (Note 3)..... 2,002,443
Investment management fee (Note 2).... 1,201,442
Transfer agent fees and expenses (Note
4).................................. 439,000
Shareholder reports and notices....... 77,656
Professional fees..................... 55,225
Custodian fees........................ 41,225
Trustees' fees and expenses (Note
4).................................. 32,552
Registration fees..................... 11,786
Other................................. 12,074
-------------
TOTAL EXPENSES.................... 3,873,403
-------------
NET INVESTMENT INCOME........... 7,373,073
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 1):
Net realized gain on investments...... 24,216,296
Net change in unrealized depreciation
on investments...................... (21,824,460)
-------------
NET GAIN ON INVESTMENTS........... 2,391,836
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $ 9,764,909
-------------
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30,1994 SEPTEMBER 30, 1993
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................ $ 7,373,073 $ 7,329,034
Net realized gain on investments..................................... 24,216,296 25,935,964
Net change in unrealized appreciation (depreciation) on
investments........................................................ (21,824,460) 11,444,791
------------------ -------------------
Net increase in net assets resulting from operations............. 9,764,909 44,709,789
Dividends to shareholders from net investment income................... (7,325,103) (7,306,204)
Net decrease from transactions in shares of beneficial interest (Note
5).................................................................... (19,938,327) (47,158,302)
------------------ -------------------
Total decrease................................................... (17,498,521) (9,754,717)
NET ASSETS:
Beginning of period.................................................... 207,893,565 217,648,282
------------------ -------------------
END OF PERIOD (including undistributed net investment income of
$3,360,672
and $3,312,702, respectively)........................................ $ 190,395,044 $ 207,893,565
------------------ -------------------
------------------ -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter Convertible 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 was organized as a Massachusetts business trust on May 21, 1985 and
commenced operations on October 31, 1985.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on
the New York or American Stock Exchange is valued at its latest sale price
on that exchange prior to the time when assets are valued (if there were no
sales that day, the security is valued at the latest bid price); (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest available bid price prior to the
time of valuation; (3) when market quotations are not readily available,
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; (4) certain of the Fund's portfolio securities may be valued
by an outside pricing service approved by the Trustees. The pricing service
utilizes 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, in
determining what it believes is the fair valuation of the portfolio
securities valued by such pricing service; (5) short-term debt securities
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 a similar type, yield, quality and maturity, until sixty days
prior to maturity and thereafter at amortized cost based on their value on
the 61st day. Short-term debt securities having a maturity date of sixty
days or less at the time of purchase are valued at amortized cost and (6)
the value of other assets will be determined in good faith at fair value
procedures established by and under the general supervision of the Trustees.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined on the identified cost
method. Discounts on securities purchased are amortized over the life of the
respective securities. The Fund does not amortize premiums on securities
purchased. Dividend income is recorded on the ex-dividend date. Interest
income is accrued daily except where collection is not expected.
C. REPURCHASE AGREEMENTS -- The Fund's custodian takes possession on behalf
of the Fund of the collateral pledged for investments in repurchase
agreements. It is the policy of the Fund to value the underlying collateral
daily on a mark-to-market basis to determine that the value, including
accrued interest, is at least equal to the repurchase price plus accrued
interest. In the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation.
D. 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.
E. 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
44
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a management fee, calculated daily and payable
monthly, by applying the following annual rates to the net assets of the Fund
determined as of the close of each business day: 0.60% of the portion of daily
net assets not exceeding $750 million; 0.55% of the portion of daily net assets
exceeding $750 million but not exceeding $1 billion; 0.50% of the portion of
daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.475% of
the portion of daily net assets exceeding $1.5 billion but not exceeding $2
billion; 0.45% of the portion of daily net assets exceeding $2 billion but not
exceeding $3 billion; and 0.425% of the portion of daily net assets exceeding $3
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 all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at an annual rate of 1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
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 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.
45
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Provided that the Plan continues in effect, any cumulative expenses incurred
by the Distributor but not yet recovered, may be recovered through future
distribution fees from the Fund and contingent deferred sales charges from the
Fund's shareholders.
The Distributor has informed the Fund that for the year ended September 30,
1994, it received approximately $38,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding short-term
investments, for the year ended September 30, 1994 aggregated $342,378,922 and
$367,332,144, respectively.
For the same period, the Fund incurred brokerage commissions of $31,360 with
Dean Witter Reynolds Inc. for transactions executed on behalf of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1994, the Fund had
transfer agent fees and expenses payable of approximately $38,000.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as an independent Trustee 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 September 30, 1994, included in Trustees' fees and expenses in
the Statement of Operations, amounted to $9,479. At September 30, 1994, the Fund
had an accrued pension liability of $45,142 which is included in accrued
expenses in the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold.................................... 2,423,832 $ 26,535,360 1,190,150 $ 11,477,771
Reinvestment of dividends............... 578,431 6,216,691 617,822 6,123,361
---------- ------------ ---------- ------------
3,002,263 32,752,051 1,807,972 17,601,132
Repurchased............................. (4,869,009) (52,690,378) (6,630,391) (64,759,434)
---------- ------------ ---------- ------------
Net decrease............................ (1,866,746) $(19,938,327) (4,822,419) $(47,158,302)
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS -- During the year ended September 30, 1994, the
Fund utilized approximately $24,921,000 of its net capital loss carryovers. At
September 30, 1994, the Fund had net capital loss carryovers to offset future
capital gains to the extent provided by regulations available through September
30 of the following years:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 TOTAL
- ----------- ------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$15,180,000 $218,065,000 $36,349,000 $46,135,000 $62,731,000 $378,460,000
</TABLE>
46
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
As of September 30, 1994, the Fund had temporary book/tax differences
primarily attributable to capital loss deferral on wash sales and corporate
reorganizations and permanent book/tax differences primarily attributable to
corporate reorganizations. To reflect reclassifications arising from permanent
book/tax differences as of September 30, 1993, accumulated undistributed net
investment income was credited and accumulated net realized loss on investments
was charged $431,384.
1994 FEDERAL TAX NOTICE (UNAUDITED)
During the fiscal year ended September 30, 1994, 48.18% of the income
dividends qualified for dividends received deduction available to
corporations.
47
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
PERIOD
OCTOBER 31,
FOR THE YEAR ENDED SEPTEMBER 30, 1985*
--------------------------------------------------------------------------------- THROUGH
1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- --------- -------- -------- -------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................... $ 10.62 $ 8.92 $ 8.67 $ 7.65 $ 9.68 $ 8.63 $ 12.42 $ 11.22 $ 10.00
-------- --------- -------- -------- -------- -------- --------- --------- ------------
Net investment income............. 0.42 0.37 0.34 0.37 0.46 0.48 0.38 0.48 0.76
Net realized and unrealized gain
(loss) on investments............ 0.11 1.67 0.15 1.05 (2.06) 1.20 (2.87) 1.59 1.22**
-------- --------- -------- -------- -------- -------- --------- --------- ------------
Total from investment
operations....................... 0.53 2.04 0.49 1.42 (1.60) 1.68 (2.49) 2.07 1.98
-------- --------- -------- -------- -------- -------- --------- --------- ------------
Less dividends and distributions
from:
Net investment income........... (0.40) (0.34) (0.24) (0.40) (0.43) (0.63) (0.23) (0.46) (0.76)
Net realized gains on
investments.................... -0 - -0 - -0 - -0 - -0 - -0 - (1.07) (0.41) -0 -
-------- --------- -------- -------- -------- -------- --------- --------- ------------
Total dividends and
distributions.................... (0.40) (0.34) (0.24) (0.40) (0.43) (0.63) (1.30) (0.87) (0.76)
-------- --------- -------- -------- -------- -------- --------- --------- ------------
Net asset value, end of period.... $ 10.75 $ 10.62 $ 8.92 $ 8.67 $ 7.65 $ 9.68 $ 8.63 $ 12.42 $ 11.22
-------- --------- -------- -------- -------- -------- --------- --------- ------------
-------- --------- -------- -------- -------- -------- --------- --------- ------------
TOTAL INVESTMENT RETURN+.......... 5.02% 23.22% 5.69% 18.93% (16.93)% 20.20% (19.79)% 19.21% 19.91%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)....................... $190,395 $207,894 $217,648 $296,844 $413,297 $821,750 $1,073,374 $2,029,462 $1,488,418
Ratios to average net assets:
Expenses........................ 1.93% 1.93% 1.92% 1.92% 1.88% 1.76% 1.79% 1.62% 1.72%(2)
Net investment income........... 3.68% 3.44% 3.43% 4.34% 4.96% 4.93% 3.87% 3.85% 7.11%(2)
Portfolio turnover rate........... 184% 221% 145% 133% 92% 167% 472% 572% 272%
<FN>
- ----------------------------------------
* COMMENCEMENT OF OPERATIONS.
** INCLUDES THE EFFECT OF CAPITAL SHARE TRANSACTIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
TCW/DW
GLOBAL CONVERTIBLE
TRUST
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 28, 1995
- --------------------------------------------------------------------------------
TCW/DW Global Convertible Trust (the "Fund") is an open-end,
non-diversified management investment company, whose investment objective is to
attain a high level of total return through a combination of capital
appreciation and current income. The Fund seeks to achieve its investment
objective by investing at least 65% of its total assets in convertible
securities of domestic and foreign issuers rated B or higher by Moody's
Investors Services, Inc. or Standard & Poor's Corporation or if not rated,
determined to be of comparable quality. See "Investment Objective and Policies."
A Prospectus for the Fund dated August 28, 1995, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone number listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
TCW/DW Global Convertible Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550
(800) 869-6397
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
The Fund and its Management. . . . . . . . . . . . . . . . . . . . . . 3
Trustees and Officers. . . . . . . . . . . . . . . . . . . . . . . . . 6
Investment Practices and Policies. . . . . . . . . . . . . . . . . . . 12
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 15
Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . 16
The Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . 20
Repurchases and Redemptions. . . . . . . . . . . . . . . . . . . . . . 24
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . 26
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . 27
Description of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 28
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . 28
Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . . 29
Reports to Shareholders. . . . . . . . . . . . . . . . . . . . . . . . 29
Legal Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . 29
Financial Statements--June 30, 1995. . . . . . . . . . . . . . . . . . 30
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . 44
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
June 29, 1994. The Fund is one of the TCW/DW Funds, which currently consist, in
addition to the Fund, of TCW/DW Core Equity Trust, TCW/DW Small Cap Growth Fund,
TCW/DW North American Government Income Trust, TCW/DW Latin American Growth
Fund, TCW/DW Term Trust 2002, TCW/DW Income and Growth Fund, TCW/DW Term Trust
2003, TCW/DW Balanced Fund, TCW/DW Term Trust 2000, TCW/DW North American
Intermediate Income Trust, TCW/DW Total Return Trust and TCW/DW Emerging Markets
Opportunities Trust.
THE MANAGER
Dean Witter Services Company Inc. (the "Manager"), a Delaware corporation,
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Manager. The Manager is a wholly-owned subsidiary of Dean Witter InterCapital
Inc. ("InterCapital"), a Delaware corporation. 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 management, administrative and investment advisory activities
previously performed by the InterCapital Division of Dean Witter Reynolds Inc.
("DWR"), a broker-dealer affiliate of the Manager. (As hereinafter used in this
Statement of Additional Information, the term "InterCapital" refers to DWR's
InterCapital Division prior to the internal reorganization and to Dean Witter
InterCapital Inc. thereafter). The daily management of the Fund is conducted by
or under the direction of officers of the Fund and of the Manager and Adviser
(see below), subject to review by the Fund's Board of Trustees. In addition,
Trustees of the Fund may provide guidance on economic factors and interest rate
trends. Information as to these Trustees and officers is contained under the
caption "Trustees and Officers."
Pursuant to a management agreement (the "Management Agreement") with the
Manager, the Fund has retained the Manager to manage the Fund's business
affairs, supervise the overall day-to-day operations of the Fund (other than
rendering investment advice) and provide all administrative services to the
Fund. Under the terms of the Management Agreement, the Manager also maintains
certain of the Fund's books and records and furnishes, at its own expense, such
office space, facilities, equipment, supplies, clerical help and bookkeeping and
certain legal services as the Fund may reasonably require in the conduct of its
business, including the preparation of prospectuses, statements of additional
information, 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 Manager,
necessary or desirable). In addition, the Manager pays the salaries of all
personnel, including officers of the Fund, who are employees of the Manager. The
Manager also bears the cost of the Fund's telephone service, heat, light, power
and other utilities.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Manager, the Fund pays the Manager
monthly compensation calculated daily by applying the annual rate of 0.51% to
the daily net assets of the Fund determined as of the close of each business
day. While the total fees payable under the Management Agreement and the
Advisory Agreement (described below) are higher than that paid by most other
investment companies for similar services, the Board of Trustees determined that
the total fees payable under the Management Agreement and the Advisory Agreement
(described below) are reasonable in relation to the scope and quality of
services to be provided thereunder. In this regard, in evaluating the Management
Agreement and the Advisory Agreement, the Board of Trustees recognized that the
Manager and the Adviser had, pursuant to an agreement described under the
section entitled "The Adviser," agreed to a division as between themselves of
the total fees necessary for the management of the business affairs of and the
furnishing of investment advice to the Fund. Accordingly, in reviewing the
Management Agreement and Advisory Agreement, the Board viewed as most
significant the question as to whether the total fees payable under the
Management and Advisory Agreements were in the aggregate reasonable in relation
to the services to be provided thereunder. For the fiscal period October 31,
1994 (commencement of operations) through June 30, 1995, the fee payable under
the Management Agreement ($56,828) was waived by the Manager pursuant to
undertakings described below.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Manager is not liable to the Fund or any of its
investors for
3
<PAGE>
any act or omission by the Manager or for any losses sustained by the Fund or
its investors. The Management Agreement in no way restricts the Manager from
acting as manager to others.
InterCapital had undertaken to assume all Fund expenses (except for the
Plan of Distribution fee and brokerage fees) and the Manager had undertaken to
waive the compensation provided for in the Management Agreement for services
rendered, and the Adviser had undertaken to waive the compensation provided for
in its Advisory Agreement, until such time as the Fund had $50 million of net
assets or until six months from the date of commencement of operations,
whichever occurred first. InterCapital continued to assume all operating
expenses (except for the Plan of Distribution fee and brokerage fees) and the
Manager and the Adviser continued to waive their respective compensation until
August 23, 1995.
InterCapital has paid the organizational expenses of the Fund
(approximately $180,000) incurred prior to the offering of the Fund's shares.
The Fund has agreed to reimburse InterCapital for such expenses. These expenses
are being deferred by the Fund and are being amortized on the straight line
method over a period not to exceed five years from the date of commencement of
the Fund's operations.
The Management Agreement was initially approved by the Trustees on April
20, 1995 and became effective on that date. The Management Agreement replaced a
prior management agreement in effect between the Fund and the Manager which was
approved by the Trustees on July 14, 1994. The nature and scope of the services
provided to the Fund, and the formula to determine fees paid by the Fund under
the Management Agreement, are identical to those of the Fund's previous
management agreement. The Management Agreement may be terminated at any time,
without penalty, on thirty days' notice by the Trustees of the Fund, or by the
Manager.
Under its terms, the Management Agreement will continue in effect until
April 30, 1996, and will continue in effect from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the vote
of the Trustees of the Fund, including the vote of a majority of the Trustees of
the Fund who are not parties to the Management or Advisory Agreement or
"interested persons" (as defined in the Investment Company Act of 1940, as
amended (the "Act")) of any such party (the "Independent Trustees").
THE ADVISER
TCW Funds Management, Inc. (the "Adviser") is a wholly-owned subsidiary of
The TCW Group, Inc. ("TCW"), whose direct and indirect subsidiaries, including
Trust Company of the West and TCW Asset Management Company, provide a variety of
trust, investment management and investment advisory services. As of June 30,
1995, the Adviser and its affiliates had approximately $50 billion under
management or committed to management. Trust Company of the West and its
affiliates have managed equity securities portfolios for institutional investors
since 1971. The Adviser is headquartered at 865 South Figueroa Street, Suite
1800, Los Angeles, California 90017 and is registered as an investment adviser
under the Investment Advisers Act of 1940. In addition to the Fund, the Adviser
serves as investment adviser to twelve other TCW/DW Funds: TCW/DW Small Cap
Growth Fund, TCW/DW Core Equity Trust, TCW/DW North American Government Income
Trust, TCW/DW Latin American Growth Fund, TCW/DW Term Trust 2002, TCW/DW Income
and Growth Fund, TCW/DW Term Trust 2003, TCW/DW Balanced Fund, TCW/DW Term Trust
2000, TCW/DW North American Intermediate Income Trust, TCW/DW Total Return Trust
and TCW/DW Emerging Markets Opportunities Trust. The Adviser also serves as
investment adviser to TCW Convertible Securities Fund, Inc., a closed-end
investment company listed on the New York Stock Exchange, and to TCW Galileo
Funds, Inc., an open-end investment company, and acts as adviser or sub-adviser
to other investment companies.
Robert A. Day, who is Chairman of the Board of Directors of TCW, may be
deemed to be a control person of the Adviser by virtue of the aggregate
ownership of Mr. Day and his family of more than 25% of the outstanding voting
stock of TCW.
Pursuant to an investment advisory agreement (the "Advisory Agreement")
with the Adviser, the Fund has retained the Adviser to invest the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Adviser 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. In addition, the Adviser pays
the salaries of all personnel, including officers of the Fund, who are employees
of the Adviser.
4
<PAGE>
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Adviser, the Fund pays the Adviser
monthly compensation calculated daily by applying the annual rate of 0.34% to
the daily net assets of the Fund determined as of the close of each business
day. For the fiscal period October 31, 1994 (commencement of operations) through
June 30, 1995, the fee payable under the Advisory Agreement ($37,886) was waived
by the Adviser pursuant to undertakings described above.
The Advisory Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations thereunder,
the Adviser is not liable to the Fund or any of its investors for any act or
omission by the Adviser or for any losses sustained by the Fund or its
investors. The Advisory Agreement in no way restricts the Adviser from acting as
investment adviser to others.
The Advisory Agreement was initially approved by the Trustees on July 14,
1994 and by InterCapital as then sole shareholder on July 27, 1994. The Advisory
Agreement may be terminated at any time, without penalty, on thirty days' notice
by the Trustees of the Fund, by the holders of a majority, as defined in the
Act, of the outstanding shares of the Fund, or by the Adviser. The Agreement
will automatically terminate in the event of its assignment (as defined in the
Act).
Under its terms, the Advisory Agreement will continue in effect until April
30, 1996, and provides that it will continue from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the vote
of the holders of a majority, as defined in the Act, of the outstanding shares
of the Fund, or by the Trustees of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Independent
Trustees of the Fund, which vote must be cast in person at a meeting called for
the purpose of voting on such approval.
Expenses not expressly assumed by the Manager under the Management
Agreement, by the Adviser under the Advisory Agreement or by the Distributor of
the Fund's shares, Dean Witter Distributors Inc. ("Distributors" or the
"Distributor") (see "The Distributor"), will be paid by the Fund. The expenses
borne by the Fund include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1 (see "The Distributor"); charges and
expenses of any registrar; custodian, stock transfer and dividend disbursing
agent; brokerage commissions and securities transaction costs; taxes; engraving
and printing of 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 Manager or Adviser or any corporate
affiliate of either; 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 Manager or the
Adviser (not including compensation or expenses of attorneys who are employees
of the Manager or the Adviser) 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.
Pursuant to the Management and Advisory Agreements, total operating
expenses of the Fund are subject to applicable limitations under rules and
regulations of states where the Fund is authorized to sell its shares.
Therefore, operating expenses are effectively subject to the most restrictive of
such limitations as the same may be amended from time to time. Presently, the
most restrictive limitation is as follows. If, in any fiscal year, the Fund's
total operating expenses, exclusive of taxes, interest, brokerage fees,
distribution fees and extraordinary expenses (to the extent permitted by
applicable state securities laws and regulations), exceed 2 1/2 % of the first
$30,000,000 of average daily net assets, 2% of the next $70,000,000 and 1 1/2 %
of any excess over $100,000,000, the Manager and the Adviser will reimburse the
Fund, on a pro rata basis, for the amount of such excess. Such amount, if any,
will be calculated daily and credited on a monthly basis. During the fiscal
period October 31, 1994 through June 30, 1995, the Fund's expenses did not
exceed the expense limitation.
DWR and TCW have entered into an Agreement for the purpose of creating,
managing, administering and distributing a family of investment companies and
other managed pooled investment vehicles offered on a retail
5
<PAGE>
basis within the United States. The Agreement contemplates that, subject to
approval of the board of trustees or directors of a particular investment
entity, DWR or its affiliates will provide management and distribution services
and TCW or its affiliates will provide investment advisory services for each
such investment entity. The Agreement sets forth the terms and conditions of
the relationship between TCW and its affiliates and DWR and its affiliates and
the manner in which the parties will implement the creation and maintenance of
the investment entities, including the parties' expectations as to respective
allocation of fees to be paid by an investment entity to each party for the
services to be provided to it by such party.
The Fund has acknowledged that each of DWR and TCW owns its own name,
initials and logo. The Fund has agreed to change its name at the request of
either the Manager or the Adviser, if the Management Agreement between the
Manager and the Fund or the Advisory Agreement between the Adviser and the Fund
is terminated.
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 the
Manager or the Adviser, and the affiliated companies of either, and with the 13
TCW/DW Funds and with 77 investment companies of which InterCapital serves as
investment manager or investment adviser (the "Dean Witter Funds"), are shown
below.
NAME, AGE, POSITION WITH FUND PRINCIPAL OCCUPATION DURING LAST
AND ADDRESS FIVE YEARS
- ------------------------------------- ---------------------------------------
John C. Argue (63) Of Counsel, Argue Pearson Harbison &
Trustee Myers (law firm); Director, Avery
c/o Argue Pearson Harbison & Myers Dennison Corporation (manufacturer of
801 South Flower Street self-adhesive products and office
Los Angeles, California supplies) and CalMat Company (producer
of aggregates, asphalt and ready mixed
concrete); Chairman, Rose Hills
Memorial Park (cemetery); advisory
director, LAACO Ltd. (owner and
operator of private clubs and real
estate); director or trustee of
various business and not-for-profit
corporations; Director, TCW Galileo
Funds, Inc.; Trustee, University of
Southern California, Occidental
College and Pomona College; Trustee of
the TCW/DW Funds.
Richard M. DeMartini* (42) President and Chief Operating Officer
Trustee of Dean Witter Capital, a division of
Two World Trade Center DWR; Director of DWR, the Manager,
New York, New York InterCapital, Distributors and Dean
Witter Trust Company ("DWTC");
Executive Vice President of DWDC;
Member of the DWDC Management
Committee; Trustee of the TCW/DW
Funds.
Charles A. Fiumefreddo* (62) Chairman, Chief Executive Officer and
Chairman of the Board, Chief Director of the Manager, InterCapital
Executive Officer and Trustee and Distributors; Executive Vice
Two World Trade Center President and Director of DWR;
New York, New York Chairman of the Board, Chief Executive
Officer and Trustee of the TCW/DW
Funds; Chairman of the Board, Director
or Trustee, President and Chief
Executive Officer of the Dean Witter
Funds; formerly Executive Vice
President and Director of DWDC (until
February, 1993); Chairman and Director
of DWTC; Director and/or officer of
various DWDC subsidiaries.
6
<PAGE>
NAME, AGE, POSITION WITH FUND PRINCIPAL OCCUPATION DURING LAST
AND ADDRESS FIVE YEARS
- ------------------------------------- ---------------------------------------
John R. Haire (70) Chairman of the Audit Committee and
Trustee Chairman of the Committee of
Two World Trade Center Independent Directors or Trustees and
New York, New York Director or Trustee of each of the
Dean Witter 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);
Trustee of the TCW/DW Funds.
Dr. Manuel H. Johnson (46) Senior Partner, Johnson Smick
Trustee International, Inc., a consulting
c/o Johnson Smick International Inc. firm; Koch Professor of International
1133 Connecticut Avenue, N.W. Economics and Director of the Center
Washington, D.C. for Global Market Studies at George
Mason University (since September,
1990); Co-Chairman and a founder of
the Group of Seven Council (G7C), an
international economic commission
(since September, 1990); Director of
NASDAQ (since June, 1995); Director of
Greenwich Capital Markets, Inc.
(broker-dealer); formerly Vice
Chairman of the Board of Governors of
the Federal Reserve System (February,
1986-August, 1990) and Assistant
Secretary of the U.S. Treasury
(1982-1986); Trustee of the TCW/DW
Funds; Director or Trustee of the Dean
Witter Funds.
Paul Kolton (71) Chairman of the Audit Committee and
Trustee Chairman of the Committee of
c/o Gordon Altman Butowsky Weitzen Independent Trustees of the TCW/DW
Shalov & Wein Funds; formerly Chairman of the
Counsel to the Independent Trustees Financial Accounting Standards
114 West 47th Street Advisory Council and Chairman and
New York, New York Chief Executive Officer of the
American Stock Exchange; Director of
UCC Investors Holding Inc. (Uniroyal
Chemical Company Inc.); director or
trustee of various not-for-profit
organizations; Director or Trustee of
the Dean Witter Funds.
Thomas E. Larkin, Jr.* (55) Executive Vice President, The TCW
President and Trustee Group, Inc.; President and Director of
865 South Figueroa Street Trust Company of the West; Vice
Los Angeles, California Chairman and Director of TCW Asset
Management Company; Chairman of the
Adviser; President and Director of TCW
Funds, Inc.; Senior Vice President of
TCW Convertible Securities Fund, Inc.;
Vice Chairman of the Advisory Council
for the College of Business
Administration of the University of
Notre Dame; Director of the California
Pediatric and Family Medicine Center;
President and Trustee of the TCW/DW
Funds.
Michael E. Nugent (59) General Partner, Triumph Capital,
Trustee L.P., a private investment
c/o Triumph Capital, L.P. partnership; formerly Vice President,
237 Park Avenue Bankers Trust Company and BT Capital
New York, New York Corporation (September, 1984-March
1988); Director of various business
organizations; Trustee of the TCW/DW
Funds; Director or Trustee of the Dean
Witter Funds.
7
<PAGE>
NAME, AGE, POSITION WITH FUND PRINCIPAL OCCUPATION DURING LAST
AND ADDRESS FIVE YEARS
- ------------------------------------- ---------------------------------------
Marc I. Stern* (51) President, The TCW Group, Inc. (since
Trustee May, 1992); President and Director of
865 South Figueroa Street the Adviser (since May, 1992); Vice
Los Angeles, California Chairman and Director of TCW Asset
Mangement Company (since May, 1992);
Executive Vice President and Director
of Trust Company of the West; Chairman
and Director of The TCW Galileo Funds,
Inc.; Trustee of the TCW/DW Funds;
Chairman of TCW Americas Development,
Inc. (since November, 1990); Chairman
of TCW Asia, Limited (since January,
1993); Chairman of TCW London
International, Limited (since March,
1993); formerly President of
SunAmerica, Inc. (financial services
company; Director of Qualcomm,
Incorporated (wireless
communications); Director or Trustee
of various not-for-profit
organizations.
John L. Schroeder (65) Executive Vice President and Chief
Trustee Investment Officer of the Home
c/o The Home Insurance Company Insurance Company (since August,
59 Maiden Lane 1991); Director or Trustee of the Dean
New York, New York Witter Funds; Director of Citizens
Utilities Company; formerly Chairman
and Chief Investment Officer of
Axe-Houghton Management and the
Axe-Houghton Funds (April, 1983-June,
1991) and President of USF&G Financial
Services, Inc. (June, 1990-June, 1991).
Sheldon Curtis (63) Senior Vice President, Secretary and
Vice President, Secretary and General Counsel of the Manager and
General Counsel InterCapital; Senior Vice President
Two World Trade Center and Secretary of DWTC; Senior Vice
New York, New York President, Assistant Secretary and
Assistant General Counsel of
Distributors; Assistant Secretary of
DWR and Vice President, Secretary and
General Counsel of the TCW/DW Funds
and the Dean Witter Funds.
Robert M. Hanisee (56) Managing Director of the Adviser
Vice President (since April, 1990); Managing
865 South Figueroa Street Director, Director of Research and
Los Angeles, California Chairman of the Equity Policy
Committee of Trust Company of the West
and TCW Asset Management Company; Vice
President of TCW/DW Income and Growth
Fund and TCW/DW Global Convertible
Trust.
Kevin A. Hunter (37) Senior Vice President of the Adviser,
Vice President Trust Company of the West and TCW
865 South Figueroa Street Asset Management Company.
Los Angeles, California
Thomas F. Caloia (48) First Vice President and Assistant
Treasurer Treasurer of the Manager, InterCapital
Two World Trade Center and Treasurer of the TCW/DW Funds and
New York, New York the Dean Witter Funds.
- --------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
the Manager and InterCapital and DWSC, Executive Vice President of Distributors
and DWTC and Director of DWTC, and David A. Hughey, Executive Vice President and
Chief Administrative Officer of the Manager, InterCapital and DWSC, Distributors
8
<PAGE>
and DWTC and Director of DWTC and Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and DWTC, are Vice Presidents of the Fund, and
Marilyn K. Cranney and Barry Fink, First Vice Presidents and Assistant General
Counsels of the Manager and InterCapital and DWSC, and Lou Anne D. McInnis and
Ruth Rossi, Vice Presidents and Assistant General Counsels of InterCapital, are
Assistant Secretaries of the Fund.
BOARD OF TRUSTEES; RESPONSIBILITIES AND COMPENSATION OF INDEPENDENT TRUSTEES
As mentioned above under the caption "The Fund and its Management," the
Fund is one of the TCW/DW Funds, a group of investment companies for which TCW
Funds Management, Inc. serves as Investment Adviser and InterCapital as Manager.
As of the date of this Statement of Additional Information, there are a total of
13 TCW/DW Funds. As of June 30, 1995, the TCW/DW Funds had total net assets of
approximately $4.1 billion and approximately a quarter of a million
shareholders.
The Board of Trustees of each TCW/DW Fund has ten (10) members. Six
Trustees, that is, a majority of the total number, have no affiliation or
business connection with TCW Funds Management, Inc. or Dean Witter Services
Company Inc. or any of their affiliated persons and do not own any stock or
other securities issued by DWDC or TCW, the parent companies of Dean Witter
Services Company Inc. and TCW Funds Management, Inc., respectively. These are
the "disinterested" or "independent" Trustees. Five of the six Independent
Trustees are also Independent Trustees of the Dean Witter Funds. As of the date
of this Statement of Additional Information, there are a total of 77 Dean Witter
Funds. Four of the TCW/DW Funds' Trustees, that is, the management Trustees, are
affiliated with either InterCapital or TCW.
As noted in a federal court ruling, "[T]he independent directors . . . are
expected to look after the interests of shareholders by 'furnishing an
independent check upon management,' especially with respect to fees paid to the
investment company's sponsor." In addition to their general "watchdog" duties,
the Independent Trustees are charged with a wide variety of responsibilities
under the Act. In order to perform their duties effectively, the Independent
Trustees are required to review and understand large amounts of material, often
of a highly technical and legal nature.
The TCW/DW Funds seek as Independent Trustees individuals of distinction
and experience in business and finance, government service, law or academia;
that is, people whose advice and counsel are valuable and 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 of the
demands made on their time by the Funds. Indeed, to serve on the Funds' Boards,
certain Trustees who would be qualified and in demand to serve on bank boards
would be prohibited by law from serving at the same time as a director of a
national bank and as a Trustee of a Fund.
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. Since most of the TCW/DW Funds have such a plan, and
since all of the Funds' Boards have the same independent members, who comprise a
majority of each Board, the Independent Trustees effectively control the
selection of other Independent Trustees of all the TCW/DW Funds.
GOVERNANCE STRUCTURE OF THE TCW/DW FUNDS
While the regulatory system establishes both general guidelines and
specific duties for the Independent Trustees, the governance arrangements from
one investment company group to another vary significantly. In some groups the
Independent Trustees perform their role by attendance at periodic meetings of
the board of directors with study of materials furnished to them between
meetings. At the other extreme, an investment company complex may employ a
full-time staff to assist the Independent Trustees in the performance of their
duties.
The governance structure of the TCW/DW Funds lies between these two
extremes. The Independent Trustees, the Funds' Manager and the Adviser alike
believe that these arrangements are effective and serve the interests of the
Funds' shareholders. 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.
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
9
<PAGE>
agreements, continually reviewing Fund performance, checking on the pricing of
portfolio securities, brokerage commissions, transfer agent costs and
performance, and trading among Funds in the same complex, and approving fidelity
bond and related insurance coverage and allocations, as well as other matters
that arise from time to time.
The 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; advising the independent accountants and Management personnel that
they have direct access to the Committee at all times; and preparing and
submitting Committee meeting minutes to the full Board.
Finally, the Board of each Fund has established 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.
During the calendar year ended December 31, 1994, the three Committees held
a combined total of eight meetings. Committee meetings are sometimes held away
from the offices of the Adviser and the Manager and sometimes in the Board room
of the Manager. These meetings are held without management directors or officers
being present, unless and until they may be invited to the meeting for purposes
of furnishing information or making a report. These separate meetings provide
the Independent Trustees an opportunity to explore in depth with their own
independent legal counsel, independent auditors and other independent
consultants, as needed, the issues they believe should be addressed and resolved
in the interests of the Funds' shareholders.
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees 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 the issues, and arranges to have the information furnished.
He also arranges for the services of independent experts to be provided to the
Committees and consults with them in advance of meetings to help refine reports
and to focus on critical issues. Members of the Committees believe that the
person who serves as Chairman of all three Committees and guides their efforts
is pivotal to the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Adviser and the Manager and other service providers. In
effect, the Chairman of the Committees serves as a combination of chief
executive and support staff of the Independent Trustees.
The Chairman of the Committees is not employed by any other organization
and devotes his time primarily to the services he performs as Committee Chairman
and Independent Trustee of the TCW/DW Funds and as an Independent Trustee of the
Dean Witter Funds. The current Committee Chairman has had a combined total of
more than 35 years experience in the securities, financial and investment
company industries. He has served as Chairman and Chief Executive of the
American Stock Exchange, Inc. and Chairman of the Financial Accounting Standards
Advisory Council.
VALUE OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL TCW/DW FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the TCW/DW Funds is in the best interests
of all the Funds' shareholders. This arrangement 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. It is
believed that having the same individuals serve as Independent Trustees of all
the Funds tends to increase their knowledge and expertise regarding matters
which
10
<PAGE>
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 likelihood 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, it is believed
that 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 TCW/DW Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund will pay each Independent Trustee an annual fee of $3,500 plus a
per meeting fee of $350 for meetings of the Board of Trustees or committees of
the Board of Trustees attended by the Trustee (the Fund will pay the Chairman of
the Audit Committee an annual fee of $1,200 and will pay the Chairman of the
Committee of the Independent Trustees an additional annual fee of $2,400, in
each case inclusive of the Committee meeting fees). The Fund will also reimburse
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 Manager or the Adviser or an affiliated company
of either will not receive any compensation or expense reimbursement from the
Fund. The Fund commenced operations on October 31, 1994 and paid no compensation
to the Independent Trustees for the fiscal period ended June 30, 1995. Payments
commenced as of August 23, 1995, the date in which the Fund began paying
management and advisory fees and bearing certain expenses.
At such time as the Fund has been in operation, and has paid fees to the
Independent Trustees, for a full fiscal year, and assuming the same number of
Board and committee meetings as were held by the other TCW/DW Funds during the
calendar year ended December 31, 1994, it is estimated that compensation paid to
each Independent Trustee during such fiscal year will be the amount shown in the
following table.
FUND COMPENSATION
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- -------------
John C. Argue. . . . . . . . . . . . . . . . . . . . . . . . . . $7,050
John R. Haire. . . . . . . . . . . . . . . . . . . . . . . . . . 7,050
Dr. Manuel H. Johnson. . . . . . . . . . . . . . . . . . . . . . 7,050
Paul Kolton. . . . . . . . . . . . . . . . . . . . . . . . . . . 9,050*
Michael E. Nugent. . . . . . . . . . . . . . . . . . . . . . . . 7,050
John L. Schroeder. . . . . . . . . . . . . . . . . . . . . . . . 7,050
- ---------------
* Of Mr. Kolton's compensation from the Fund, $3,600 is paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($1,200).
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1994 for services
to the 13 TCW/DW Funds and, in the case of Messrs. Haire, Johnson, Kolton and
Nugent, the 73 Dean Witter Funds that were in operation at December 31, 1994,
and, in the case of Mr. Argue, TCW Galileo Funds, Inc. With respect to Messrs.
Haire, Johnson, Kolton and Nugent, the Dean Witter Funds are included solely
because of a limited exchange privilege between various TCW/DW Funds and five
Dean Witter Money Market Funds. With respect to Mr. Argue, TCW Galileo Funds,
Inc. is included solely because the Fund's Adviser, TCW Funds Management, Inc.,
also serves as Adviser to that investment company.
11
<PAGE>
CASH COMPENSATION FROM FUND GROUPS
<TABLE>
<CAPTION>
FOR SERVICE AS
FOR SERVICE CHAIRMAN OF TOTAL CASH
FOR SERVICE AS AS DIRECTOR OR COMMITTEES OF COMPENSATION
TRUSTEE AND TRUSTEE AND FOR SERVICE AS INDEPENDENT FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER DIRECTOR OF DIRECTORS/ 73 DEAN WITTER FUNDS,
OF 13 TCW/DW OF 73 DEAN WITTER TCW GALILEO TRUSTEES AND 13 TCW/DW FUNDS AND
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS, INC. AUDIT COMMITTEES TCW GALILEO FUNDS, INC.
- --------------------------- ---------------- ----------------- -------------- ---------------- -----------------------
<S> <C> <C> <C> <C> <C>
John C. Argue . . . . . . . . $63,250 -- $37,000 -- $100,250
John R. Haire . . . . . . . . 66,950 $101,061 -- $225,563** 393,574
Dr. Manuel H. Johnson . . . . 60,750 122,461 -- -- 183,211
Paul Kolton . . . . . . . . . 51,850 128,961 -- 34,200*** 215,011
Michael E. Nugent . . . . . . 52,650 115,761 -- -- 168,411
John L. Schroeder . . . . . . -- 85,938 -- -- 85,938
<FN>
** For the 73 Dean Witter Funds.
*** For the 13 TCW/DW Funds.
</TABLE>
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
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES
As discussed in the Prospectus, the Fund may invest in, among other
securities, securities issued by the U.S. Government, its agencies or
instrumentalities. Such securities include:
(1) U.S. Treasury bills (maturities of one year or less), U.S.
Treasury notes (maturities of one to ten years) and U.S. Treasury bonds
(generally maturities of greater than ten years), all of which are direct
obligations of the U.S. Government and, as such, are backed by the "full
faith and credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to 30 years.
(3) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but whose issuing
agency or instrumentality has the right to borrow, to meet its obligations,
from an existing line of credit with the U.S. Treasury. Among the agencies
and instrumentalities issuing such obligations are the Tennessee Valley
Authority, the Federal National Mortgage Association ("FNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") and the U.S. Postal Service.
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal
Farm Credit System and the Federal Home Loan Banks.
Neither the value nor the yield of the U.S. Government securities which may
be invested in by the Fund are 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 any U.S.
Government securities held by the Fund 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. The Fund is not limited as to the maturities of the
U.S. Government securities in which it may invest.
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<PAGE>
MONEY MARKET SECURITIES
As stated in the Prospectus, the money market instruments which the Fund
may purchase include U.S. Government securities, bank obligations, Eurodollar
certificates of deposit, obligations of savings institutions, fully insured
certificates of deposit and commercial paper. Such securities are limited to:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit, bankers'
acceptances, commercial paper (see below) and other debt obligations) of banks
subject to regulation by the U.S. Government and having total assets of $1
billion or more, and instruments secured by such obligations, not including
obligations of foreign branches of domestic banks except as permitted below;
EURODOLLAR CERTIFICATES OF DEPOSIT. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more (investments in Eurodollar certificates may be affected by changes in
currency rates or exchange control regulations, or changes in governmental
administration or economic or monetary policy in the United States and abroad);
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more (investments in savings institutions above $100,000 in principal amount are
not protected by Federal deposit insurance);
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is insured by the Bank Insurance Fund or the
Savings Association Insurance Fund (each of which is administered by the Federal
Deposit Insurance Corporation), limited to $100,000 principal amount per
certificate and to 15% or less of the Fund's total assets in all such
obligations and in all illiquid assets, in the aggregate; and
COMMERCIAL PAPER. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation or the highest grade by Moody's Investors Service,
Inc. or, if not rated, issued by a company having an outstanding debt issue
rated at least AAA by Standard & Poor's or Aaa by Moody's.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund (subject to notice
provisions described below), and are at all times secured by cash or money
market instruments, which are maintained in a segregated account pursuant to
applicable regulations and that are equal to at least the market value,
determined daily, of the loaned securities. The advantage of such loans is that
the Fund continues to receive the income on the loaned securities while at the
same time earning interest on the cash amounts deposited as collateral, which
will be invested in short-term obligations. The Fund will not lend its portfolio
securities if such loans are not permitted by the laws or regulations of any
state in which its shares are qualified for sale and will not lend more than 25%
of the value of its total assets. A loan may be terminated by the borrower on
one business day's notice, or by the Fund on two business days' notice. If the
borrower fails to deliver the loaned securities within two days after receipt of
notice, the Fund could use the collateral to replace the securities while
holding the borrower liable for any excess of replacement cost over collateral.
As with any extensions of credit, there are risks of delay in recovery and in
some cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Adviser to be creditworthy and when the
income which can be earned from such loans justifies the attendant risks. Upon
termination of the loan, the borrower is required to return the securities to
the Fund. Any gain or loss in the market price during the loan period would
inure to the Fund. The creditworthiness of firms to which the Fund lends its
portfolio securities will be monitored on an ongoing basis by the Adviser
pursuant to procedures adopted and reviewed, on an ongoing basis, by the Board
of Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such
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<PAGE>
rights if the matters involved would have a material effect on the Fund's
investment in such loaned securities. The Fund will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.
REPURCHASE AGREEMENTS
When cash may be available for only a few days, it may be invested by the
Fund in repurchase agreements until such time as it may otherwise be invested or
used for payments of obligations of the Fund. These agreements, which may be
viewed as a type of secured lending by the Fund, typically involve the
acquisition by the Fund of debt securities from a selling financial institution
such as a bank, savings and loan association or broker-dealer. The agreement
provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral") at a
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. The collateral will be maintained in a
segregated account and will be marked to market daily to determine that the
value of the collateral, as specified in the agreement, does not decrease below
the purchase price plus accrued interest. If such decrease occurs, additional
collateral will be requested and, when received, added to the account to
maintain full collateralization. The Fund will accrue interest from the
institution until the time when the repurchase is to occur. Although such date
is deemed by the Fund to be the maturity date of a repurchase agreement, the
maturities of securities subject to repurchase agreements are not subject to any
limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Adviser subject
to procedures established by the Board of Trustees of the Fund. In addition, as
described above, the value of the collateral underlying the repurchase agreement
will be at least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or bankruptcy by a
selling financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of the Fund not to
invest in repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts to
more than 15% of its net assets.
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 and may purchase
or sell securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery and
payment can take place a month or more after the date of the commitment. The
securities so purchased or sold are subject to market fluctuation and no
interest or dividends accrue to the purchaser prior to the settlement date.
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. At the time the Fund makes the commitment to purchase or sell
securities on a when-issued, delayed delivery or forward commitment basis, the
Fund 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, the
value may be more or less than the purchase or sale price. The Fund will also
establish a segregated account with the Fund's custodian bank in which it will
continuously maintain cash or U.S. Government securities or other high grade
liquid debt portfolio securities equal in value to commitments to purchase
securities on a when-issued, delayed delivery or forward commitment basis;
subject to this requirement, the Fund may purchase securities on such basis
without limit. An increase in the percentage of the Fund's assets committed to
the purchase of securities on a when-issued or delayed delivery basis may
increase the volatility of the Fund's net asset value. The Adviser does not
believe that the Fund's net asset value or income will be adversely affected by
its purchase of securities on such basis.
WHEN, AS AND IF ISSUED SECURITIES
The Fund may purchase securities on a "when, as and if issued" basis under
which the issuance of the security depends upon the occurrence of a subsequent
event, such as approval of a merger, corporate reorganization,
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<PAGE>
leveraged buyout or debt restructuring. The commitment for the purchase of any
such security will not be recognized in the portfolio of the Fund until the
Adviser determines that issuance of the security is probable. At such time, the
Fund will record the transaction and, in determining its net asset value, will
reflect the value of the security daily. At such time, the Fund will also
establish a segregated account with its custodian bank in which it will
continuously maintain cash or U.S. Government securities or other high grade
liquid debt portfolio securities equal in value to recognized commitments for
such securities. Settlement of the trade will occur within five business days of
the occurrence of the subsequent event. Once a segregated account has been
established, if the anticipated event does not occur and the securities are not
issued the Fund will have lost an investment opportunity. The Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value. The Adviser
does not believe that the net asset value of the Fund will be adversely affected
by its purchase of securities on such basis. The Fund may also sell securities
on a "when, as and if issued" basis provided that the issuance of the security
will result automatically from the exchange or conversion of a security owned by
the Fund at the time of the sale.
PORTFOLIO TURNOVER
It is anticipated that the Fund's portfolio turnover rate generally will
not exceed 100%. A 100% turnover rate would occur, for example, if 100% of the
securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced within
one year.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at a
meeting of shareholders, if the holders of 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Fund.
The Fund may not:
1. Purchase or sell real estate or interests therein (including
limited partnership interests), although the Fund may purchase securities
of issuers which engage in real estate operations and securities secured by
real estate or interests therein.
2. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
3. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
4. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed).
5. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(4). For the purpose of this restriction, collateral arrangements with
respect to initial or variation margin for futures are not deemed to be
pledges of assets.
6. Issue senior securities as defined in the Act except insofar as
the Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement; (b) purchasing any securities on a
when-issued or delayed delivery basis; (c) purchasing or selling any
financial futures contracts; (d) borrowing money in accordance with
restrictions described above; or (e) lending portfolio securities.
7. Make loans of money or securities, except: (a) by the purchase of
portfolio securities in which the Fund may invest consistent with its
investment objective and policies; (b) by investment in repurchase
agreements; or (c) by lending its portfolio securities.
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<PAGE>
8. Purchase or sell commodities or commodities contracts except that
the Fund may purchase or sell financial or stock index futures contracts or
options thereon.
9. Make short sales of securities.
10. Purchase securities on margin, except for such short-term loans
as are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts is not considered the purchase of a security on margin.
11. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
12. Invest for the purpose of exercising control or management of any
other issuer.
In addition, as a nonfundamental policy, the Fund may not invest in
securities of any issuer if, to the knowledge of the Fund, any officer or
trustee of the Fund or any officer or director of the Adviser or the Manager
owns more than 1/2 of 1% of the outstanding securities of such issuer, and such
officers, trustees and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuers.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Trustees, the Adviser is
responsible for decisions to buy and sell securities for the Fund, the selection
of brokers and dealers to effect the transactions, and the negotiation of
brokerage commissions, if any. Purchases and sales of securities on a stock
exchange are effected through brokers who charge a commission for their
services. In the over-the-counter market, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a profit
to the dealer. In addition, securities may be purchased at times in underwritten
offerings where the price includes a fixed amount of compensation, generally
referred to as the underwriter's concession or discount. Futures transactions
will usually be effected through a broker and a commission will be charged. On
occasion, the Fund may also purchase certain money market instruments directly
from an issuer, in which case no commissions or discounts are paid. During the
fiscal period October 31, 1994 through June 30, 1995, the Fund paid $1,790 in
brokerage commissions.
The Adviser currently serves as investment adviser to a number of clients,
including other investment companies, and may in the future act as investment
adviser to others. It is the practice of the Adviser to cause purchase and sale
transactions to be allocated among the Fund and others whose assets it manages
in such manner as it deems equitable. In making such allocations among the Fund
and other client accounts, the main factors considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investments generally held and the opinions of the persons responsible for
managing the portfolios of the Fund and other client accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Adviser from obtaining a high quality of brokerage and
research services. In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the Adviser relies upon its experience and
knowledge regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily subjective
and imprecise, as in most cases an exact dollar value for those services is not
ascertainable.
In seeking to implement the Fund's policies, the Adviser effects
transactions with those brokers and dealers who the Adviser believes provide the
most favorable prices and are capable of providing efficient executions. If the
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<PAGE>
Adviser 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 Adviser. Such services may include, but are not limited to, any
one or more of the following: reports on industries and companies, economic
analyses and review of business conditions, portfolio strategy, analytic
computer software, account performance services, computer terminals and various
trading and/or quotation equipment. They also include advice from broker-dealers
as to the value of securities, availability of securities, availability of
buyers, and availability of sellers. In addition, they include recommendations
as to purchase and sale of individual securities and timing of such
transactions. The Fund will not purchase at a higher price or sell at a lower
price in connection with transactions effected with a dealer, acting as
principal, who furnishes research services to the Fund than would be the case if
no weight were given by the Fund to the dealer's furnishing of such services.
During the period October 31, 1994 through June 30, 1995, the Fund did not
direct the payment of any brokerage commissions because of research services
provided.
The information and services received by the Adviser from brokers and
dealers may be of benefit to the Adviser in the management of accounts of some
of its other clients and may not in all cases benefit the Fund directly. While
the receipt of such information and services is useful in varying degrees and
would generally reduce the amount of research or services otherwise performed by
the Adviser and thereby reduce its expenses, it is of indeterminable value and
the advisory fee paid to the Adviser is not reduced by any amount that may be
attributable to the value of such services.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR. In order for DWR to effect any portfolio transactions for
the Fund, the commissions, fees or other remuneration received by DWR must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow DWR to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Board of Trustees of the
Fund, including a majority of the Trustees who are not "interested" persons of
the Fund, as defined in the Act, have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to DWR
are consistent with the foregoing standard. During the period October 31, 1994
through June 30, 1995, the Fund paid no brokerage commissions to DWR.
THE DISTRIBUTOR
- --------------------------------------------------------------------------------
As discussed in the Prospectus, during the continuous offering 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. As part of an internal reorganization that took place in
January, 1993, the Distributor assumed the investment company share distribution
activities previously performed by DWR. The Trustees of the Fund, including a
majority of the Independent Trustees, approved, at their meeting held on July
14, 1994, a Distribution Agreement appointing the Distributor as exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. By its terms, the Distribution
Agreement had an initial term ending April 30, 1995, and provides that it will
remain in effect from year to year thereafter if approved by the Board. At their
meeting held on April 20, 1995, the Trustees, including a majority of the
Independent Trustees, approved the continuance of the Distribution Agreement
until April 30, 1996.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws. The Fund and the Distributor
have agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. Under the Distribution
Agreement,
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<PAGE>
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
To compensate the Distributor for the services it or any selected dealer
provides and for the expenses it bears under the Distribution Agreement, the
Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan") pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at the annual rate of 1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the 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 Fund's average daily net assets. The Distributor 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. The
Distributor has informed the Fund that it and/or DWR received approximately
$38,226 in contingent deferred sales charges for the period October 31, 1994
through June 30, 1995.
The Distributor has informed the Fund that a portion of the fees payable by
the Fund each year under the Plan of Distribution, equal to 0.25% of the Fund's
average daily net assets, is characterized as a "service fee" under the Rules of
Fair Practice of the National Association of Securities Dealers (of which the
Distributor is a member). Such fee is payments made for personal service and/or
the maintenance of shareholder accounts. The remaining portions of the Plan of
Distribution fee payments made by the Fund are characterized as "asset-based
sales charges" pursuant to the aforementioned Rules of Fair Practice.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each fiscal quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. In the Trustees' quarterly reviews of the
Plan, they will consider its continued appropriateness and the level of
compensation provided therein. The Fund accrued $111,428 payable to the
Distributor, under the Plan, for the fiscal period October 31, 1994 through June
30, 1995. This is an accrual at an annual rate of 1.0% of the average daily net
assets of the Fund for the fiscal year and was calculated pursuant to clause (b)
under the Plan. This 12b-1 fee 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 5% of the amount sold and an annual
residual commission of up to 0.25 of 1% of the current value of the amount sold.
The gross sales credit is a charge which reflects commissions paid by DWR to its
account executives and DWR's Fund associated distribution-related expenses,
including sales compensation, and overhead and other branch office
distribution-related expenses including: (a) the expenses of operating DWR's
branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies; (b) the costs of client sales seminars; (c) travel expenses of mutual
fund sales coordinators to promote the sale of Fund shares; and (d) other
expenses relating to branch promotion of Fund share sales. The distribution fee
that the Distributor receives from the Fund under the Plan, in effect, offsets
distribution expenses 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 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 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.
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<PAGE>
The Fund paid 100% of the $111,428 accrued under the Plan for the fiscal
period ended June 30, 1995 to the Distributor. The Distributor estimates it has
spent, pursuant to the Plan, $1,548,772 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) 32.55% ($504,105)--advertising and
promotional expenses; (ii) 6.71% ($103,884)--printing of prospectuses for
distribution to other than current stockholders; and (iii) 60.74%
($940,733)--other expenses, including the gross sales credit and the carrying
charges of which 3.31% ($31,146) represents carrying charges, 38.58% ($362,925)
represents commission credits to DWR branch offices for payments of commissions
to account executives and 58.11% ($546,662) represents overhead and other branch
office distribution-related expenses. The term "overhead and other branch office
distribution-related expenses" represents (a) the expenses of operating DWR's
branch offices in connection with the sale of the Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies; (b) the costs of client sales seminars; (c) travel expenses of Mutual
Fund sales coordinators to promote the sale of Fund shares; and (d) other
expenses relating to branch promotion of Fund share sales.
At any given time, the expenses in distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to the
Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. The Distributor has advised the Fund that
the excess distribution expenses, including the carrying charge designed to
approximate the opportunity costs incurred by DWR which arise from it having
advanced monies without having received the amount of any sales charges imposed
at the time of the sale of the Fund's shares totalled $1,398,806 at June 30,
1995. Because there is no requirement under the Plan that the Distributor be
reimbursed for all expenses or any requirement that the Plan be continued from
year to year, this excess amount does not constitute a liability of the Fund.
Although there is no legal obligation for the Fund to pay distribution expenses
in excess of payments made 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.
Under the Plan, 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.
The Plan remained in effect until April 30, 1995, and will continue from
year to year thereafter, provided such continuance is approved annually by a
vote of the Trustees, including a majority of the Independent 12b-1 Trustees.
At their meeting held on April 20, 1995, the Board of Trustees of the Fund,
including a majority of the Independent 12b-1 Trustees approved the continuance
of the Plan until April 30, 1996. Prior to approving the continuation of the
Plan, the Board requested and received from the Distributor and reviewed all the
information which it deemed necessary to arrive at an informed determination. In
making their determination to continue the Plan, the Trustees considered: (1)
the Fund's experience under the Plan and whether such experience indicates that
the Plan is operating as anticipated; (2) the benefits the Fund had obtained,
was obtaining and would be likely to obtain under the Plan; and (3) what
services had been provided and were continuing to be provided under the Plan by
the Distributor, DWR and other selected broker-dealers 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. This determination was
based upon the conclusion of the Trustees that the Plan provides an effective
means of stimulating sales of shares of the Fund and of reducing or avoiding net
redemptions and the potentially adverse effects that may occur therefrom. In the
Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.
Any amendment to increase materially the maximum amount authorized to be
spent under the Plan must be approved by the shareholders of the Fund, and all
material amendments to the Plan must be approved by the Trustees in the manner
described above. The Plan may be terminated at any time, without payment of any
penalty,
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<PAGE>
by vote of a majority of the Independent 12b-1 Trustees or by a vote of the
holders of a majority of the outstanding voting securities of the Fund (as
defined in the Act) on not more than 30 days written notice to any other party
to the Plan. So long as the Plan is in effect, the selection or nomination of
the Independent Trustees is committed to the discretion of the Independent
Trustees.
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 or indirect
financial interest in the operation of the Plan except to the extent that DWR,
InterCapital, the Distributor or the Manager 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.
DETERMINATION OF NET ASSET VALUE
As stated in the Prospectus, short-term securities with remaining
maturities of sixty days or less at the time of purchase are valued at amortized
cost, unless the Trustees determine such does not reflect the securities' market
value, in which case these securities will be valued at their fair value as
determined by the Trustees. Other short-term debt securities will be valued on a
mark-to-market basis until such time as they reach a remaining maturity of sixty
days, whereupon they will be valued at amortized cost using their value on the
61st day unless the Trustees determine such does not reflect the securities'
market value, in which case these securities will be valued at their fair value
as determined by the Trustees. All other securities and other assets are valued
at their fair value as determined in good faith under procedures established by
and under the supervision of the Trustees.
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time, on each day that the New York Stock Exchange is open (or,
on days when the New York Stock Exchange closes prior to 4:00 p.m., at such
earlier time), by taking the value of all assets of the Fund, subtracting its
liabilities, dividing by the number of shares outstanding and adjusting to the
nearest cent. The New York Stock Exchange currently observes the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by Dean
Witter Trust Company (the "Transfer Agent"). This is an open account in which
shares owned by the investor are credited by the Transfer Agent in lieu of
issuance of a share certificate. If a share certificate is desired, it must be
requested in writing for each transaction. Certificates are issued only for full
shares and may be redeposited in the account at any time. There is no charge to
the investor for issuance of a certificate. Whenever a shareholder-instituted
transaction takes place in the Shareholder Investment Account, the shareholder
will be mailed a confirmation of the transaction from the Fund or from DWR or
other selected broker-dealer.
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of the
Fund is made upon the condition that the Transfer Agent is thereby automatically
appointed as agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and distributions
will be paid, at the net asset value per share, in shares of the Fund (or in
cash if the shareholder so requests) as of the close of business on the record
date. At any time an investor may request the Transfer Agent, in writing, to
have subsequent dividends and/or capital gains distributions paid to him or her
in cash rather than shares. To assure sufficient time to process the change,
such request should be received by the Transfer Agent at least five business
days prior to the record date of the dividend or distribution. In the case of
recently purchased shares for which registration instructions have not been
received on the record date, cash payments will be made to DWR or the other
selected broker-dealer, and which 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 a TCW/DW Fund other than TCW/DW Global
Convertible 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
selected TCW/DW Fund as of the close of business
20
<PAGE>
on the payment date of the dividend or distribution and will begin to earn
dividends, if any, in the selected TCW/DW 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 TCW/DW Fund targeted to
receive investments from dividends at the time they enter the Targeted Dividends
program. Investors should review the prospectus of the targeted TCW/DW 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 distribution may invest such dividend or distribution at the net
asset value per share, without the imposition of a contingent deferred sales
charge upon redemption, by returning the check or the proceeds to the Transfer
Agent within 30 days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset value
per share next determined after receipt of the check or proceeds by the Transfer
Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon the
then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount, not
less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable contingent deferred sales charge will be
imposed on shares redeemed under the Withdrawal Plan (see "Repurchases and
Redemptions--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 concurrently with purchases of additional
shares may be inadvisable because of the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six years
(see "Repurchases and Redemptions--Contingent Deferred Sales Charge").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her DWR or other selected broker-dealer account executive or by written
notification to the Transfer Agent. In addition, the party and/or the address to
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<PAGE>
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
"Repurchases and Redemptions" in the Prospectus) at any time. Shareholders
wishing to enroll in the Withdrawal Plan should contact their account executive
or the Transfer Agent.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to TCW/DW Global
Convertible 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 TCW/DW Funds sold with a contingent deferred
sales charge ("CDSC Funds"), TCW/DW North American Government Income Trust,
TCW/DW Income and Growth Fund, TCW/DW Balanced Fund, TCW/DW North American
Intermediate Income Trust and five money market funds for which InterCapital
serves as investment manager (the foregoing nine non-CDSC funds are hereinafter
collectively referred to as the "Exchange Funds"). Exchanges may be made after
the shares of the fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment. An exchange
will be treated for federal income tax purposes the same as a repurchase or
redemption of shares, on which the shareholder may realize a capital gain or
loss.
Shareholders utilizing the Fund's Exchange Privilege may subsequently
re-exchange such shares back to the Fund. However, no exchange privilege is
available between the Fund and any other fund managed by the Manager or
InterCapital, except for other TCW/DW Funds and the five money market funds
listed in the Prospectus.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the captions "Exchange
Privilege" and "Contingent Deferred Sales Charge," a contingent deferred sales
charge ("CDSC") may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of the Fund or any
other CDSC Fund are exchanged for shares of an Exchange Fund, the exchange is
executed at no charge to the shareholder, without the imposition of the CDSC at
the time of the exchange. During the period of time the shareholder remains in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired), the holding period or "year since purchase
payment made" is frozen. When shares are redeemed out of the Exchange Fund, they
will be subject to a CDSC which would be based upon the period of time the
shareholder held shares in the Fund. However, in the case of shares exchanged
into an Exchange Fund, upon a redemption of shares which results in a CDSC being
imposed, a credit (not to exceed the amount of the CDSC) will be given in an
amount equal to the Exchange Fund 12b-1 distribution fees which are attributable
to those shares. Shareholders acquiring shares of an Exchange Fund pursuant to
this exchange privilege may exchange those shares back into the Fund from the
Exchange Fund, with no charge being imposed on such exchange. The holding period
previously frozen when shares were first exchanged for shares of an 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.
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<PAGE>
When shares initially purchased in a CDSC Fund are exchanged for shares of
an Exchange Fund, the date of purchase of the shares of the fund exchanged into,
for purposes of the CDSC upon redemption, will be the last day of the month in
which the shares being exchanged were originally purchased. In allocating the
purchase payments between funds for purposes of the CDSC the amount which
represents the current net asset value of shares at the time of the exchange
which were (i) purchased more than six years prior to the exchange and (ii)
originally acquired through reinvestment of dividends or distributions (all such
shares called "Free Shares") will be exchanged first. After an exchange, all
dividends earned on shares in the Exchange Fund will be considered Free Shares.
If the exchanged amount exceeds the value of such Free Shares, an exchange is
made, on a block-by-block basis, of non-Free Shares held for the longest period
of time. Shares equal to any appreciation in the value of non-Free Shares
exchanged will be treated as Free Shares, and the amount of the purchase
payments for the non-Free Shares of the fund exchanged into will be equal to the
lesser of (a) the purchase payments for, or (b) the current net asset value of,
the exchanged non-Free Shares. If an exchange between funds would result in
exchange of only part of a particular block of non-Free Shares, then shares
equal to any appreciation in the value of the block (up to the amount of the
exchange) will be treated as Free Shares and exchanged first, and the purchase
payment for that block will be allocated on a pro rata basis between the
non-Free Shares of that block to be retained and the non-Free Shares to be
exchanged. The prorated amount of such purchase payment attributable to the
retained non-Free Shares will remain as the purchase payment for such shares,
and the amount of purchase payment for the exchanged non-Free Shares will be
equal to the lesser of (a) the prorated amount of the purchase payment for, or
(b) the current net asset value of, those exchanged non-Free Shares. Based upon
the procedures described in the Prospectus under the caption "Contingent
Deferred Sales Charge," any applicable CDSC will be imposed upon the ultimate
redemption of shares of any fund, regardless of the number of exchanges since
those shares were originally purchased.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of other
fund shares. In the absence of negligence on its part, neither the Transfer
Agent nor the Fund shall be liable for any redemption of Fund shares caused by
unauthorized telephone or telegraph instructions. Accordingly, in such event the
investor shall bear the risk of loss. The staff of the Securities and Exchange
Commission is currently considering the propriety of such a policy.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions.
With respect to exchanges, redemptions or repurchases, the Transfer Agent
shall be liable for its own negligence and not for the default or negligence of
its correspondents or for losses in transit. The Fund shall not be liable for
any default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000 for
Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income Trust,
Dean Witter New York Municipal Money Market Trust and Dean Witter California
Tax-Free Daily Income Trust, although those funds may, at their discretion,
accept initial investments of as low as $1,000. The minimum initial investment
for Dean Witter U.S. Government Money Market Trust and for all TCW/DW Funds is
$1,000.) Upon exchange into an Exchange Fund, the shares of that fund will be
held in a special Exchange Privilege Account separately from accounts of those
shareholders who have acquired their shares directly from that fund. As a
result, certain services normally available to shareholders of money market
funds, including the check writing feature, will not be available for funds held
in that account.
The Fund, each of the other TCW/DW Funds and each of the money market 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 funds for which
shares
23
<PAGE>
of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days for termination or material
revision), provided that six months prior written notice of termination will be
given to the shareholders who hold shares of Exchange Funds pursuant to this
Exchange Privilege, and provided further that the Exchange Privilege may be
terminated or materially revised without notice at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, (d) during any other period when the Securities and
Exchange Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist) or (e) if the Fund would be
unable to invest amounts effectively in accordance with its investment
objective, policies and restrictions.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss. However, the ability to deduct capital losses on
an exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REPURCHASES AND REDEMPTIONS
- --------------------------------------------------------------------------------
REDEMPTION. As stated in the Prospectus, shares of the Fund can be redeemed
for cash at any time at the net asset value per share next determined; however,
such redemption proceeds may be reduced by the amount of any applicable
contingent deferred sales charges (see below). If shares are held in a
shareholder's account without a share certificate, a written request for
redemption to the Fund's Transfer Agent at P.O. Box 983, Jersey City, NJ 07303
is required. If certificates are held by the shareholder, the shares may be
redeemed by surrendering the certificates with a written request for redemption.
The share certificate, or an accompanying stock power, and the request for
redemption, must be signed by the shareholder or shareholders exactly as the
shares are registered. Each request for redemption, whether or not accompanied
by a share certificate, must be sent to the Fund's Transfer Agent, which will
redeem the shares at their net asset value next computed (see "Purchase of Fund
Shares") after it receives the request, and certificate, if any, in good order.
Any redemption request received after such computation will be redeemed at the
next determined net asset value. The term "good order" means that the share
certificate, if any, and request for redemption are properly signed, accompanied
by any documentation required by the Transfer Agent, and bear signature
guarantees when required by the Fund or the Transfer Agent. If redemption is
requested by a corporation, partnership, trust or fiduciary, the Transfer Agent
may require that written evidence of authority acceptable to the Transfer Agent
be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a revised
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 TCW/DW Fund (see "Shareholder Services--Targeted Dividends"), plus (c)
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<PAGE>
increases in the net asset value of the investor's shares above the total amount
of payments for the purchase of Fund shares made during the preceding six years.
The CDSC will be paid to the Distributor.
In determining the applicability of a CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will be
the amount which represents the net asset value of the investor's shares
purchased more than six years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions. 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 will
be subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years from
the time of any payment for the purchase of shares, all payments made during a
month will be aggregated and deemed to have been made on the last day of the
month. The following table sets forth the rates of the CDSC:
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
------------ ------------------
First. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0%
Second . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0%
Third. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0%
Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0%
Fifth. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0%
Sixth. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0%
Seventh and thereafter . . . . . . . . . . . . . . . . . . . None
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. 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 REPURCHASED OR REDEEMED. 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, 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.
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<PAGE>
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the contingent deferred sales charge or free of such charge
(and with regard to the length of time shares subject to the charge have been
held), any transfer involving less than all of the shares in an account will be
made on a pro-rata basis (that is, by transferring shares in the same proportion
that the transferred shares bear to the total shares in the account immediately
prior to the transfer). The transferred shares will continue to be subject to
any applicable contingent deferred sales charge as if they had not been so
transferred.
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within thirty days after the date of
redemption or repurchase reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund at the net asset value next
determined after a reinstatement request, together with such 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 shareholders will be required to include such
undistributed gains in their taxable income and will be able to claim their
share of the tax paid by the Fund as a credit against their individual federal
income tax.
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.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
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 net 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 dividend or distribution record date.
Dividends, interest and capital gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Investors may be entitled to claim United States foreign tax credits or
deductions with respect to such taxes, subject to certain provisions and
limitations contained in the Code. If more than 50% of the Fund's total assets
at the close of its fiscal year consist of securities of foreign corporations,
the Fund would be eligible and would determine whether or not to file an
election with the Internal Revenue Service pursuant to which shareholders of the
Fund will be required to include their respective pro rata portions of such
withholding taxes in their United States income tax returns as gross income,
treat such respective pro rata portions as taxes paid by them, and deduct such
respective pro rata portions in computing their taxable income or,
alternatively, use them as foreign tax credits against their United States
income taxes. If the Fund does elect to file the election with the Internal
Revenue Service, the Fund will report annually to its shareholders the amount
per share of such withholding.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS. In general, gains
from foreign currencies and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in stock,
securities or foreign currencies are currently considered to be qualifying
income for purposes of
26
<PAGE>
determining whether the Fund qualifies as a regulated investment company. It is
currently unclear, however, who will be treated as the issuer of certain foreign
currency instruments or how foreign currency options, futures, or forward
foreign currency contracts will be valued for purposes of the regulated
investment company diversification requirements applicable to the Fund.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (I.E.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from forward contracts, from futures
contracts that are not "regulated futures contracts", and from unlisted options
will be treated as ordinary income or loss under Code Section 988. Also, certain
foreign exchange gains or losses derived with respect to foreign fixed-income
securities are also subject to Section 988 treatment. In general, therefore,
Code Section 988 gains or losses will increase or decrease the amount of the
Fund's investment company taxable income available to be distributed to
shareholders as ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Additionally, if Code Section 988 losses exceed
other investment company taxable income during a taxable year, the Fund would
not be able to make any ordinary dividend distributions.
If the Fund invests in an entity which is classified as a "passive foreign
investment company" ("PFIC") for U.S. tax purposes, the application of certain
technical tax provisions applying to such companies could result in the
imposition of federal income tax with respect to such investments at the Fund
level which could not be eliminated by distributions to shareholders. The U.S.
Treasury issued proposed regulation section 1.1291-8 which establishes a
mark-to-market regime which allows investment companies investing in PFIC's to
avoid most, if not all, of the difficulties posed by the PFIC rules. In any
event, it is not anticipated that any taxes on the Fund with respect to
investments in PFIC's would be significant.
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 and/or
dividend income for each security in the Fund's portfolio is determined in
accordance with regulatory requirements; the total for the entire portfolio
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
June 30, 1995, the Fund's yield, calculated pursuant to the formula described
above, was 3.76%.
During the period, InterCapital assumed certain expenses of the Fund and
the Manager and the Adviser waived their respective management and advisory
fees. Had the Fund borne these expenses and paid these fees during the stated
period, the yield for the 30-day period would have been 1.58%.
The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period (of a year or more) 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 total return of the Fund for the period from October 31, 1994
(commencement of operations) through June 30, 1995 was 2.99%. During this
period, InterCapital assumed certain expenses of the Fund and the Manager and
the Adviser waived their management and advisory fees, respectively. Had the
Fund borne these expenses and paid these fees during the stated period, the
total return for the period would have been 1.269%.
27
<PAGE>
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, 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 total return of the Fund may be calculated
in the manner described above, but without deduction for any applicable
contingent deferred sales charge. Based on the foregoing, the Fund's total
return for the period October 31, 1994 through June 30, 1995 was 7.99%.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a decimal and without taking into
account the effect of any applicable CDSC) and multiplying by $10,000, $50,000
or $100,000, as the case may be. Investments of $10,000, $50,000 and $100,000 in
the Fund at inception would have grown to $10,799, $53,995 and $107,990,
respectively, at June 30, 1995.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share held. The Trustees have been elected by InterCapital as the sole
shareholder of the Fund. Mr. Schroeder was elected by the other Trustees of the
Fund on April 20, 1995. The Trustees themselves have the power to alter the
number and the terms of office of the Trustees, 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 to remove the Trustees following a meeting called for that
purpose requested in writing by the record holders of not less than ten percent
of the Fund's outstanding shares. The voting rights of shareholders are not
cumulative, so that holders of more than 50 percent of the shares voting can, if
they choose, elect all Trustees being selected, while the holders of the
remaining shares would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances). However, the Trustees have not authorized
any such additional series or classes of shares.
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, nor is any Trustee,
officer, employee or agent liable to any third persons in connection with the
affairs of the Fund, except as such liability may arise from his 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's 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 liabilities
in connection with the affairs of the Fund.
The Fund is authorized to issue an unlimited number of shares of beneficial
interest. The Fund shall be of unlimited duration subject to the provisions of
the Declaration of Trust concerning termination by action of the shareholders.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Chase Manhattan Bank, NA., Chase Plaza, New York, New York, 10005, 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 Services Company Inc., the
Fund's Manager, and of Dean Witter
28
<PAGE>
Distributors Inc., the Fund's Distributor. As Transfer Agent and Dividend
Disbursing Agent, Dean Witter Trust Company's responsibilities include
maintaining shareholder accounts, including providing subaccounting and
recordkeeping services for certain retirement accounts; disbursing cash
dividends and reinvesting dividends; processing account registration changes;
handling purchase and redemption transactions; mailing prospectuses and reports;
mailing and tabulating proxies; processing share certificate transactions; and
maintaining shareholder records and lists. For these services Dean Witter Trust
Company receives a per shareholder account fee.
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 June 30. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund for the fiscal period ended June 30,
1995 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.
29
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995
<TABLE>
<CAPTION>
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
---------------- ------ ------- -----
<S> <C> <C> <C>
CONVERTIBLE BONDS AND PREFERRED STOCKS (90.8%)
ARGENTINA (1.2%)
BANKING
US$ 340,000 Banco de Galicia y Buenos Aires S.A.. . . . . . . . 7.00% 08/01/02 $ 233,556
-----------
AUSTRALIA (1.2%)
FINANCIAL SERVICES
US$ 200,000 Lend Lease Finance International Ltd. . . . . . . . 4.75 06/01/03 222,000
-----------
BERMUDA (0.5%)
FINANCIAL SERVICES
US$ 105,000 SwissRe Finance - 144A**. . . . . . . . . . . . . . 2.00 07/06/00 94,566
-----------
CANADA (2.5%)
POLLUTION CONTROL
US$ 200,000 Laidlaw Inc. - 144A** . . . . . . . . . . . . . . . 6.00 01/15/99 225,000
-----------
BASIC CYCLICALS
CAD 350,000 Magna International, Inc.*. . . . . . . . . . . . . 7.25 07/05/05 255,120
-----------
TOTAL CANADA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,120
-----------
CAYMAN ISLANDS (3.0%)
FINANCIAL SERVICES
US$ 175,000 HSH Overseas Finance Ltd. . . . . . . . . . . . . . 5.00 01/06/01 155,969
-----------
OIL & GAS
2,100 Parker & Parsley Capital LLC - 144A** $3.12 . . . . 92,663
REAL ESTATE
US$ 310,000 HD Finance Cayman Ltd. - 144A** . . . . . . . . . . 6.75 06/01/00 308,063
-----------
TOTAL CAYMAN ISLANDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556,695
-----------
FINLAND (0.5%)
LEISURE
US$ 100,000 Amer Group Ltd. - 144A**. . . . . . . . . . . . . . 6.25 06/15/03 92,000
-----------
FRANCE (7.1%)
AUTOMOTIVE
FRF 1,089,000 Peugeot S.A.. . . . . . . . . . . . . . . . . . . . 2.00 01/01/01 211,726
-----------
BANKING
ECU 125,000 BCP Bank & Trust. . . . . . . . . . . . . . . . . . 8.75 05/21/02 173,108
-----------
FINANCIAL SERVICES
FRF 321,250 AXA Midi Assurances S.A.. . . . . . . . . . . . . . 6.00 01/01/01 77,229
FRF 548,000 Finaxa. . . . . . . . . . . . . . . . . . . . . . . 3.00 01/01/01 113,152
FRF 791,940 Unibail . . . . . . . . . . . . . . . . . . . . . . 3.75 01/01/04 151,063
-----------
341,444
-----------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
FRF 157,500 Saint Louis . . . . . . . . . . . . . . . . . . . . 7.00 01/01/00 37,100
-----------
INDUSTRIALS
FRF 289,800 Danone. . . . . . . . . . . . . . . . . . . . . . . 6.60 01/01/00 69,496
-----------
MEDIA GROUP
FRF 373,800 Euro Rscg Worldwide . . . . . . . . . . . . . . . . 2.75 01/01/01 75,419
FRF 475,000 Havas S.A.. . . . . . . . . . . . . . . . . . . . . 3.00 12/31/97 113,148
-----------
188,567
-----------
30
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
<CAPTION>
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
---------------- ------ ------- -----
<S> <C> <C> <C>
MULTI-INDUSTRY
FRF 607,050 CIE Generale des Eaux . . . . . . . . . . . . . . . 6.00% 01/01/98 $ 137,870
-----------
TIRE & RUBBER GOODS
FRF 841,500 Michelin France . . . . . . . . . . . . . . . . . . 2.50 01/01/01 172,859
-----------
TOTAL FRANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,332,170
-----------
HONG KONG (4.5%)
CONSTRUCTION PLANT & EQUIPMENT
US$ 125,000 Kumagai Gumi Finance. . . . . . . . . . . . . . . . 4.875 12/08/98 108,750
-----------
ELECTRICAL EQUIPMENT
US$ 120,000 Johnson Electric Holdings, Ltd. . . . . . . . . . . 4.50 11/05/00 104,400
-----------
HOTELS/MOTELS
US$ 225,000 Shangri-La Asia Capital . . . . . . . . . . . . . . 2.875 12/16/00 176,625
-----------
REAL ESTATE
US$ 80,000 Guangzhou Investment Co.. . . . . . . . . . . . . . 4.50 10/08/98 69,000
US$ 160,000 Hong Kong Land Co.. . . . . . . . . . . . . . . . . 4.00 02/23/01 130,600
US$ 290,000 New World Development . . . . . . . . . . . . . . . 4.375 12/11/00 258,463
-----------
458,063
-----------
TOTAL HONG KONG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 847,838
-----------
INDONESIA (0.3%)
PAPER & FOREST PRODUCTS
US$ 50,000 PT International Indorayon Utama. . . . . . . . . . 5.50 10/01/02 58,875
-----------
ITALY (0.3%)
COMPUTER SERVICES
ITL 100,000,000 Olivetti International N.V. . . . . . . . . . . . . 3.75 12/31/99 48,466
-----------
JAPAN (5.7%)
AUTOMOTIVE
Y 11,000,000 Toyota Motor Corp.. . . . . . . . . . . . . . . . . 1.20 01/28/98 131,323
-----------
BANKING
US$ 125,000 Yasuda Trust & Banking. . . . . . . . . . . . . . . 2.875 09/30/03 95,000
-----------
COMPUTERS
Y 4,000,000 NEC Corporation . . . . . . . . . . . . . . . . . . 1.70 03/31/99 49,882
Y 5,000,000 NEC Corporation . . . . . . . . . . . . . . . . . . 1.90 03/30/01 61,643
-----------
111,525
-----------
CONSUMER PRODUCTS
Y 10,000,000 Sekisui House . . . . . . . . . . . . . . . . . . . 0.80 07/31/01 107,565
-----------
HEALTHCARE
Y 2,000,000 Eisai Co., Ltd. . . . . . . . . . . . . . . . . . . 4.20 03/31/98 25,531
-----------
INDUSTRIALS
Y 6,000,000 Fujitsu Ltd.. . . . . . . . . . . . . . . . . . . . 1.90 03/29/02 71,418
Y 10,000,000 Kawasaki Heavy Industries Ltd.. . . . . . . . . . . 0.80 09/28/01 107,683
Y 12,000,000 Matsushita Electric Industries. . . . . . . . . . . 1.40 03/31/04 136,454
Y 5,000,000 Shin-Etsu Chemical Co.. . . . . . . . . . . . . . . 1.30 03/31/99 59,043
-----------
374,598
-----------
31
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
<CAPTION>
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
---------------- ------ ------- -----
<S> <C> <C> <C>
OIL RELATED
Y 10,000,000 Mitsubishi Oil Co., Ltd.. . . . . . . . . . . . . . 2.00% 09/29/00 $ 117,021
-----------
TRANSPORTATION
Y 10,000,000 Keihin Electric Express Railway . . . . . . . . . . 1.50 03/29/02 113,593
-----------
TOTAL JAPAN . . . . . . . . . . . . . . . . . . . . 1,076,156
-----------
LUXEMBOURG (0.4%)
METALS
ECU 70,000 Arbed S.A.. . . . . . . . . . . . . . . . . . . . . 5.50 07/07/99 84,822
-----------
MALAYSIA (0.7%)
CONGLOMERATES
US$ 90,000 Renong Berhad - 144A**. . . . . . . . . . . . . . . 2.00 07/15/05 89,550
-----------
ENTERTAINMENT & LEISURE TIME
US$ 50,000 Technology Resources Industries Berhad. . . . . . . 2.75 11/28/04 51,500
-----------
TOTAL MALAYSIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,050
-----------
MEXICO (0.9%)
BUILDING MATERIALS
US$ 220,000 Cemex S.A.. . . . . . . . . . . . . . . . . . . . . 4.25 11/01/97 166,650
-----------
NETHERLANDS (0.5%)
INSURANCE
US$ 75,000 Aegon N.V. - 144A** . . . . . . . . . . . . . . . . 4.75 11/01/04 93,892
-----------
TAIWAN (3.3%)
CHEMICALS
US$ 125,000 Formosa Chem & Fibre Corp.. . . . . . . . . . . . . 1.75 07/19/01 117,500
-----------
CONSUMER PRODUCTS
US$ 150,000 President Enterprises Corp. . . . . . . . . . . . . 0.00 07/22/01 181,313
-----------
INDUSTRIALS
US$ 100,000 Sampo Corp. . . . . . . . . . . . . . . . . . . . . 2.625 11/23/01 108,250
-----------
TEXTILES
US$ 200,000 Far Eastern Textile . . . . . . . . . . . . . . . . 4.00 10/07/06 224,000
-----------
TOTAL TAIWAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631,063
-----------
THAILAND (1.5%)
BANKING
US$ 130,000 Bangkok Bank Public Co. . . . . . . . . . . . . . . 3.25 03/03/04 131,950
-----------
INDUSTRIALS
US$ 120,000 Banpu Public Company Ltd. . . . . . . . . . . . . . 3.50 08/25/04 146,100
-----------
TOTAL THAILAND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278,050
-----------
UNITED KINGDOM (7.6%)
AUTOMOTIVE
ECU 130,000 Investor International PLC. . . . . . . . . . . . . 7.25 06/21/01 181,547
-----------
CHEMICALS
L 150,000 Cookson Group . . . . . . . . . . . . . . . . . . . 7.00 11/02/04 230,433
-----------
FINANCIAL SERVICES
L 100,000 Lonhro Finance Public . . . . . . . . . . . . . . . 6.00 02/27/04 140,073
-----------
32
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
<CAPTION>
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
---------------- ------ ------- -----
<S> <C> <C> <C>
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
L 70,000 Allied Domecq PLC . . . . . . . . . . . . . . . . . 6.75% 07/07/08 $ 109,488
US$ 250,000 Burns, Philp Treasury . . . . . . . . . . . . . . . 5.50 04/30/04 214,375
US$ 60,000 Grand Metropolitan PLC. . . . . . . . . . . . . . . 6.50 01/31/00 63,900
L 100,000 Tate & Lyle International Finance PLC . . . . . . . 5.75 03/21/01 133,298
-----------
521,061
-----------
INDUSTRIALS
L 80,000 Coats Viyella PLC . . . . . . . . . . . . . . . . . 6.25 08/09/03 111,102
-----------
MULTI-INDUSTRY
L 150,000 Hanson PLC. . . . . . . . . . . . . . . . . . . . . 9.50 01/31/06 243,284
-----------
TOTAL UNITED KINGDOM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,427,500
-----------
UNITED STATES (49.1%)
BUILDING MATERIALS
1,800 Owens-Corning Capital LLC - 144A** $3.25. . . . . . 92,250
-----------
BUSINESS SERVICES
US$ 145,000 Danka Business Systems - 144A** . . . . . . . . . . 6.75 04/01/02 147,552
US$ 190,000 Omnicom Group, Inc. - 144A**. . . . . . . . . . . . 4.50 09/01/00 217,550
-----------
365,102
-----------
COMPUTER EQUIPMENT
US$ 105,000 3Com Corp. - 144A** . . . . . . . . . . . . . . . . 10.25 11/01/01 134,007
US$ 145,000 EMC Corp. . . . . . . . . . . . . . . . . . . . . . 4.25 01/01/01 195,750
US$ 150,000 Storage Technology Corp.. . . . . . . . . . . . . . 8.00 05/31/15 146,250
US$ 160,000 Unisys Corp.. . . . . . . . . . . . . . . . . . . . 8.25 08/01/00 177,600
-----------
653,607
-----------
COMPUTER SERVICES
US$ 350,000 Automatic Data Processing, Inc. . . . . . . . . . . 0.00 02/20/12 154,875
US$ 285,000 First Financial Management Corp.. . . . . . . . . . 5.00 12/15/99 386,175
4,300 General Motors Corp. $3.25 (Series C) (1) . . . . . 270,900
-----------
811,950
-----------
ELECTRONICS - SEMICONDUCTORS
US$ 90,000 Integrated Device Technology. . . . . . . . . . . . 5.50 06/01/02 93,833
-----------
FINANCIAL SERVICES
1,200 Allstate Corp. (The) $2.30 (2). . . . . . . . . . . 48,900
US$ 160,000 Merrill Lynch & Co., Inc. - 144A** (3). . . . . . . 0.00 06/30/99 201,600
2,700 St. Paul Capital LLC $3.00. . . . . . . . . . . . . 141,075
-----------
391,575
-----------
FUNERAL SERVICES
3,300 SCI Finance LLC $3.125 (Series A) . . . . . . . . . 200,475
-----------
HEALTHCARE
US$ 215,000 Elan International Finance Ltd. . . . . . . . . . . 0.00 10/16/12 99,975
US$ 130,000 Healthsouth Rehabilitation Corp.. . . . . . . . . . 5.00 04/01/01 141,288
US$ 90,000 Multicare Companies, Inc. . . . . . . . . . . . . . 7.00 03/15/03 86,850
US$ 105,000 Quantum Health Resources Inc. . . . . . . . . . . . 4.75 10/01/00 90,300
US$ 130,000 Theratx Inc. - 144A** . . . . . . . . . . . . . . . 8.00 02/01/02 116,288
-----------
534,701
-----------
HOUSEHOLD PRODUCTS
US$ 110,000 McKesson Corp.. . . . . . . . . . . . . . . . . . . 4.50 03/01/04 99,000
-----------
33
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
<CAPTION>
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
---------------- ------ ------- -----
<S> <C> <C> <C>
HOTELS/MOTELS
US$ 150,000 Hospitality Franchise Systems, Inc. . . . . . . . . 4.50% 10/01/99 $ 169,550
-----------
INDUSTRIALS
2,900 Westinghouse Electric Corp. - 144A**
$1.30 (Series C) . . . . . . . . . . . . . . . . . 43,138
-----------
INSURANCE
1,800 American General Delaware $3.00 (Series A). . . . . 93,375
US$ 90,000 Chubb Capital Corp. . . . . . . . . . . . . . . . . 6.00 05/15/98 92,813
US$ 120,000 Fremont General Corp. . . . . . . . . . . . . . . . 0.00 10/12/13 45,300
US$ 240,000 USF&G Corp. . . . . . . . . . . . . . . . . . . . . 0.00 03/03/09 132,000
-----------
363,488
-----------
LEISURE
US$ 600,000 Coleman Worldwide Corp. . . . . . . . . . . . . . . 0.00 05/27/13 174,000
-----------
MACHINERY - DIVERSIFIED
US$ 199,000 Cooper Industries, Inc. . . . . . . . . . . . . . . 7.05 01/01/15 205,965
-----------
MEDIA GROUP
US$ 210,000 Comcast Corp. . . . . . . . . . . . . . . . . . . . 3.375 09/09/05 193,200
US$ 655,000 News America Holdings, Inc. . . . . . . . . . . . . 0.00 03/11/13 311,125
US$ 265,000 Time Warner, Inc. . . . . . . . . . . . . . . . . . 8.75 01/10/15 275,931
-----------
780,256
-----------
MEDICAL SERVICES
4,000 FHP International Corp. $1.25 (Series A). . . . . . 94,000
US$ 170,000 Integrated Health Services, Inc.. . . . . . . . . . 5.75 01/01/01 183,175
-----------
277,175
-----------
METALS
US$ 155,000 Allegheny Ludlum Corp.. . . . . . . . . . . . . . . 5.875 03/15/02 165,416
-----------
OIL & GAS
US$ 145,000 Apache Corp.. . . . . . . . . . . . . . . . . . . . 6.00 01/15/02 161,494
3,000 Occidental Petroleum Corp. $3.00 (Series A) . . . . 177,750
2,800 Occidental Petroleum Corp. - 144A** $3.875. . . . . 159,600
US$ 235,000 Pennzoil Co. (4). . . . . . . . . . . . . . . . . . 4.75 10/01/03 221,206
US$ 70,000 SFP Pipeline Holdings, Inc. . . . . . . . . . . . . 11.16 08/15/10 89,600
-----------
809,650
-----------
PAPER & FOREST PRODUCTS
US$ 120,000 Riverwood International Corp. . . . . . . . . . . . 6.75 09/15/03 160,279
-----------
POLLUTION CONTROL
US$ 295,000 Thermo Electron Corp. . . . . . . . . . . . . . . . 5.00 04/15/01 400,463
US$ 165,000 U.S. Filter Corp. . . . . . . . . . . . . . . . . . 5.00 10/15/00 173,250
US$ 213,000 WMX Technologies, Inc.. . . . . . . . . . . . . . . 2.00 01/24/05 179,186
-----------
752,899
-----------
PUBLISHING
US$ 90,000 Nelson (Thomas), Inc. - 144A**. . . . . . . . . . . 5.75 11/30/99 103,536
-----------
RESTAURANTS
US$ 430,000 Boston Chicken Inc. . . . . . . . . . . . . . . . . 0.00 06/01/15 97,825
-----------
34
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
<CAPTION>
SHARES/PRINCIPAL COUPON MATURITY
AMOUNT RATE DATES VALUE
---------------- ------ ------- -----
<S> <C> <C> <C>
RETAIL
US$ 300,000 Office Depot, Inc.. . . . . . . . . . . . . . . . . 0.00% 11/01/08 $ 196,500
US$ 85,000 Pep Boys-Manny, Moe & Jack. . . . . . . . . . . . . 4.00 09/01/99 78,382
-----------
274,882
-----------
SCIENTIFIC INSTRUMENTS
US $175,000 Fisher Scientific International, Inc. . . . . . . . 4.75 03/01/03 188,248
-----------
TELECOMMUNICATIONS
1,800 Corning Delaware, L.P. $3.00. . . . . . . . . . . . 92,025
US$ 135,000 LDDS Communications, Inc. . . . . . . . . . . . . . 5.00 08/15/03 130,275
2,100 MFS Communications Company, Inc. $2.68. . . . . . . 72,450
US$ 365,000 Motorola, Inc.. . . . . . . . . . . . . . . . . . . 0.00 09/27/13 298,388
US$ 90,000 U.S. Cellular Corp. . . . . . . . . . . . . . . . . 0.00 06/15/15 27,900
-----------
621,038
-----------
TRANSPORTATION
US$ 305,000 AMR Corp. . . . . . . . . . . . . . . . . . . . . . 6.125 11/01/24 317,377
US$ 305,000 Delta Air Lines, Inc. . . . . . . . . . . . . . . . 3.23 06/15/03 293,761
-----------
611,138
-----------
WASTE MANAGEMENT
6,200 Browning-Ferris Industries, Inc. $2.583 . . . . . . 226,300
-----------
TOTAL UNITED STATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,267,276
-----------
TOTAL INVESTMENTS (Identified Cost $15,844,627) (a) . . . . . . . . . . 90.8% 17,132,745
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES. . . . . . . . . . . . . 9.2 1,740,631
----- -----------
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $18,873,376
----- -----------
----- -----------
<FN>
* SECURITY WAS PURCHASED ON A WHEN ISSUED BASIS.
** RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS.
(1) EXCHANGEABLE INTO GENERAL MOTORS CORP. CLASS E COMMON STOCK.
(2) EXCHANGEABLE INTO PMI GROUP INC. COMMON STOCK.
(3) EXCHANGEABLE INTO MICROSOFT CORP. COMMON STOCK.
(4) EXCHANGEABLE INTO CHEVRON CORP. COMMON STOCK.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $15,845,477; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $1,389,124 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $101,856, RESULTING IN NET UNREALIZED
APPRECIATION OF $1,287,268.
</TABLE>
See Notes to Financial Statements
35
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PORTFOLIO OF INVESTMENTS JUNE 30, 1995 (CONTINUED)
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 1995:
<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS EXCHANGE DELIVERY APPRECIATION/
TO RECEIVE FOR DATE (DEPRECIATION)
---------- --------------- -------- --------------
<S> <C> <C> <C> <C> <C>
CAD 200,000 US$ 145,751 07/05/95 $ 32
CAD 150,000 US$ 109,067 07/05/95 270
US$ 147,992 ECU 112,192 07/18/95 (1,388)
US$ 1,053,807 L 650,097 07/18/95 17,964
US$ 51,627 ITL 83,333,333 07/18/95 (2,429)
US$ 125,043 Y 10,634,907 07/18/95 (1,022)
US$ 107,789 Y 8,920,600 07/18/95 2,045
US$ 300,720 ECU 224,142 08/18/95 2,365
US$ 1,149,893 FRF 5,526,730 10/18/95 10,827
US$ 783,929 Y 62,777,032 10/18/95 30,516
-------
NET UNREALIZED APPRECIATION. . . . . . . $59,180
-------
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------- -------- ----------
<S> <C> <C>
Automotive . . . . . . . . . . . . . . . . . . . . $ 524,596 2.78%
Banking. . . . . . . . . . . . . . . . . . . . . . 633,614 3.36
Basic Cyclicals. . . . . . . . . . . . . . . . . . 255,120 1.35
Building Materials . . . . . . . . . . . . . . . . 258,900 1.37
Business Services. . . . . . . . . . . . . . . . . 365,102 1.94
Chemicals. . . . . . . . . . . . . . . . . . . . . 347,933 1.84
Computers. . . . . . . . . . . . . . . . . . . . . 111,525 0.59
Computer Equipment . . . . . . . . . . . . . . . . 653,607 3.46
Computer Services. . . . . . . . . . . . . . . . . 860,416 4.56
Conglomerates. . . . . . . . . . . . . . . . . . . 89,550 0.47
Consumer Products. . . . . . . . . . . . . . . . . 288,878 1.53
Construction Plant & Equipment . . . . . . . . . . 108,750 0.58
Electronics-Semiconductors . . . . . . . . . . . . 93,833 0.50
Electrical Equipment . . . . . . . . . . . . . . . 104,400 0.55
Entertainment & Leisure Time . . . . . . . . . . . 51,500 0.27
Financial Services . . . . . . . . . . . . . . . . 1,345,627 7.13
Food, Beverage, Tobacco & Household Products . . . 558,161 2.96
Funeral Services . . . . . . . . . . . . . . . . . 200,475 1.06
Healthcare . . . . . . . . . . . . . . . . . . . . 560,232 2.97
Hotels/Motels. . . . . . . . . . . . . . . . . . . 346,175 1.83
Household Products . . . . . . . . . . . . . . . . 99,000 0.52
Industrials. . . . . . . . . . . . . . . . . . . . 852,684 4.52
Insurance. . . . . . . . . . . . . . . . . . . . . 457,380 2.42
Leisure. . . . . . . . . . . . . . . . . . . . . . 266,000 1.41
Machinery-Diversified. . . . . . . . . . . . . . . 205,965 1.09
Media Group. . . . . . . . . . . . . . . . . . . . 968,823 5.13
Medical Services . . . . . . . . . . . . . . . . . 277,175 1.47
Metals . . . . . . . . . . . . . . . . . . . . . . 250,238 1.33
Multi-Industry . . . . . . . . . . . . . . . . . . 381,154 2.02
Oil & Gas. . . . . . . . . . . . . . . . . . . . . 902,313 4.78
Oil Related. . . . . . . . . . . . . . . . . . . . 117,021 0.62
Paper & Forest Products. . . . . . . . . . . . . . 219,154 1.16
Pollution Control. . . . . . . . . . . . . . . . . 977,899 5.18
Publishing . . . . . . . . . . . . . . . . . . . . 103,536 0.55
Real Estate. . . . . . . . . . . . . . . . . . . . 766,126 4.06
Restaurants. . . . . . . . . . . . . . . . . . . . 97,825 0.52
Retail . . . . . . . . . . . . . . . . . . . . . . 274,882 1.46
Scientific Instruments . . . . . . . . . . . . . . 188,248 1.00
Telecommunications . . . . . . . . . . . . . . . . 621,038 3.29
Tire & Rubber Goods. . . . . . . . . . . . . . . . 172,859 0.92
Textiles . . . . . . . . . . . . . . . . . . . . . 224,000 1.19
Transportation . . . . . . . . . . . . . . . . . . 724,731 3.84
Waste Management . . . . . . . . . . . . . . . . . 226,300 1.20
----------- -----
$17,132,745 90.78%
----------- -----
----------- -----
</TABLE>
SUMMARY OF INVESTMENTS BY TYPE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- ------------------ -------- ----------
<S> <C> <C>
Convertible Bonds. . . . . . . . . . . . . . . . . $15,327,844 81.22%
Convertible Preferred Stocks . . . . . . . . . . . 1,804,901 9.56
----------- -----
$17,132,745 90.78%
----------- -----
----------- -----
</TABLE>
37
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $15,844,627) . . . . . . . . . . . . . . . $17,132,745
Unrealized appreciation on foreign currency contracts. . . . 64,019
Cash (including $12,550 in foreign currency) . . . . . . . . 2,186,598
Receivable for:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 188,547
Investments sold. . . . . . . . . . . . . . . . . . . . . . 20,799
Shares of beneficial interest sold. . . . . . . . . . . . . 10,409
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 8,845
Deferred organizational expenses . . . . . . . . . . . . . . 156,132
Receivable from investment manager . . . . . . . . . . . . . 110,941
Prepaid expenses and other assets. . . . . . . . . . . . . . 31,583
-----------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . 19,910,618
-----------
LIABILITIES:
Unrealized depreciation on foreign currency contracts. . . . 4,839
Payable for:
Investments purchased . . . . . . . . . . . . . . . . . . . 718,992
Plan of distribution fee. . . . . . . . . . . . . . . . . . 14,880
Accrued expenses and other payables. . . . . . . . . . . . . 142,399
Organizational expenses. . . . . . . . . . . . . . . . . . . 156,132
-----------
Total Liabilities . . . . . . . . . . . . . . . . . . . . 1,037,242
-----------
NET ASSETS:
Paid-in-capital. . . . . . . . . . . . . . . . . . . . . . . 17,938,587
Net unrealized appreciation. . . . . . . . . . . . . . . . . 1,346,040
Undistributed net investment income. . . . . . . . . . . . . 47,052
Net realized loss. . . . . . . . . . . . . . . . . . . . . . (458,303)
-----------
Net Assets. . . . . . . . . . . . . . . . . . . . . . . . $18,873,376
-----------
-----------
Net Asset Value Per Share, 1,787,684 shares outstanding
(unlimited shares authorized of $.01 par value) . . . . . . $10.56
------
------
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 31, 1994* THROUGH JUNE 30, 1995
- --------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME:
Income
Interest (net of $398 foreign withholding tax) . . . . . . $ 523,560
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . 41,940
-----------
Total Income. . . . . . . . . . . . . . . . . . . . . . . 565,500
-----------
Expenses
Plan of distribution fee . . . . . . . . . . . . . . . . . 111,428
Transfer agent fees and expenses . . . . . . . . . . . . . 64,014
Management fee . . . . . . . . . . . . . . . . . . . . . . 56,828
Professional fees. . . . . . . . . . . . . . . . . . . . . 47,665
Investment advisory fee. . . . . . . . . . . . . . . . . . 37,886
Organizational expenses. . . . . . . . . . . . . . . . . . 23,868
Trustees' fees and expenses. . . . . . . . . . . . . . . . 21,786
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 20,536
Shareholder reports and notices. . . . . . . . . . . . . . 7,957
Registration fees. . . . . . . . . . . . . . . . . . . . . 6,079
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,993
-----------
Total Expenses Before Amounts Waived/Assumed. . . . . . . 400,040
Less: Amounts Waived/Assumed. . . . . . . . . . . . . . . (288,612)
-----------
Total Expenses After Amounts Waived/Assumed . . . . . . . 111,428
-----------
Net Investment Income . . . . . . . . . . . . . . . . . . 454,072
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . (2,922)
Foreign exchange transactions. . . . . . . . . . . . . . . (455,381)
-----------
Total Loss. . . . . . . . . . . . . . . . . . . . . . . . (458,303)
-----------
Net unrealized appreciation on:
Investments. . . . . . . . . . . . . . . . . . . . . . . . 1,288,118
Translation of foreign exchange forward contracts,
other assets and liabilities denominated in
foreign currencies. . . . . . . . . . . . . . . . . . . . 57,922
-----------
TOTAL APPRECIATION. . . . . . . . . . . . . . . . . . . . 1,346,040
-----------
NET GAIN. . . . . . . . . . . . . . . . . . . . . . . . . 887,737
-----------
NET INCREASE. . . . . . . . . . . . . . . . . . . . . . . $ 1,341,809
-----------
-----------
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE PERIOD
OCTOBER 31, 1994*
THROUGH
JUNE 30, 1995
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income. . . . . . . . . . . . . . . . . . . $454,072
Net realized loss. . . . . . . . . . . . . . . . . . . . . (458,303)
Net unrealized appreciation. . . . . . . . . . . . . . . . 1,346,040
-----------
Net increase. . . . . . . . . . . . . . . . . . . . . . 1,341,809
-----------
Dividends to shareholders from net investment income. . . . (407,020)
Net increase from transactions in shares of beneficial
interest . . . . . . . . . . . . . . . . . . . . . . . . . 17,838,587
-----------
Total increase . . . . . . . . . . . . . . . . . . . . . 18,773,376
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . . . . . . . 100,000
-----------
End of period (including undistributed net investment
income of $47,052). . . . . . . . . . . . . . . . . . . . $18,873,376
-----------
-----------
<FN>
- --------------
* COMMENCEMENT OF OPERATIONS.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- TCW/DW Global Convertible Trust
(the "Fund") is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a non-diversified, open-end management investment company. The
Fund was organized as a Massachusetts business trust on June 29, 1994 and on
July 21, 1994 issued 10,000 shares of beneficial interest for $100,000 to Dean
Witter InterCapital Inc. ("InterCapital"), an affiliate of Dean Witter Services
Company Inc. (the "Manager"), to effect the Fund's initial capitalization. The
Fund commenced operations on October 31, 1994.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on
the New York or American Stock Exchange or other domestic or foreign stock
exchange is valued at its latest sale price on that exchange prior to the
time when assets are valued; if there were no sales that day, the security
is valued at the latest bid price; (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued
at the latest available bid price prior to the time of valuation; (3) when
market quotations are not readily available, including circumstances under
which it is determined by the Adviser 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; (4) portfolio
securities may be valued by an outside pricing service approved by the
Trustees. The pricing service utilizes a matrix system incorporating
security quality, maturity and coupon as the evaluation model parameters,
and/or research and evaluation by its staff, including review of
broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the portfolio securities valued by such
pricing service; and (5) short-term debt securities having a maturity date
of more than sixty days at time of purchase are valued on a mark-to-market
basis until sixty days prior to maturity and thereafter at amortized cost
based on their value on the 61st day. Short-term debt securities having a
maturity date of sixty days or less at the time of purchase are valued at
amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized
gains and losses on security transactions are determined by the identified
cost method. Discounts on securities purchased are amortized over the life
of the respective securities. Dividend income is recorded on the
ex-dividend date except for certain dividends from foreign securities which
are recorded as soon as the Fund is informed after the ex-dividend date.
Interest income is accrued daily.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market
value of investment securities, other assets and liabilities and forward
contracts are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the
exchange rates prevailing on the respective dates of such transactions. The
resultant exchange gains and losses are included in the Statement of
Operations as realized and unrealized gain/loss on foreign exchange
transactions. Pursuant to U.S. Federal income tax regulations, certain
foreign exchange gains/losses included in realized and unrealized gain/loss
are included in or are a reduction of ordinary income for federal income
tax purposes. The Fund does not isolate that portion of the results of
operations arising as a result of changes in the foreign exchange rates
from the changes in the market prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant exchange gains and losses are
39
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
included in the Statement of Operations as unrealized gain/loss on foreign
exchange transactions. The Fund records realized gains or losses on
delivery of the currency or at the time the forward contract is
extinguished (compensated) by entering into a closing transaction prior to
delivery.
E. 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.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records
dividends and distributions to its shareholders on the ex-dividend date.
The amount of dividends and distributions from net investment income and
net realized capital gains are determined in accordance with federal income
tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized capital gains. To the
extent they exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of paid-in-capital.
G. ORGANIZATIONAL EXPENSES -- InterCapital paid the organizational
expenses of the Fund in the amount of approximately $180,000 which will be
reimbursed for the full amount thereof, exclusive of amounts assumed. Such
costs have been deferred and are being amortized on the straight line
method over a period not to exceed five years from the commencement of
operations.
2. MANAGEMENT AGREEMENT -- Pursuant to a Management Agreement, the Fund pays
its Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.51% to the net assets of the Fund determined as of the close of
each business day.
Under the terms of the Management Agreement, the Manager maintains certain
of the Fund's books and records and furnishes, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and pays
the salaries of all personnel, including officers of the Fund who are employees
of the Manager. The Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory
Agreement with TCW Funds Management, Inc. (the "Adviser"), the Fund pays the
Adviser an advisory fee, accrued daily and payable monthly, by applying the
annual rate of 0.34% to the net assets of the Fund determined as of the close of
each business day.
Under the terms of the Investment Advisory Agreement, the Fund has retained
the Adviser to invest the Fund's assets, including placing orders for the
purchase and sale of portfolio securities. The Adviser 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. In
addition, the Adviser pays the salaries of all personnel, including officers of
the Fund, who are employees of the Adviser.
40
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
InterCapital had undertaken to assume all operating expenses (except for
any 12b-1 and/or brokerage fees) and the Manager had agreed to waive the
compensation provided for in its Management Agreement and the Adviser had
undertaken to waive the compensation provided for in its Advisory Agreement,
until such time as the Fund had $50 million of net assets or until six months
from the date of commencement of the Fund's operations, whichever occurred
first. InterCapital will continue to assume all operating expenses (except for
12b-1 and/or brokerage fees) and the Manager and the Adviser will continue to
waive their respective compensation until such time as the Fund has $50 million
of net assets or until August 23, 1995, whichever occurs first.
4. PLAN OF DISTRIBUTION -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act
pursuant to which the Fund pays the Distributor compensation, accrued daily and
payable monthly, at an annual rate of 1.0% of the lesser of: (a) the average
daily aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend 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 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,
account executives of Dean Witter Reynolds Inc., an affiliate of the Manager and
Distributor, and other employees and 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 by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred but not yet recovered may be recovered through future distribution fees
from the Fund and contingent deferred sales charges from the Fund's
shareholders.
The Distributor has informed the Fund that for the period ended June 30,
1995, it received approximately $38,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding short-term
investments, for the period ended June 30, 1995 aggregated $24,687,787 and
$8,880,708, respectively.
Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent.
41
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD OCTOBER 31, 1994*
THROUGH JUNE 30, 1995
--------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
Sold . . . . . . . . . . . . . . . . . . 1,939,734 $19,459,412
Reinvestment of dividends. . . . . . . . 30,636 310,550
--------- -----------
1,970,370 19,769,962
Repurchased. . . . . . . . . . . . . . . (192,686) (1,931,375)
--------- -----------
Net increase . . . . . . . . . . . . . . 1,777,684 $17,838,587
--------- -----------
--------- -----------
<FN>
- ---------------
* COMMENCEMENT OF OPERATIONS.
</TABLE>
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS -- The Fund
may enter into forward foreign currency contracts ("forward contracts") to
facilitate settlement of foreign currency denominated portfolio transactions or
to manage foreign currency exposure associated with foreign currency denominated
securities. Additionally, as a hedge against adverse foreign currency and market
risk, the Fund may purchase and write options on foreign currency ("derivative
instruments").
At June 30, 1995, there were open forward contracts used to facilitate
settlement of foreign currency denominated portfolio transactions and manage
foreign currency exposure.
Derivative instruments involve elements of market risk in excess of the
amounts reflected in the Statement of Assets and Liabilities. The Fund bears the
risk of an unfavorable change in the foreign exchange rates underlying the
forward contracts. Risks may also arise upon entering into these contracts from
the potential inability of the counterparties to meet the terms of their
contracts.
8. FEDERAL INCOME TAX STATUS -- Capital and foreign currency 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 and foreign currency losses of
approximately $182,000 and $214,000, respectively, during fiscal 1995. As of
June 30, 1995, the Fund had temporary book/tax differences primarily
attributable to post-October losses and the mark-to-market of open forward
foreign currency exchange contracts.
42
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31, 1994*
THROUGH
JUNE 30, 1995
-----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period . . . . . . . . . . . . $10.00
------
Net investment income. . . . . . . . . . . . . . . . . . . . 0.27
Net realized and unrealized gain . . . . . . . . . . . . . . 0.53
------
Total from investment operations . . . . . . . . . . . . . . 0.80
------
Less dividends from net investment income. . . . . . . . . . (0.24)
------
Net asset value, end of period . . . . . . . . . . . . . . . $10.56
------
------
TOTAL INVESTMENT RETURN+ . . . . . . . . . . . . . . . . . . 7.99%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%(2)(3)
Net investment income. . . . . . . . . . . . . . . . . . . . 4.07%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) . . . . . . . . . . $18,873
Portfolio turnover rate. . . . . . . . . . . . . . . . . . . 61%(1)
<FN>
- ---------------
* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) INTERCAPITAL HAD UNDERTAKEN TO ASSUME ALL OPERATING EXPENSES (EXCEPT FOR
ANY 12B-1 AND/OR BROKERAGE FEES) AND THE MANAGER HAD AGREED TO WAIVE THE
COMPENSATION PROVIDED FOR IN ITS MANAGEMENT AGREEMENT AND THE ADVISER HAD
UNDERTAKEN TO WAIVE THE COMPENSATION PROVIDED FOR IN ITS ADVISORY
AGREEMENT, UNTIL SUCH TIME AS THE FUND HAD $50 MILLION OF NET ASSETS OR
UNTIL SIX MONTHS FROM THE DATE OF COMMENCEMENT OF THE FUND'S OPERATIONS,
WHICHEVER OCCURRED FIRST. INTERCAPITAL WILL CONTINUE TO ASSUME ALL
OPERATING EXPENSES (EXCEPT FOR 12B-1 AND/OR BROKERAGE FEES) AND THE MANAGER
AND THE ADVISER WILL CONTINUE TO WAIVE THEIR RESPECTIVE COMPENSATION UNTIL
SUCH TIME AS THE FUND HAS $50 MILLION OF NET ASSETS OR UNTIL AUGUST 23,
1995, WHICHEVER OCCURS FIRST. IF THE FUND HAD BORNE ALL EXPENSES, AFTER
APPLICATION OF THE EXPENSE LIMITATION, THE ABOVE ANNUALIZED EXPENSE AND NET
INVESTMENT INCOME RATIOS WOULD HAVE BEEN 3.50% AND 1.48%, RESPECTIVELY.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of TCW/DW Global Convertible 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 TCW/DW Global Convertible Trust
(the "Fund") at June 30, 1995, and the results of its operations, the changes in
its net assets and the financial highlights for the period October 31, 1994
(commencement of operations) through June 30, 1995, 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 audit. We conducted our audit
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
audit, which included confirmation of securities owned at June 30, 1995 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
August 14, 1995
44
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
The response to this item is incorporated by reference to (a) Item 27 of
Post-Effective Amendment No. 10, which was filed electronically pursuant to
Regulation S-T on November 22, 1994 ("Post-Effective Amendment No. 10"), as an
amendment to Registrant's Registration Statement on Form N-1A (File Nos.
2-97963; 811-4310), filed on May 24, 1985 (the "Registration Statement"), and
(b) Exhibits 1 and 2 hereto.
ITEM 16. EXHIBITS
(1) Declaration of Trust dated May 21, 1985
(2) Bylaws of Registrant dated May 21, 1985, as amended on July 27, 1989 and
January 25, 1995
(3) Not Applicable
(4) Copy of Agreement and Plan of Reorganization (filed herewith as Exhibit
A to the Proxy Statement and Prospectus)
(5) Not Applicable
(6) Investment Management Agreement (incorporated by reference to Exhibit 5
to Post-Effective Amendment No. 10)
(7) (a) Distribution Agreement between Registrant and Dean Witter
Distributors Inc. (incorporated by reference to Exhibit 6(a) to
Post-Effective Amendment No. 10)
(b) Form of Selected Dealer's Agreement (incorporated by reference to
Exhibit 6(b) to Post-Effective Amendment No. 10)
(c) Form of Selected Dealer's Agreement
(8) Not Applicable
(9) (a) Custody Agreement dated September 20, 1991
(b) Transfer Agency and Services Agreement between Registrant and Dean
Witter Trust Company (incorporated by reference to Exhibit 8 to
Post-Effective Amendment No. 10)
(10) Amended and Restated Plan of Distribution pursuant to Rule 12b-1, dated
August 8, 1985, as amended on October 21, 1986, January 4, 1993 and
April 28, 1993 (incorporated by reference to Exhibit 15 to Post-
Effective Amendment No. 10)
(11) (a) Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein
(b) Opinion and consent of Lane Altman & Owens
(12) Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein
regarding tax matters
(13) Services Agreement between Dean Witter InterCapital Inc. and Dean Witter
Services Company Inc.
(14) Consent of Independent Accountants
(15) Not Applicable
<PAGE>
(16) Powers of Attorney
(17) (a) Registrant's Rule 24f-2 Notice pursuant to Rule 24f-2 under the
Investment Company Act of 1940, for its fiscal year ended September
30, 1994, as filed on November 21, 1994
(b) Form of Proxy
ITEM 17.
1. The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of the prospectus which is a part of
this registration statement on Form N-14 by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
2. The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to this
registration statement on Form N-14 and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act of
1933, each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial BONA FIDE offering of them.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this registration statement has
been signed on behalf of the registrant, in the City of New York and State of
New York, on the 24th day of August, 1995.
DEAN WITTER CONVERTIBLE SECURITIES
TRUST
By: ________/s/_SHELDON CURTIS________
VICE PRESIDENT AND SECRETARY
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------------------------------- ---------------------------------- ------------------
<S> <C> <C> <C>
1. Principal Executive Officer
President, Chief Executive
/s/ CHARLES A. FIUMEFREDDO Officer, Trustee and August 24, 1995
---------------------------------------- Chairman
2. Principal Financial Officer
Treasurer and Principal
/s/ THOMAS F. CALOIA Accounting Officer August 24, 1995
----------------------------------------
3. Majority of Trustees
/s/ JACK F. BENNETT Trustee August 24, 1995
----------------------------------------
/s/ MICHAEL BOZIC Trustee August 24, 1995
----------------------------------------
/s/ CHARLES A. FIUMEFREDDO Trustee August 24, 1995
----------------------------------------
/s/ EDWIN J. GARN Trustee August 24, 1995
----------------------------------------
/s/ JOHN R. HAIRE Trustee August 24, 1995
----------------------------------------
/s/ MANUEL H. JOHNSON Trustee August 24, 1995
----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
----------------------------------------- ---------------------------- --------------
<S> <C> <C> <C> <C>
August 24,
/s/ PAUL KOLTON Trustee 1995
----------------------------------------
---------------------------------------- Trustee , 1995
Michael E. Nugent
August 24,
/s/ PHILIP J. PURCELL Trustee 1995
----------------------------------------
August 24,
/s/ JOHN L. SCHROEDER Trustee 1995
----------------------------------------
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT NUMBER
- ---------- ---------------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
(1) Declaration of Trust dated May 21, 1985
(2) Bylaws of Registrant dated May 21, 1995, as amended on July 27, 1989 and January 25, 1995
(7) (c) Form of Selected Dealer's Agreement
(9) (a) Custody Agreement dated September 21, 1991
(11) (a) Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein regarding tax matters
(b) Opinion and consent of Lane Altman & Owens
(12) Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein regarding tax matters
(13) Services Agreement between Dean Witter InterCapital Inc. and Dean Witter Services Company Inc.
(14) Consent of Independent Accountants
(16) Powers of Attorney
(17) (a) Registrant's Rule 24f-2 Notice pursuant to Rule 24f-2 under the Investment Company Act of 1940,
for its fiscal year ended September 30, 1994, as filed on November 21, 1994
(b) Form of Proxy
</TABLE>
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
DECLARATION OF TRUST
Dated: May 21, 1985
<PAGE>
DECLARATION OF TRUST
OF
DEAN WITTER CONVERTIBLE SECURITIES TRUST
Dated: May 21, 1985
THE DECLARATION OF TRUST of Dean Witter Convertible Securities Trust is
made the 21st day of May, 1985 by the parties signatory hereto, as trustees
(such persons, so long as they shall continue in office in accordance with the
terms of this Declaration of Trust, and all other persons who at the time in
question have been duly elected or appointed as trustees in accordance with the
provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is provided that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I -- NAME AND DEFINITIONS 2
Section 1.1 Name 2
Section 1.2 Definitions 2
ARTICLE II -- TRUSTEES 4
Section 2.1 Number of Trustees 4
Section 2.2 Election and Term 4
Section 2.3 Resignation and Removal 4
Section 2.4 Vacancies 5
Section 2.5 Delegation of Power to Other Trustees 5
ARTICLE III -- POWERS OF TRUSTEES 6
Section 3.1 General 6
Section 3.2 Investments 6
Section 3.3 Legal Title 7
Section 3.4 Issuance and Repurchase of Securities 8
Section 3.5 Borrowing Money; Lending Trust Assets 8
Section 3.6 Delegation; Committees 8
Section 3.7 Collection and Payment 8
Section 3.8 Expenses 8
Section 3.9 Manner of Acting; By-Laws 9
Section 3.10 Miscellaneous Powers 9
Section 3.11 Principal Transactions 10
Section 3.12 Litigation 10
ARTICLE IV -- INVESTMENT ADVISER, DISTRIBUTOR,
CUSTODIAN AND TRANSFER AGENT 11
Section 4.1 Investment Adviser 11
Section 4.2 Administrative Services 11
Section 4.3 Distributor 11
Section 4.4 Transfer Agent 12
Section 4.5 Custodian 12
Section 4.6 Parties to Contract 12
<PAGE>
PAGE
----
ARTICLE V -- LIMITATIONS OF LIABILITY
OF SHAREHOLDERS, TRUSTEES
AND OTHERS
13
Section 5.1 No Personal Liability of
Shareholders, Trustees, etc. 13
Section 5.2 Non-Liability of Trustees, etc. 13
Section 5.3 Indemnification 13
Section 5.4 No Bond Required of Trustees 14
Section 5.5 No Duty of Investigation;
Notice in Trust Instruments, etc. 14
Section 5.6 Reliance on Experts, etc. 15
ARTICLE VI -- SHARES OF BENEFICIAL INTEREST 16
Section 6.1 Beneficial Interest 16
Section 6.2 Rights of Shareholders 16
Section 6.3 Trust Only 16
Section 6.4 Issuance of Shares 17
Section 6.5 Register of Shares 17
Section 6.6 Transfer of Shares 18
Section 6.7 Notices 18
Section 6.8 Voting Powers 18
Section 6.9 Series or Classes of Shares 19
ARTICLE VII -- REDEMPTIONS 22
Section 7.1 Redemptions 22
Section 7.2 Redemption of Shares; Disclosure of Holding 22
Section 7.3 Redemptions of Accounts of Less than $100 23
-ii-
<PAGE>
PAGE
----
ARTICLE VIII -- DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 8.1 Net Asset Value 24
Section 8.2 Distributions to Shareholders 24
Section 8.3 Determination of Net Income 25
Section 8.4 Power to Modify Foregoing Procedures 25
ARTICLE IX -- DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC. 26
Section 9.1 Duration 26
Section 9.2 Termination of Trust 26
Section 9.3 Amendment Procedure 27
Section 9.4 Merger, Consolidation and Sale of Assets 28
Section 9.5 Incorporation 28
ARTICLE X -- REPORTS TO SHAREHOLDERS 30
ARTICLE XI -- MISCELLANEOUS 31
Section 11.1 Filing 31
Section 11.2 Governing Law 31
Section 11.3 Resident Agent 31
Section 11.4 Counterparts 31
Section 11.5 Reliance by Third Parties 31
Section 11.6 Provisions in Conflict with Law or Regulations 32
Section 11.7 Use of the Name "Dean Witter" 33
SIGNATURE PAGE 33
-iii-
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1 NAME. The name of the trust created hereby is the "Dean Witter
Convertible Securities Trust," and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever herein used) shall
refer to the Trustees as Trustees, and not as individuals, or personally, and
shall not refer to the officers, agents, employees or Shareholders of the Trust.
Should the Trustees determine that the use of such name is not advisable, they
may use such other name for the Trust as they deem proper and the Trust may hold
its property and conduct its activities under such other name.
SECTION 1.2 DEFINITIONS. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "BY-LAWS" means the By-Laws referred to in Section 3.9 hereof, as from
time to time amended.
(b) the terms "COMMISSION," "AFFILIATED PERSON" and "INTERESTED PERSON,"
have the meanings given them in the 1940 Act.
(c) "DECLARATION" means this Declaration of Trust as amended from time to
time. Reference in this Declaration of Trust to "DECLARATION," "HEREOF,"
"HEREIN" and "HEREUNDER" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(d) "DISTRIBUTOR" means the party, other than the Trust, to a contract
described in Section 4.3 hereof.
(e) "FUNDAMENTAL POLICIES" shall mean the investment policies and
restrictions set forth in the Prospectus and designated as fundamental policies
therein.
(f) "INVESTMENT ADVISER" means any party, other than the Trust, to a
contract described in Section 4.1 hereof.
(g) "MAJORITY SHAREHOLDER VOTE" means the vote of the holders of a
majority of Shares, which shall consist of: (i) a majority of Shares
represented in person or by proxy and entitled to vote at a meeting of
Shareholders
-2-
<PAGE>
at which a quorum, as determined in accordance with the By-Laws, is present;
(ii) a majority of Shares issued and outstanding and entitled to vote when
action is taken by written consent of Shareholders; and (iii) a "majority of the
outstanding voting securities," as the phrase is defined in the 1940 Act, when
any action is required by the 1940 Act by such majority as so defined.
(h) "1940 ACT" means the Investment Company Act of 1940 and the rules and
regulations thereunder as amended from time to time.
(i) "PERSON" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(j) "PROSPECTUS" means the Prospectus and Statement of Additional
Information constituting parts of the Registration Statement of the Trust under
the Securities Act of 1933 as such Prospectus and Statement of Additional
Information may be amended or supplemented and filed with the Commission from
time to time.
(k) "SHAREHOLDER" means a record owner of outstanding Shares.
(l) "SHARES" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the shares
of any and all series or classes which may be established by the Trustees, and
includes fractions of Shares as well as whole Shares.
(m) "TRANSFER AGENT" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.
(n) "TRUST" means the Dean Witter Convertible Securities Trust.
(o) "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(p) "TRUSTEES" means the persons who have signed the Declaration, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly elected or appointed, qualified
and serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
-3-
<PAGE>
ARTICLE III
TRUSTEES
SECTION 2.1. NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three (3) nor more than fifteen (15).
SECTION 2.2. ELECTION AND TERM. The Trustees shall be elected by a
Majority Shareholder Vote at the first meeting of Shareholders following the
public offering of Shares of the Trust. The Trustees shall have the power to
set and alter the terms of office of the Trustees, and they may at any time
lengthen or lessen their own terms or make their terms of unlimited duration,
subject to the resignation and removal provisions of Section 2.3 hereof.
Subject to Section 16(a) of the 1940 Act, the Trustees may elect their own
successors and may, pursuant to Section 2.4 hereof, appoint Trustees to fill
vacancies. The Trustees shall adopt By-Laws not inconsistent with this
Declaration or any provision of law to provide for election of Trustees by
Shareholders at such time or times as the Trustees shall determine to be
necessary or advisable.
SECTION 2.3. RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (provided the aggregate number
of Trustees after such removal shall not be less than the number required by
Section 2.1 hereof) by the action of two-thirds of the remaining Trustees or by
the action of the Shareholders of record of not less than two-thirds of the
Shares outstanding (for purposes of determining the circumstances and procedures
under which such removal by the Shareholders may take place, the provisions of
Section 16(c) of the 1940 Act shall be applicable to the same extent as if the
Trust were subject to the provisions of that Section). Upon the resignation or
removal of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute
and deliver such documents as the remaining Trustees shall require for the
purpose of conveying to the Trust or the remaining Trustees any Trust Property
held in the name of
-4-
<PAGE>
the resigning or removed Trustee. Upon the incapacity or death of any Trustee,
his legal representative shall execute and deliver on his behalf such documents
as the remaining Trustees shall require as provided in the preceding sentence.
SECTION 2.4. VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy existing by reason of an
increase in the number of Trustees, subject to the provisions of Section 16(a)
of the 1940 Act, the remaining Trustees or, prior to the public offering of
Shares of the Trust, if only one Trustee shall then remain in office, the
remaining Trustee, shall fill such vacancy by the appointment of such other
person as they or he, in their or his discretion, shall see fit, made by a
written instrument signed by a majority of the remaining Trustees or by the
remaining Trustee, as the case may be. Any such appointment shall not become
effective, however, until the person named in the written instrument of
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of the Declaration. An appointment of a
Trustee may be made in anticipation of a vacancy to occur at a later date by
reason of retirement, resignation or increase in the number of Trustees,
provided that such appointment shall not become effective prior to such
retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.4, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by the Declaration. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees shall be conclusive evidence of the existence of such vacancy.
SECTION 2.5. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise expressly provided.
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ARTICLE II
POWERS OF TRUSTEES
SECTION 3.1 GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities wheresoever in the world they may be
located as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made
by the Trustees in good faith shall be conclusive. In construing the provisions
of the Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
SECTION 3.2. INVESTMENTS. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute,
lend or otherwise deal in or dispose of negotiable or non-negotiable
instruments, obligations, evidences of indebtedness, certificates of
deposit or indebtedness, commercial paper, repurchase agreements,
reverse repurchase agreements, options, commodities, commodity futures
contracts and related options, currencies, currency futures and
forward contracts, and other securities, investment contracts and
other instruments of any kind, including, without limitation, those
issued, guaranteed or sponsored
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by any and all Persons including, without limitation, states,
territories and possessions of the United States, the District of
Columbia and any of the political subdivisions, agencies or
instrumentalities thereof, and by the United States Government or its
agencies or instrumentalities, foreign or international
instrumentalities, or by any bank or savings institution, or by any
corporation or organization organized under the laws of the United
States or of any state, territory or possession thereof, and of
corporations or organizations organized under foreign laws, or in
"when issued" contracts for any such securities, or retain Trust
assets in cash and from time to time change the investments of the
assets of the Trust; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect
thereto, with power to designate one or more persons, firms,
associations or corporations to exercise any of said rights, powers
and privileges in respect of any of said instruments; and the Trustees
shall be deemed to have the foregoing powers with respect to any
additional securities in which the Trust may invest should the
Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by any
law limiting the investments which may be made by fiduciaries.
SECTION 3.3. LEGAL TITLE. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust, or in the name of
any other Person as nominee, on such terms as the Trustees may determine,
provided that the interest of the Trust therein is appropriately protected.
The right, title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property,
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and the right, title and interest of such Trustee in the Trust Property shall
vest automatically in the remaining Trustees. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered.
SECTION 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section 6.9
hereof, to apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the Trust, whether capital or
surplus or otherwise, to the full extent now or hereafter permitted by the laws
of the Commonwealth of Massachusetts governing business corporations.
SECTION 3.5. BORROWING MONEY; LENDING TRUST ASSETS. Subject to the
Fundamental Policies, the Trustees shall have power to borrow money or otherwise
obtain credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Trust, to endorse, guarantee, or
undertake the performance of any obligation, contract or engagement of any other
Person and to lend Trust assets.
SECTION 3.6. DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Trustees or otherwise as the Trustees may deem expedient.
SECTION 3.7. COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
SECTION 3.8. EXPENSES. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of the Declaration, and to pay reasonable
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compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees.
SECTION 3.9. MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by
written consents of all the Trustees. The Trustees may adopt By-Laws not
inconsistent with this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such By-Laws to the extent such power is not
reserved to the Shareholders.
SECTION 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted to be taken by any
such Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (f) to the extent permitted by law, indemnify any
person with whom the Trust has dealings, including any Investment Adviser,
Distributor, Transfer Agent and selected dealers, to such extent as the Trustees
shall determine; (g) guarantee indebtedness or contractual obligations of
others; (h) determine and change the fiscal year of the Trust and the method by
which its accounts shall be kept; and (i) adopt a seal for the Trust but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
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SECTION 3.11. PRINCIPAL TRANSACTIONS. Except in transactions permitted by
the 1940 Act or any rule or regulation thereunder, or any order of exemption
issued by the Commission, or effected to implement the provisions of any
agreement to which the Trust is a party, the Trustees shall not, on behalf of
the Trust, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Trust to, any Trustee or
officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any Investment
Adviser, Distributor or Transfer Agent or with any Affiliated Person of such
Person; but the Trust may employ any such Person, or firm or company in which
such Person is an Interested Person, as broker, legal counsel, registrar,
transfer agent, dividend disbursing agent or custodian upon customary terms.
SECTION 3.12. LITIGATION. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust to pay or to satisfy
any debts, claims or expenses incurred in connection therewith, including those
of litigation, and such power shall include without limitation the power of the
Trustees or any appropriate committee thereof, in the exercise of their or its
good faith business judgment, to dismiss any action, suit, proceeding, dispute,
claim, or demand, derivative or otherwise, brought by any person, including a
Shareholder in its own name or the name of the Trust, whether or not the Trust
or any of the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Trust.
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ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
SECTION 4.1. INVESTMENT ADVISER. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time enter
into one or more investment advisory or management contracts whereby the other
party or parties to any such contracts shall undertake to furnish the Trust
such management, investment advisory, administration, accounting, legal,
statistical and research facilities and services, promotional or marketing
activities, and such other facilities and services, if any, as the Trustees
shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any provisions of the Declaration, the Trustees may authorize the Investment
Advisers, or any of them, under any such contracts (subject to such general or
specific instructions as the Trustees may from time to time adopt) to effect
purchases, sales, loans or exchanges of portfolio securities and other
investments of the Trust on behalf of the Trustees or may authorize any officer,
employee or Trustee to effect such purchases, sales, loans or exchanges pursuant
to recommendations of such Investment Advisers, or any of them (and all without
further action by the Trustees). Any such purchases, sales, loans and exchanges
shall be deemed to have been authorized by all of the Trustees. The Trustees
may, in their sole discretion, call a meeting of Shareholders in order to submit
to a vote of Shareholders at such meeting the approval or continuance of any
such investment advisory or management contract.
SECTION 4.2. ADMINISTRATIVE SERVICES. The Trustees may in their discretion
from time to time contract for administrative personnel and services whereby the
other party shall agree to provide the Trustees or the Trust administrative
personnel and services to operate the Trust on a daily or other basis, on such
terms and conditions as the Trustees may in their discretion determine. Such
services may be provided by one or more persons or entities.
SECTION 4.3. DISTRIBUTOR. The Trustees may in their discretion from time
to time enter into one or more contracts, providing for the sale of Shares to
net the Trust not less than the net asset value per Share (as described in
Article VIII hereof) and pursuant to which the Trust may either agree to sell
the Shares to the other parties to the contracts, or any of them, or appoint any
such other party its sales agent for such Shares. In either case, any such
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article IV,
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including, without limitation, the provision for the repurchase or sale of
shares of the Trust by such other party as principal or as agent of the Trust.
SECTION 4.4. TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or more
Persons.
SECTION 4.5. CUSTODIAN. The Trustees may appoint or otherwise engage one
or more banks or trust companies, each having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of at least five
million dollars ($5,000,000) to serve as Custodian with authority as its agent,
but subject to such restrictions, limitations and other requirements, if any, as
may be contained in the By-Laws of the Trust.
SECTION 4.6. PARTIES TO CONTRACT. Any contract of the character described
in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other contract
may be entered into with any Person, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship; nor shall any Person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article IV. The same Person may be the
other party to any contracts entered into pursuant to Sections 4.1, 4.2, 4.3,
4.4 or 4.5 above or otherwise, and any individual may be financially interested
or otherwise affiliated with Persons who are parties to any or all of the
contracts mentioned in this Section 4.6.
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ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
SECTION 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs
of the Trust. No Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever to any Person, other than the
Trust or its Shareholders, in connection with the Trust Property or the
affairs of the Trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard for his duty to such
Person; and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising in connection with the affairs
of the Trust. If any Shareholder, Trustee, officer, employee or agent, as
such, of the Trust is made a party to any suit or proceeding to enforce any
such liability, he shall not, on account thereof, be held to any personal
liability. The Trust shall indemnify and hold each Shareholder harmless from
and against all claims and liabilities, to which such Shareholder may become
subject by reason of his being or having been a Shareholder, and shall
reimburse such Shareholder for all legal and other expenses reasonably
incurred by him in connection with any such claim or liability. The rights
accruing to a Shareholder under this Section 5.1 shall not exclude any other
right to which such Shareholder may be lawfully entitled, nor shall anything
herein contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically
provided herein.
SECTION 5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties.
SECTION 5.3. INDEMNIFICATION. (a) The Trustees shall provide for
indemnification by the Trust of any person who is, or has been, a Trustee,
officer, employee or agent of the Trust against all liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or
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otherwise by virtue of his being or having been a Trustee, officer, employee or
agent and against amounts paid or incurred by him in the settlement thereof, in
such manner as the Trustees may provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
SECTION 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
SECTION 5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC.
No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust shall be bound to
make any inquiry concerning the validity of any transaction purporting to be
made by the Trustees or by said officer, employee or agent or be liable for
the application of money or property paid, loaned, or delivered to or on the
order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing whatsoever executed in
connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity as officers,
employees or agents of the Trust. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking
made or issued by the Trustees shall recite that the same is executed or made
by them not individually, but as Trustees under the Declaration, and that the
obligations of any such instrument are not binding upon any of the Trustees
or Shareholders, individually, but bind only the Trust Estate, and may
contain any further recital which they or he may deem appropriate, but the
omission of such recital shall not operate to bind the Trustees or
Shareholders individually. The Trustees shall at all times maintain
insurance for the protection of the Trust Property, its Shareholders,
Trustees, officers, employees and agents in such amount as the Trustees shall
deem adequate to cover possible tort liability, and such other insurance as
the Trustees in their sole judgment shall deem advisable.
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SECTION 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by any Investment Adviser, Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
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ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.01 par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees may initially issue whole and fractional
shares of a single class, each of which shall represent an equal proportionate
share in the Trust with each other Share. The Trustees may divide or combine
the shares into a greater or lesser number of shares without thereby changing
the proportionate interests in the Trust. Subject to the provisions of Section
6.9 hereof, the Trustees may also authorize the creation of additional series of
shares (the proceeds of which may be invested in separate, independently managed
portfolios) and additional classes of shares within any series. All Shares
issued hereunder including, without limitation, Shares issued in connection with
a dividend in Shares or a split in Shares, shall be fully paid and
nonassessable.
SECTION 6.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property
of every description and right to conduct any business hereinbefore described
are vested exclusively in the Trustees, and the Shareholders shall have no
interest therein other than the beneficial interest conferred by their Shares,
and they shall have no right to call for any partition or division of any
property, profits, rights or interests of the Trust nor can they be called upon
to assume any losses of the Trust or suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property giving only
the rights in the Declaration specifically set forth. The Shares shall not
entitle the holder to preference, preemptive, appraisal, conversion or exchange
rights, except as the Trustees may determine with respect to any series of
Shares.
SECTION 6.3. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint
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stock association, corporation, bailment or any form of legal relationship other
than a trust. Nothing in the Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
SECTION 6.4. ISSUANCE OF SHARES. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration,
including cash or property, at such time or times and on such terms as the
Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares. The Trustees may from
time to time divide or combine the Shares into a greater or lesser number
without thereby changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be redeemed
as, whole Shares and/or fractions of a Share as described in the Prospectus.
SECTION 6.5. REGISTER OF SHARES. A register shall be kept at the
principal office of the Trust or at an office of the Transfer Agent which
shall contain the names and addresses of the Shareholders and the number of
Shares held by them respectively and a record of all transfers thereof. Such
register may be in written form or any other form capable of being converted
into written form within a reasonable time for visual inspection. Such
register shall be conclusive as to who are the holders of the Shares and who
shall be entitled to receive dividends or distributions or otherwise to
exercise or enjoy the rights of Shareholders. No Shareholder shall be
entitled to receive payment of any dividend or distribution, nor to have
notice given to him as herein or in the By-Laws provided, until he has given
his address to the Transfer Agent or such other officer or agent of the
Trustees as shall keep the said register for entry thereon. It is not
contemplated that certificates will be issued for the Shares; however, the
Trustees, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their use.
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SECTION 6.6. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on
the register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law, except as may otherwise be provided by the laws of
the Commonwealth of Massachusetts.
SECTION 6.7. NOTICES. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
SECTION 6.8. VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.2 hereof, (ii) for the
removal of Trustees as provided in Section 2.3 hereof, (iii) with respect to any
investment advisory or management contract as provided in Section 4.1, (iv) with
respect to termination of the Trust as provided in Section 9.2, (v) with respect
to any amendment of the Declaration to the extent and as provided in Section
9.3, (vi) with respect to any merger, consolidation or sale of assets as
provided in Section 9.4, (vii) with respect to incorporation of the Trust to the
extent and as provided in Section 9.5, (viii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action,
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proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, and (ix) with
respect to such additional matters relating to the Trust as may be required by
law, the Declaration, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as and when the Trustees
may consider necessary or desirable. Each whole Share shall be entitled to one
vote as to any matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote, except that Shares held in
the treasury of the Trust as of the record date, as determined in accordance
with the By-Laws, shall not be voted and except that the Trustees may, in
conjunction with the establishment of any series or classes of Shares, establish
conditions under which the several series or classes of Shares shall have
separate voting rights or no voting rights. Unless and until otherwise
determined by the Trustees, any vote of Shareholders shall be taken without
regard to class or series. There shall be no cumulative voting in the election
of Trustees. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, the Declaration or the By-
Laws to be taken by Shareholders. The By-Laws may include further provisions
for Shareholders' votes and meetings and related matters.
SECTION 6.9. SERIES OR CLASSES OF SHARES. If the Trustees shall divide the
shares of the Trust into two or more series or two or more classes of series, as
provided in Section 6.1 hereof, the following provisions shall be applicable:
(a) The number of authorized shares and the number of shares of each
series or of each class that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued shares or any shares previously issued and
reacquired of any series or class into one or more series or one or more classes
that may be established and designated from time to time. The Trustees may hold
as treasury shares (of the same or some other series or class), reissue for such
consideration and on such terms as they may determine, or cancel any shares of
any series or any class reacquired by the Trust at their discretion from time to
time.
(b) The power of the Trustees to invest and reinvest the Trust
Property shall be governed by Section 3.2 of this Declaration with respect to
any one or more series which represents the interests in the assets of the Trust
immediately prior to the establishment of two
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or more series and the power of the Trustees to invest and reinvest assets
applicable to any other series shall be as set forth in the instrument of the
Trustees establishing such series which is hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
shares of a particular series or class together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series or class for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular series or class, the Trustees shall allocate them
among any one or more of the series or classes established and designated from
time to time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the shareholders of all series or classes for all
purposes.
(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the shareholders.
(e) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 8.2 of
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this Declaration with respect to any one or more series or classes which
represents the interests in the assets of the Trust immediately prior to the
establishment of two or more series or classes. With respect to any other
series or class, dividends and distributions on shares of a particular series
or class may be paid with such frequency as the Trustees may determine, which
may be daily or otherwise, pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine, to
the holders of shares of that series or class, from such of the income and
capital gains, accrued or realized, from the assets belonging to that series
or class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that series or class. All dividends and
distributions on shares of a particular series or class shall be distributed
pro rata to the holders of that series or class in proportion to the number
of shares of that series or class held by such holders at the date and time
of record established for the payment of such dividends or distributions.
(f) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and dividend
rights, of each class and series of Shares.
(g) The establishment and designation of any series or class of
shares shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences of such series or class, or as otherwise
provided in such instrument. At any time that there are no shares outstanding
of any particular series or class previously established and designated, the
Trustees may by an instrument executed by a majority of their number abolish
that series or class and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of an amendment
to this Declaration.
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ARTICLE VII
REDEMPTIONS
7.1. REDEMPTIONS. All outstanding Shares may be redeemed at the option of
the holders thereof, upon and subject to the terms and conditions provided in
this Article VII. The Trust shall, upon application of any Shareholder or
pursuant to authorization from any Shareholder, redeem or repurchase from such
Shareholder outstanding shares for an amount per share determined by the
Trustees in accordance with any applicable laws and regulations; provided that
(a) such amount per share shall not exceed the cash equivalent of the
proportionate interest of each share or of any class or series of shares in the
assets of the Trust at the time of the redemption or repurchase and (b) if so
authorized by the Trustees, the Trust may, at any time and from time to time
charge fees for effecting such redemption or repurchase, at such rates as the
Trustees may establish, as and to the extent permitted under the 1940 Act and
the rules and regulations promulgated thereunder, and may, at any time and from
time to time, pursuant to such Act and such rules and regulations, suspend such
right of redemption. The procedures for effecting and suspending redemption
shall be as set forth in the Prospectus from time to time. Payment will be made
in such manner as described in the Prospectus.
7.2. REDEMPTION OF SHARES; DISCLOSURE OF HOLDING. If the Trustees shall,
at any time and in good faith, be of the opinion that direct or indirect
ownership of Shares or other securities of the Trust has or may become
concentrated in any Person to an extent which would disqualify the Trust as a
regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power by lot or other means deemed equitable by them
(i) to call for redemption by any such Person a number, or principal amount,
of Shares or other securities of the Trust sufficient, in the opinion of the
Trustees, to maintain or bring the direct or indirect ownership of Shares or
other securities of the Trust into conformity with the requirements for such
qualification and (ii) to refuse to transfer or issue Shares or other
securities of the Trust to any Person whose acquisition of the Shares or
other securities of the Trust in question would in the opinion of the
Trustees result in such disqualification. The redemption shall be effected
at a redemption price determined in accordance with Section 7.1.
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The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other authority.
SECTION 7.3. REDEMPTIONS OF ACCOUNTS OF LESS THAN $100. The Trustees shall
have the power at any time to redeem Shares of any Shareholder at a redemption
price determined in accordance with Section 7.1 if at such time the aggregate
net asset value of the Shares in such Shareholder's account is less than $100.
A Shareholder will be notified that the value of his account is less than $100
and allowed sixty (60) days to make an additional investment before the
redemption is processed.
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ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
SECTION 8.1. NET ASSET VALUE. The net asset value of each outstanding
Share of the Trust shall be determined on such days and at such time or times as
the Trustees may determine. The method of determination of net asset value
shall be determined by the Trustees and shall be as set forth in the Prospectus.
The power and duty to make the daily calculations may be delegated by the
Trustees to any Investment Adviser, the Custodian, the Transfer Agent or such
other person as the Trustees by resolution may determine. The Trustees may
suspend the daily determination of net asset value to the extent permitted by
the 1940 Act.
SECTION 8.2. DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from time
to time distribute ratably among the Shareholders such proportion of the net
profits, surplus (including paid-in surplus), capital, or assets held by the
Trustees as they may deem proper. Such distribution may be made in cash or
property (including without limitation any type of obligations of the Trust
or any assets thereof), and the Trustees may distribute ratably among the
Shareholders additional Shares issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem proper. Such distributions
may be among the Shareholders of record at the time of declaring a
distribution or among the Shareholders of record at such later date as the
Trustees shall determine. The Trustees may always retain from the net
profits such amount as they may deem necessary to pay the debts or expenses
of the Trust or to meet obligations of the Trust, or as they may deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business. The Trustees may adopt and offer
to Shareholders such dividend reinvestment plans, cash dividend payout plans
or related plans as the Trustees deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
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SECTION 8.3. DETERMINATION OF NET INCOME. The Trustees shall have the
power to determine the net income of the Trust and from time to time to
distribute such net income ratably among the Shareholders as dividends in
cash or additional Shares issuable hereunder. The determination of net
income and the resultant declaration of dividends shall be as set forth in
the Prospectus. The Trustees shall have full discretion to determine whether
any cash or property received by the Trust shall be treated as income or as
principal and whether any item of expense shall be charged to the income or
the principal account, and their determination made in good faith shall be
conclusive upon the Shareholders. In the case of stock dividends received,
the Trustees shall have full discretion to determine, in the light of the
particular circumstances, how much, if any, of the value thereof shall be
treated as income, the balance, if any, to be treated as principal.
SECTION 8.4. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or desirable
to enable the Trust to comply with any provision of the 1940 Act, or any rule or
regulation thereunder, including any rule or regulation adopted pursuant to
Section 22 of the 1940 Act by the Commission or any securities association
registered under the Securities Exchange Act of 1934, or any order of exemption
issued by said Commission, all as in effect now or hereafter amended or
modified. Without limiting the generality of the foregoing, the Trustees may
establish classes of series of Shares in accordance with Section 6.9.
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<PAGE>
ARTICLE IX
DURATION; TERMINATION OF
TRUST; AMENDMENT; MERGERS, ETC.
SECTION 9.1. DURATION. The Trust shall continue without limitation of time
but subject to the provisions of this Article IX.
SECTION 9.2. TERMINATION OF TRUST. (a) The Trust may be terminated (i) by
the affirmative vote of the holders of not less than two-thirds of the Shares
outstanding and entitled to vote at any meeting of Shareholders, or (ii) by an
instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by the holders of not less than two-thirds of such Shares, or
by such other vote as may be established by the Trustees with respect to any
class or series of Shares, or (iii) by the Trustees by written notice to the
Shareholders. Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the purpose
of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound
up, including the power to fulfill or discharge the contracts of the
Trust, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property
to one or more persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities and to do all
other acts appropriate to liquidate its business; provided that any
sale, conveyance, assignment, exchange, transfer or other disposition
of all or substantially all the Trust Property shall require
Shareholder approval in accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities and
refunding
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agreements, as they deem necessary for their protection, the Trustees
may distribute the remaining Trust Property, in cash or in kind or
partly each, among the Shareholders according to their respective
rights.
(b) After termination of the Trust and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth
the fact of such termination, and the Trustees shall thereupon be discharged
from all further liabilities and duties hereunder, and the rights and
interests of all Shareholders shall thereupon cease.
SECTION 9.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended by
a Majority Shareholder Vote, at a meeting of Shareholders, or by written consent
without a meeting. The Trustees may also amend this Declaration without the
vote or consent of Shareholders to change the name of the Trust, to supply any
omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or if they deem it necessary to conform this
Declaration to the requirements of applicable federal laws or regulations or
the requirements of the regulated investment company provisions of the Internal
Revenue Code, or to eliminate or reduce any federal, state or local taxes which
are or may be payable by the Trust or the Shareholders, but the Trustees shall
not be liable for failing to do so.
(b) No amendment may be made under this Section 9.3 which would
change any rights with respect to any Shares of the Trust by reducing the amount
payable thereon upon liquidation of the Trust or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares outstanding and entitled to vote, or by such
other vote as may be established by the Trustees with respect to any series or
class of Shares. Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the
Secretary or any Assistant Secretary of the Trust, setting forth an amendment
and reciting that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and
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<PAGE>
executed by a majority of the Trustees or certified by the Secretary or any
Assistant Secretary of the Trust, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
SECTION 9.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may merge
or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized, at any meeting of Shareholders called
for the purpose, by the affirmative vote of the holders of not less than two-
thirds of the Shares outstanding and entitled to vote, or by an instrument or
instruments in writing without a meeting, consented to by the holders of not
less than two-thirds of such Shares, or by such other vote as may be established
by the Trustees with respect to any series or class of Shares; provided,
however, that, if such merger, consolidation, sale, lease or exchange is
recommended by the Trustees, a Majority Shareholder Vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
statutes of the Commonwealth of Massachusetts. In respect of any such merger,
consolidation, sale or exchange of assets, any Shareholder shall be entitled to
rights of appraisal of his Shares to the same extent as a shareholder of a
Massachusetts business corporation in respect of a merger, consolidation, sale
or exchange of assets of a Massachusetts business corporation, and such rights
shall be his exclusive remedy in respect of his dissent from any such action.
SECTION 9.5. INCORPORATION. With approval of a Majority Shareholder Vote,
or by such other vote as may be established by the Trustees with respect to any
series or class of Shares, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the
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Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
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<PAGE>
ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1. FILING. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee or by the Secretary or any Assistant Secretary of the
Trust stating that such action was duly taken in a manner provided herein, and
unless such amendment or such certificate sets forth some later time for the
effectiveness of such amendment, such amendment shall be effective upon its
filing. A restated Declaration, integrating into a single instrument all of the
provisions of the Declaration which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall, upon filing
with the Secretary of the Commonwealth of Massachusetts, be conclusive evidence
of all amendments contained therein and may thereafter be referred to in lieu of
the original Declaration and the various amendments thereto.
SECTION 11.2. RESIDENT AGENT. The Prentice-Hall Corporation System, Inc.,
84 State Street, Boston, Massachusetts 02109 is the resident agent of the Trust
in the Commonwealth of Massachusetts.
SECTION 11.3. GOVERNING LAW. This Declaration is executed by the Trustees
with reference to the laws of the Commonwealth of Massachusetts, and the rights
of all parties and the validity and construction of every provision hereof shall
be subject to and construed according to the laws of said State.
SECTION 11.4. COUNTERPARTS. The Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
SECTION 11.5. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary of the Trust, certifying to: (a)
the number or identity of Trustees or Shareholders, (b) the due authorization of
the
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<PAGE>
execution of any instrument or writing, (c) the form of any vote passed at a
meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees and their successors.
SECTION 11.6. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation to
the extent necessary to eliminate such conflict; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
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SECTION 11.7. USE OF THE NAME "DEAN WITTER." Dean Witter Reynolds Inc.
("DWR") has consented to the use by the Trust of the identifying name "Dean
Witter," which is a property right of DWR. The Trust will only use the name
"Dean Witter" as a component of its name and for no other purpose, and will not
purport to grant to any third party the right to use the name "Dean Witter" for
any purpose. DWR, or any corporate affiliate of the parent of DWR, may use or
grant to others the right to use the name "Dean Witter", or any combination or
abbreviation thereof, as all or a portion of a corporate or business name or for
any commercial purpose, including a grant of such right to any other investment
company. At the request of DWR or its parent, the Trust will take such action
as may be required to provide its consent to the use by DWR or its parent, or
any corporate affiliate of DWR's parent, or by any person to whom DWR or its
parent or an affiliate of DWR's parent shall have granted the right to the use,
of the name "Dean Witter," or any combination or abbreviation thereof. Upon the
termination of any investment advisory agreement into which DWR and the Trust
may enter, the Trust shall, upon request by DWR or its parent, cease to use the
name "Dean Witter" as a component of its name, and shall not use the name, or
any combination or abbreviation thereof, as a part of its name or for any other
commercial purpose, and shall cause its officers, trustees and shareholders to
take any and all actions which DWR or its parent may request to effect the
foregoing and to reconvey to DWR or its parent any and all rights to such name.
IN WITNESS WHEREOF, the undersigned have executed this instrument this
21st day of May, 1985.
/s/ Charles A. Fiumefreddo /s/ Andrew J. Melton, Jr.
- ----------------------------------- -----------------------------------
Charles A. Fiumefreddo, as Andrew J. Melton, Jr., as
Trustee and not individually Trustee and not individually
One World Trade Center 130 Liberty Street
New York, New York 10048 New York, New York 10006
/s/ Sheldon Curtis ,
- ----------------------------------- -----------------------------------
Sheldon Curtis, as Trustee , as Trustee
and not individually and not individually
One World Trade Center
New York, New York 10048
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IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of May, 1985.
/s/ John W. Belash
-----------------------------------
, as Trustee
and not individually
One Federal Street
Boston, MA 02110
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. Boston, MA
May 21, 1985
Then personally appeared the above-named John W. Belash who acknowledged
the foregoing instrument to be his free act and deed,
before me,
/s/ Pauline Frances Martin
-----------------------------------
Notary Public
My commission expires: 10/31/86
-----------------------------------
<PAGE>
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK)
On this 21st date of May, 1985, ANDREW J. MELTON, JR., CHARLES A.
FIUMEFREDDO AND SHELDON CURTIS, known to me and known to be the individuals
described in and who executed the foregoing instrument, personally appeared
before me and they severally acknowledged the foregoing instrument to be their
free act and deed.
/s/ Rodd M. Baxter
-----------------------------------
Notary Public
My commission expires:
RODD M. BAXTER
Notary Public, State of New York
Mo. 41-4637346
Qualified in Nassau County
Commission Expires March 30, 1986.
<PAGE>
BY-LAWS
OF
TCW/DW GLOBAL CONVERTIBLE TRUST
(AMENDED AND RESTATED AS OF JANUARY 25, 1995)
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 TCW/ DW Global Convertible Trust dated
June 29, 1994.
ARTICLE II
OFFICES
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
SECTION 2.2. OTHER OFFICES. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and without
the Commonwealth as the Trustees may from time to time designate or the business
of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. MEETINGS. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the provisions
of Section 16(a) of the 1940 Act, for that purpose. Meetings of Shareholders
shall also be called by the Secretary upon the written request of the holders of
Shares entitled to vote as otherwise required by Section 16(c) of the 1940 Act
and to the extent required by the corporate or business statute of any state in
which the Shares of the Trust are sold, as made applicable to the Trust by the
provisions of Section 2.3 of the Declaration. Such request shall state the
purpose or purposes of such meeting and the matters proposed to be acted on
thereat. Except to the extent otherwise required by Section 16(c) of the 1940
Act, as made applicable to the Trust by the provisions of Section 2.3 of the
Declaration, the Secretary shall inform such Shareholders of the reasonable
estimated cost of preparing and mailing such notice of the meeting, and upon
payment to the Trust of such costs, the Secretary shall give notice stating the
purpose or purposes of the meeting to all entitled to vote at such meeting. No
meeting need be called upon the request of the holders of Shares entitled to
cast less than a majority of all votes entitled to be cast at such meeting, to
consider any matter which is substantially the same as a matter voted upon at
any meeting of Shareholders held during the preceding twelve months.
SECTION 3.3. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety (90)
days before such meeting to each Shareholder entitled to vote at such meeting.
Such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to the Shareholder at his address as it appears
on the records of the Trust.
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
<PAGE>
Shares issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum for the
transaction of business. In the absence of a quorum, the Shareholders present or
represented by proxy and entitled to vote thereat shall have 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 Section 32 of the Corporations Law of the State of
Massachusetts.
SECTION 3.9. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to be
taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
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
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and place as shall be determined from time to time by the Trustees without
further notice. Special meetings of the Trustees may be called at any time by
the Chairman and shall be called by the Chairman or the Secretary upon the
written request of any two (2) Trustees.
SECTION 4.2. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, directed to
the Trustee at his address as it appears on the records of the Trust. Subject to
the provisions of the 1940 Act, notice or waiver of notice need not specify the
purpose of any special meeting.
SECTION 4.3. TELEPHONE MEETINGS. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such committee,
as the case may be, by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at the meeting.
SECTION 4.4. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present, the
affirmative vote of a majority of the Trustees present shall be the act of the
Trustees, unless the concurrence of a greater proportion is expressly required
for such action by law, the Declaration or these By-Laws. If at any meeting of
the Trustees there be less than a quorum present, the Trustees present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall have been obtained.
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
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manner he reasonably believed to be in or not opposed to the best interests of
the Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b)The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or on behalf of the Trust to obtain a judgment or decree in
its favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses, including
attorneys' fees actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Trust; except that no indemnification shall be made in respect of any claim,
issue, or matter as to which the person has been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Trust, except to
the extent that the court in which the action or suit was brought, or a court of
equity in the county in which the Trust has its principal office, determines
upon application that, despite the adjudication of liability but in view of all
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for those expenses which the court shall deem proper, provided such
Trustee, officer, employee or agent is not adjudged to be liable by reason of
his willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
(c)To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
therewith.
(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
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(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
(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
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to consist of two (2) or more of the Trustees of the Trust and may delegate to
such committees, in the intervals between meetings of the Trustees, any or all
of the powers of the Trustees in the management of the business and affairs of
the Trust. In the absence of any member of any such committee, the members
thereof present at any meeting, whether or not they constitute a quorum, may
appoint a Trustee to act in place of such absent member. Each such committee
shall keep a record of its proceedings. The Executive Committee and any other
committee shall fix its own rules or procedure, but the presence of at least
fifty percent (50%) of the members of the whole committee shall in each case be
necessary to constitute a quorum of the committee and the affirmative vote of
the majority of the members of the committee present at the meeting shall be
necessary to take action. All actions of the Executive Committee shall be
reported to the Trustees at the meeting thereof next succeeding to the taking of
such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Trust. The number of persons constituting any such advisory committee
shall be determined from time to time by the Trustees. The members of any such
advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of any Committee of the Trustees appointed pursuant to Section 5.1 of
these By-Laws may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all members of the Committee entitled to
vote upon the action and such written consent is filed with the records of the
proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person, but
no officer shall execute, 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 Chairman the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable.
SECTION 6.3. TERM AND REMOVAL AND VACANCIES. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any officer
or agent of the Trust may be removed by the Trustees whenever, in their
judgment, the best interests of the Trust will be served thereby, but such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 6.4. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. 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
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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. (a) The Chairman shall be the chief executive
officer of the Trust; he shall preside at all meetings of the Shareholders and
of the Trustees; he shall have general and active management of the business of
the Trust, shall see that all orders and resolutions of the Trustees are carried
into effect, and, in connection therewith, shall be authorized to delegate to
the President or to one or more Vice Presidents such of his powers and duties at
such times and in such manner as he may deem advisable; he 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.
(b)In the absence of the Chairman, the Board shall determine who shall
preside at all meetings of the shareholders and the Board of Trustees.
SECTION 6.7. THE PRESIDENT. The President shall perform such duties as the
Board of Trustees and the Chairman 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 Chairman, 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 Chairman may from time to
time prescribe.
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 Chairman.
SECTION 6.10. THE SECRETARY. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the proceedings
of the meetings of the Shareholders and of the Trustees in a book to be kept for
that purpose, and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
Shareholders and special meetings of the Trustees, and shall perform such other
duties and have such powers as the Trustees, or the Chairman, may from time to
time prescribe. He 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 Chairman, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such duties and have such other powers as the Trustees or the Chairman may from
time to time prescribe.
SECTION 6.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Trust. He 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 Chairman, 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
Chairman, may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order determined
by the Trustees or the Chairman, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Trustees, or the
Chairman, may from time to time prescribe.
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SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in Shares,
from any sources permitted by law, all as the Trustees shall from time to time
determine.
Inasmuch as the computation of net income and net profits from the sales of
securities or other properties for federal income tax purposes may vary from the
computation thereof on the records of the Trust, the Trustees shall have power,
in their discretion, to distribute as income dividends and as capital gain
distributions, respectively, amounts sufficient to enable the Trust to avoid or
reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such form
and design at any time or from time to time, and shall be entered in the records
of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number of
full Shares owned by such holder; shall be signed by or in the name of the Trust
by the Chairman, 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.
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ARTICLE IX
CUSTODIAN
SECTION 9.1. APPOINTMENT AND DUTIES. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at least
five million dollars ($5,000,000) as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as may
be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver the
same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees
may direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these By-Laws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice and filed with the records of the meeting, whether before or after the
holding thereof, or actual attendance at the meeting of shareholders, Trustees
or committee, as the case may be, in person, shall be deemed equivalent to the
giving of such notice to such person.
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,
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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, 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 TCW/DW Global Convertible Trust, dated
June 29, 1994, a copy of which is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name TCW/DW Global Convertible
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 TCW/DW Global Convertible 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 TCW/DW Global Convertible Trust, but the Trust Estate only shall
be liable.
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DEAN WITTER DISTRIBUTORS INC.
Gentlemen:
Dean Witter Distributors Inc. (the "Distributor") has a distribution
agreement (the "Distribution Agreement") with Dean Witter Convertible Securities
Trust, a Massachusetts business trust (the "Fund"), pursuant to which it acts as
the Distributor for the sale of the Fund's shares of beneficial interest, par
value $0.01 per share (the "Shares"). Under the Distribution Agreement, the
Distributor has the right to distribute Shares for resale.
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to the
public are registered under the Securities Act of 1933, as amended. You have
received a copy of the Distribution Agreement between us and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms used herein, including "Prospectus" and "Registration Statement" of
the Fund and "Selected Dealer" shall have the same meaning in this Agreement as
in the Distribution Agreement. As principal, we offer to sell shares to your
customers, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act on behalf of your
customers, and in no transaction shall you have any authority to act as agent
for the Fund, for us or for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order, as set forth in the
current Prospectus. The procedure relating to the handling of orders shall be
subject to instructions which we or the Fund shall forward from time to time to
you. All orders are subject to acceptance or rejection by the Distributor or the
Fund in the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable net asset values and
subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares except
under circumstances that will result in compliance with the applicable Federal
and state securities laws and that in connection with sales and offers to sell
Shares you will furnish to each person to whom any such sale or offer is made a
copy of the Prospectus (as then amended or supplemented) and will not furnish to
any person any information relating to the Shares, which is inconsistent in any
respect with the information contained in the Prospectus (as then amended or
supplemented) or cause any advertisement to be published by radio or television
or in any newspaper or posted in any public place or use any sales promotional
material without our consent and the consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund and
personal services to Fund shareholders by paying you a sales charge and/or other
commission (which may be in the form of a gross sales credit and/or an annual
residual commission) and/or a service fee, under the terms as are set forth in
the Fund's Prospectus.
5. If any Shares sold to your customers under the terms of this Agreement
are repurchased by us for the account of the Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and refund
to us, any commission received by you with respect to such Shares.
6. No person is authorized to make any representations concerning the
Shares or the Fund except those contained in the current Prospectus and in such
printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus. In selling Shares, you shall rely solely on the
representations contained in the Prospectus and supplemental information
mentioned above. Any printed information which we furnish you other than the
Prospectus and the Fund's periodic reports and proxy solicitation material are
our sole responsibility and not the responsibility of the Fund, and you agree
that the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
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7. You agree to deliver to each of the purchasers making purchases a copy
of the then current Prospectus at or prior to the time of offering or sale, and
you agree thereafter to deliver to such purchasers copies of the annual and
interim reports and proxy solicitation materials of the Fund. You further agree
to endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus, annual or interim reports and proxy solicitation materials of the
Fund will be supplied to you in reasonable quantities upon request.
8. You are hereby authorized (i) to place orders directly with the Fund or
its agent for shares of the Fund to be sold by us subject to the applicable
terms and conditions governing the placement of orders for the purchase of Fund
shares, as set forth in the Distribution Agreement, and (ii) to tender shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in the Distribution Agreement.
9. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Shares entirely. Each party hereto has the right to
cancel this agreement upon notice to the other party.
10. I. You shall indemnify and hold harmless the Distributor, from and
against any claims, damages and liabilities which arise as a result of action
taken pursuant to instructions from you, or on your behalf to: a)(i) place
orders for Shares of the Fund with the Fund's transfer agent or direct the
transfer agent to receive instructions for the order of Shares, and (ii) accept
monies or direct that the transfer agent accept monies as payment for the order
of such Shares, all as contemplated by and in accordance with Section 3 of the
Distribution Agreement; b)(i) place orders for the redemption of Shares of the
Fund with the Fund's transfer agent or direct the transfer agent to receive
instruction for the redemption of Shares and (ii) to pay redemption proceeds or
to direct that the transfer agent pay redemption proceeds in connection with
orders for the redemption of Shares, all as contemplated by and in accordance
with Section 4 of the Distribution Agreement; provided, however, that in no
case, (i) is this indemnity in favor of the Distributor and any such controlling
persons to be deemed to protect the Distributor or any such controlling persons
thereof against any liability to which the Distributor or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of reckless
disregard of its obligations and duties under this Agreement or the Distribution
Agreement; or (ii) are you to be liable under the indemnity agreement contained
in this paragraph with respect to any claim made against the Distributor or any
such controlling persons, unless the Distributor or any such controlling
persons, as the case may be, shall have notified you in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify you of any such claim shall not relieve you from
any liability which you may have to the person against whom such action is
brought otherwise than on account of the indemnity agreement contained in this
paragraph. You will be entitled to participate at your own expense in the
defense, or, if you so elect, to assume the defense, of any suit brought to
enforce any such liability, but if you elect to assume the defense, such defense
shall be conducted by counsel chosen by you and satisfactory to the Distributor
or such controlling person or persons, defendant or defendants in the suit. In
the event you elect to assume the defense of any such suit and retain such
counsel, the Distributor or such controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them, but, in case you do not elect to assume the defense of
any such suit, you will reimburse the Distributor or such controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. You shall promptly notify the
Distributor of the commencement of any litigation or proceedings against it or
any of its officers or directors in connection with the issuance or sale of the
Shares.
II. If the indemnification provided for in this Section 10 is unavailable
or insufficient to hold harmless the Distributor, as provided above in respect
of any losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to herein, then you shall contribute to the amount paid or
payable by the Distributor as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by you on the one
hand and the
2
<PAGE>
Distributor on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then you shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also your relative fault on the one hand and the relative
fault of the Distributor on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. You and the Distributor agree that it would not be
just and equitable if contribution were determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by the Distributor
as a result of the losses, claims, damages, liabilities or expenses (or actions
in respect thereof) referred to above shall be deemed to include any legal or
other expenses reasonably incurred by the Distributor in connection with
investigating or defending such claim. Notwithstanding the provisions of this
subsection (II), you shall not be required to contribute any amount in excess of
the amount by which the total price at which the Shares distributed by it to the
public were offered to the public exceeds the amount of any damages which it has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act of
1933 Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Fund shares. We shall be under no liability to you except for lack
of good faith and for obligations expressly assumed by us herein. Nothing
contained in this paragraph is intended to operate as, and the provisions of
this paragraph shall not in any way whatsoever constitute, a waiver by you of
compliance with any provision of the Securities Act of 1933, as amended, or of
the rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we
believe the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. All communications to us should be sent to the address shown below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
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15. This Agreement shall become effective as of the date of your acceptance
hereof, provided that you return to us promptly a signed and dated copy.
DEAN WITTER DISTRIBUTORS, INC.
By /s/ illegible
---------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
Dean Witter Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: Nations Securities
----------------------------
By: /s/illegible
-----------------------------------
Address: 4201 Congress St. Suite 245
------------------------------
Charlotte NC 28209
------------------------------
Date: 6/7/93
---------------------------------
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<PAGE>
CUSTODY AGREEMENT
Agreement made as of this 20th day of September, 1991,
between DEAN WITTER CONVERTIBLE SECURITIES TRUST, a Massachusetts business trust
organized and existing under the laws of the Commonwealth of Massachusetts,
having its principal office and place of business at 2 World Trade Center, New
York, New York 10048 (hereinafter called the "Fund"), and THE BANK OF NEW YORK,
a New York corporation authorized to do a banking business, having its principal
of- fice and place of business at 48 Wall Street, New York, New York 10286
(hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, shall have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices and
Certifications described in the Exhibits delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether or not such person
is an Officer or employee of the Fund, duly authorized by the Board of Trustees
of the Fund to give Oral Instructions and Written Instructions on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time, provided that
each person who is designated in any such Certificate as an "Officer of DWTC"
shall be an Authorized Person only for purposes of Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
<PAGE>
4. "Call Option" shall mean an exchange traded option with respect to
Securities other than Index, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received (irrespective of constructive receipt) by
the Custodian and signed on behalf of the Fund by any two Offic- ers. The term
Certificate shall also include instructions by the Fund to the Custodian
communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of any Put
Option guarantee let- ter or similar document described in paragraph 8 of
Article V herein.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, cur- rency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
10. "Financial Futures Contract" shall mean the firm commitment to buy or
sell financial instruments on a U.S. com- modities exchange or board of trade at
a specified future time at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures Contract and/or
Index Futures Contracts.
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<PAGE>
12. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
13. "Investment Company Act of 1940" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
14. "Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
index at the close of the last business day of the contract and the price at
which the futures contract is originally struck.
15. "Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commis- sion
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or a Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's effect- ing an
appropriate entry in its books and records.
17. "Money Market Security" shall mean all instruments and obligations
commonly known as a money market instruments, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale, including, without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest and/or
principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to Securities and bank time deposits.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the
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<PAGE>
Securities Exchange Act of 1934, its successor or successors, and its
nominee or nominees.
19. "Officers" shall mean the President, any Vice President, the
Secretary, the Clerk, the Treasurer, the Controller, any Assistant Secretary,
any Assistant Clerk, any Assistant Treasurer, and any other person or persons,
whether or not any such other person is an officer or employee of the Fund, but
in each case only if duly authorized by the Board of Trustees of the Fund to
execute any Certificate, instruction, notice or other instrument on behalf of
the Fund and listed in the Certificate annexed hereto as Appendix B or such
other Certificate as may be received by the Custodian from time to time;
provided that each person who is designated in any such Certificate as holding
the position of "Officer of DWTC" shall be an Officer only for purposes of
Articles XII and XIII hereof.
20. "Option" shall mean a Call Option, Covered Call Op- tion, Index Option
and/or a Put Option.
21. "Oral Instructions" shall mean verbal instructions actually received
(irrespective of constructive receipt) by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an Authorized
Person.
22. "Put Option" shall mean an exchange traded option with respect to
instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securi- ties, to sell such instruments, currency, or Securities to the writer
thereof for the exercise price.
23. "Reverse Repurchase Agreement" shall mean an agree- ment pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
24. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Op- tions, Index Options, Index Futures
Contracts, Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, over the
counter options on Securities, common stocks and other securities having
characteristics similar to common stocks, preferred stocks, debt obligations
issued by state or municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds, industrial bonds
and industrial development bonds), bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe
- 4 -
<PAGE>
for the same, or evidencing or representing any other rights or interest
therein, or rights to any property or assets.
25. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recorda- tion or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically al-
located to such Series shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.
26. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund, except that if the Fund does not have more than one portfolio, "Series"
shall mean the Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only one portfolio.
27. "Shares" shall mean the shares of beneficial inter- est of the Fund
and its Series.
28. "Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each use of the
Terminal Link the use of an authorization code provided by the Custodian and at
least two access codes established by the Fund, provided, that the Fund shall
have delivered to the Custodian a Certificate substantially in the form of
Appendix C.
29. "Transfer Agent" shall mean Dean Witter Trust Company, a New Jersey
limited purpose trust company, its successors and assigns.
30. "Transfer Agent Account" shall mean any account in the name of the
Transfer Agent maintained with The Bank of New York pursuant to a Cash
Management and Related Services Agreement between The Bank of New York and the
Transfer Agent.
31. "Written Instructions" shall mean written communications actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an
Authorized Person by telex or any other such system whereby the receiver of such
communications is able to verify by codes or otherwise with a reasonable degree
of certainty the identity of the sender of such communication.
- 5 -
<PAGE>
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated, and the Custodian shall not
be responsible for any Securities or money not so delivered. The Custodian shall
physically segregate, keep and maintain the Securities of the Series separate
and apart from each other Series and from other assets held by the Custodian.
Except as otherwise expressly provided in this Agreement, the Custodian will not
be responsible for any Securities and moneys not actually received by it, unless
the Custodian has been negligent or has engaged in willful misconduct with
respect thereto. The Custodian will be entitled to reverse any credits of money
made on the Fund's behalf where such credits have been previously made and
moneys are not finally collected, unless the Custodian has been negligent or has
engaged in willful misconduct with respect thereto. The Fund shall deliver to
the Custodian a certified resolution of the Board of Trustees of the Fund,
substantially in the form of Exhibit A hereto, ap- proving, authorizing and
instructing the Custodian on a continuous and on-going basis to deposit in the
Book-Entry System all Securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated and to utilize the
Book-Entry System to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities and deliveries and
returns of Securities collateral. Prior to a deposit of Securities specifically
allocated to a Series in any Depository, the Fund shall deliver to the Custodian
a certified resolution of the Board of Trustees of the Fund,
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<PAGE>
substantially in the form of Exhibit B hereto, approving, authorizing and
instructing the Custodian on a continuous and ongoing basis until instructed to
the contrary by a Certificate to deposit in such Depository all Securities
specifically allocated to such Series eligible for deposit therein, and to
utilize such Depository to the extent possible with respect to such Securities
in connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities collateral. Securities and
moneys deposited in either the Book-Entry System or a Depository will be
represented in accounts which include only assets held by the Custodian for
customers, including, but not limited to, accounts in which the Custodian acts
in a fiduciary or representative capacity and will be specifically allocated on
the Custodian's books to the separate account for the applicable Series. Prior
to the Custodian's accepting, utilizing and acting with respect to Clearing
Member confirmations for Options and transactions in Options for a Series as
provided in this Agreement, the Custodian shall have received a certified
resolution of the Fund's Board of Trustees, substantially in the form of Exhibit
C hereto, approving, authorizing and instructing the Custodian on a continuous
and on-going basis, until instructed to the contrary by a Certificate, to
accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series. All securities are to be held or
disposed of by the Custodian for, and subject at all times to the instructions
of, the Fund pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement, and shall have the
sole power to release and deliver Securities held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Such moneys will be held in such manner and account as the Fund and the
Custodian shall agree upon in writing from time to time. Money credited to a
separate account for a Series shall be subject only to drafts, orders, or
charges of the Custodian pursuant to this Agreement and shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Resolutions of the Fund's Board of Trustees certified
by an Officer and by the Secretary or Assistant Secretary of the Fund setting
forth the name and address of the person to whom the payment is to be made, the
Series account from which payment is to be made, the purpose for which payment
is to be made, and declaring such purpose to
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<PAGE>
be a proper corporate purpose; provided, however, that amounts representing
dividends, distributions, or redemptions proceeds with respect to Shares shall
be paid only to the Transfer Agent Account;
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series and authorized by this
Agreement; or
(d) Pursuant to Certificates to pay interest, taxes, management fees
or operating expenses (including, without limitation thereto, Board of Trustees'
fees and expenses, and fees for legal accounting and auditing services), which
Certificates set forth the name and address of the person to whom payment is to
be made, state the purpose of such payment and designate the Series for whose
account the payment is to be made.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series but held in a Depository, the Custodian shall upon such
transfer also by book-entry or otherwise identify such Securities as belonging
to such Series in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or a
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in a Depository in a separate
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<PAGE>
account in the name of such Series physically segregated at all times from those
of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income and dividends due or payable;
(b) Promptly give notice to the Fund and promptly present for payment
and collect the amount of money or other consideration payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix D annexed hereto, which may be amended at
any time by the Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for the Fund's account
the amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in exchange for
definitive Securities;
(e) Promptly execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series, all
rights and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered holder (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
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<PAGE>
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Promptly execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held hereunder for
the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
right, warrant or conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series in exchange
therefor such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount payable upon
Securities which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940 in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates in connection with any such purchase, sale, writing, settlement or
closing out upon its receipt from a broker, dealer, or futures commission
merchant of a statement or confirmation reasonably believed by the Custodian to
be in the form customarily used by brokers, dealers, or future
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commission merchants with respect to such Futures Contracts, Options, or Futures
Contract Options, as the case may be, confirming that such Security is held by
such broker, dealer or futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstanding the foregoing,
payments to or deliveries from the Margin Account and payments with respect to
Securities to which a Margin Account relates, shall be made in accordance with
the terms and conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall, notwithstanding
any provision in this Agreement to the contrary, make payment for any Futures
Contract, Option, or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the provisions of this
Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each execution of a purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, or a Futures Contract
Option, the Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each purchase of Money Market Securities, a Certificate,
Oral Instructions or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of such Securities purchased by or for
the Fund, pay to the broker specified in
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the Certificate out of the moneys held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate, Oral Instructions or Written
Instructions.
2. Promptly after each execution of a sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures Contract Option, or
any Reverse Repurchase Agreement, the Fund shall deliver such to the Custodian
(i) with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate, Oral Instructions or Written Instructions, specifying
with respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale and settlement; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series to the broker in
accordance with generally accepted street practices and as specified in the
Certificate upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by the Fund
other than a closing purchase transaction the Fund shall deliver to the
Custodian a Certificate specifying with respect to each Option purchased: (a)
the Series to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or Security underlying such
Option and the number of Options, or the name of the in the case of an Index
Option, the index to which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in connection
with such purchase; and (h) the name of the Clearing Member through whom such
Option was purchased. The Custodian shall pay, upon receipt of a Clearing
Member's statement confirming the purchase of such Option held by such Clearing
Member for the account of the Custodian (or any duly appointed and registered
nominee of the
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Custodian) as custodian for the Fund, out of moneys held for the account of the
Series to which such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Certificate.
2. Promptly after the execution of a sale of any Option purchased by the
Fund, other than a closing sale transaction, pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the instrument, currency, or Security
underlying such Option and the number of Options, or the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Index
Option, the index to which such Option relates and the number of Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which previously supplied
the confirmation described in preceding paragraph 1 of this Article with respect
to such Option against payment to the Custodian of the total amount payable to
the Fund, provided that the same conforms to the total amount payable as set
forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise
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and settlement; (e) the exercise price per share; (f) the total amount to be
paid to the Fund upon such exercise; and (g) the name of the Clearing Member
through whom such Put Option was exercised. The Custodian shall, upon receipt of
the amount payable upon the exercise of the Put Option, deliver or direct a
Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Index Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Index Option: (a) the
Series to which such Index Option was specifically allocated; (b) the type of
Index Option (put or call); (c) the number of Options being exercised; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct a
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
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Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct a Depository to deliver, the underlying Securities as specified in the
Certificate against payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically al-
located to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate, against delivery of such
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Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) whether such
Index Option is a put or a call; (c) the number of options written; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the Clearing Member through whom such Option was written; (h) the
premium to be received by the Fund; (i) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian shall, upon
receipt of the premium specified in the Certificate, make the deposits, if any,
into the Senior Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian has specifically agreed to
issue, which are in accordance with the customs prevailing among Clearing
Members in Index Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever an Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option being exercised;
(c) the Clearing Member through whom such Index Option is being exercised; (d)
the total amount payable upon such exercise, and whether such amount is to be
paid by or to the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f) the amount
of cash and/or amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
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12. Promptly after the execution of a purchase or sale by the Fund of any
Option identical to a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was written; (c)
the instrument, currency, or Security subject to the Option, or, in the case of
an Index Option, the index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g) the type of Option
(put or call); (h) the date of such purchase or sale; (i) the name of the
Clearing Member to whom the premium is to be paid or from whom the amount is to
be received; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium or receipt of the amount, as the case may be,
specified in the Certificate and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the
Option being liquidated through the Closing Purchase Transaction or the Closing
Sale Transaction, the Custodian shall remove, or direct a Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Ac-
count and/or the Senior Security Account as may be specified in a Certificate
received in connection with such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an Option
described in this Article shall be subject to Article IV hereof.
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ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of identical Futures Contract(s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying index or financial instrument); (c)
the number of identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the Futures Contract(s)
was (were) entered into and the maturity date; (f) whether the Fund is buying
(going long) or selling (going short) such Futures Contract(s); (g) the amount
of cash and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract was entered into;
and (i) the amount of fee or commission, if any, to be paid and the name of the
broker, dealer, or futures commission merchant to whom such amount is to be
paid. The Custodian shall make the deposits, if any, to the Margin Account in
ac- cordance with the terms and conditions of the Margin Account Agreement. The
Custodian shall make payment out of the moneys specifically allocated to such
Series of the fee or commis- sion, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the amount of cash and/or
the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian prior to the delivery or
settlement date a Certificate specifying: (a) the Futures Contract and the
Series to which the same relates; (b) with respect to an Index Futures Contract,
the total cash settlement amount to be paid
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or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically allocated to such Series the total
amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
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2. Promptly after the execution of a sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Future Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in
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the Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically al-
located; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
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7. Promptly after the execution by the Fund of a purchase of any Futures
Contract Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction
is a closing transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Option Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of Securities by any
Series of the Fund, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b) the name of
the issuer and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale
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price per unit; (f) the total amount credited to the Fund upon such sale, if
any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. Promptly after the execution of a purchase to close-out any short sale
of Securities, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or the principal amount, and accrued interest
or dividends, if any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase price per
unit; (f) the net total amount payable to the Fund upon such closing-out; (g)
the net total amount payable to the broker upon such closing-out; (h) the amount
of cash and the amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The Custodian
shall, upon receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/or cancellation of the receipts, if any, issued
by the Custodian with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.
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ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral Instructions, or
Written Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker, dealer, or financial institution with whom the Reverse
Repurchase Agreement is entered; (d) the amount and kind of Securities to be
delivered by the Fund to such broker, dealer, or financial institution; (e) the
date of such Reverse Repurchase Agreement; and (f) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in a Senior Security Account for such Series in connection with
such Reverse Repurchase Agreement. The Custodian shall, upon receipt of the
total amount payable to the Fund specified in the Certificate, Oral
Instructions, or Written Instructions make the delivery to the broker, dealer,
or financial institution and the deposits, if any, to the Senior Security
Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate, Oral Instructions, or Written Instructions to the
Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and
the Series for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in connection
with such termination; (d) the date of termination; (e) the name of the broker,
dealer, or financial institution with whom the Reverse Repurchase Agreement is
to be terminated; and (f) the amount of cash and/or the amount and kind of
Securities to be withdrawn from the Senior Securities Account for such Series.
The Custodian shall, upon receipt of the amount and kind of Securities to be
received by the Fund specified in the Certificate, Oral Instructions, or Written
Instructions, make the payment to the broker, dealer, or financial institution
and the withdrawals, if any, from the Senior Security Account, specified in such
Certificate, Oral Instructions, or Written Instructions.
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3. The Certificates, Oral Instructions, or Written Instructions described
in paragraphs 1 and 2 of this Article may with respect to any particular Reverse
Repurchase Agreement be combined and delivered to the Custodian at the time of
entering into such Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated in the
Certificate as to be delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than through the
Book-Entry System or a Depository only in the form of a certified or bank
cashier's check payable to the order of the Fund or the Custodian drawn on New
York Clearing House funds.
2. In connection with each termination of a loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
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ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from time
to time make such deposits thereto, or withdrawals therefrom, as specified in a
Certificate. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from, a Senior
Securities Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such deposit
has been made.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the
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Margin Account; (b) the amount and kind of Securities held therein; and (c) the
amount of money held therein. The Custodian shall make available upon request to
any broker, dealer, or futures commission merchant specified in the name of a
Margin Account a copy of the statement furnished the Fund with respect to such
Margin Account.
6. The Custodian shall establish a Collateral Account and from time to
time shall make such deposits thereto as may be specified in a Certificate.
Promptly after the close of business on each business day in which cash and/or
Securities are maintained in a Collateral Account for any Series, the Custodian
shall furnish the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the delivery to the
Fund of such statement, the Fund shall furnish to the Custodian a Certificate or
Written Instructions specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated to
be less than the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document, the Fund shall promptly specify in
a Certificate the additional cash and/or Securities to be deposited in such Col-
lateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein and the declaration of dividends and
distributions thereon the Custodian to rely on Oral Instructions, Written
Instructions, or a Certificate setting forth the date of the declaration of
such dividend or distribution, the date of payment thereof, the record date as
of which shareholders entitled to payment shall be determined, the amount
payable per Share of such Series to the shareholders of record as of that date
and the total amount payable to the Dividend Agent on the payment date.
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2. Upon the payment date specified in such resolution, Oral Instructions,
Written Instructions, or Certificate, as the case may be, the Custodian shall
pay to the Transfer Agent Account out of the moneys held for the account of the
Series specified therein the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause to
be delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale of
such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall pay, out
of the money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish, or cause to be
furnished, to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent Account out of the moneys held in the separate
account in the name of the Series the total amount
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specified in the Certificate issued pursuant to the foregoing paragraph 4 of
this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient to
pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate, Oral Instructions, or
Written Instructions or which results in an overdraft in the separate account of
such Series for some other reason, or if the Fund is for any other reason
indebted to the Custodian with respect to a Series, (except a borrowing for
investment or for temporary or emergency purposes using Securities as collateral
pursuant to a separate agreement and subject to the provisions of paragraph 2 of
this Article), such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to the Federal Funds Rate plus 1/2%,
such rate to be adjusted on the effective date of any change in such Federal
Funds Rate but in no event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien and security
interest in the aggregate amount of such overdrafts and indebtedness as may from
time to time exist in and to any property specifically allocated to such Series
at any time held by it for the benefit of such Series or in which the Fund may
have an interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's behalf. The
Fund authorizes the Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due thereon against any
money balance of account standing to such Series' credit on the Custodian's
books. In addition, the Fund hereby covenants that on each Business Day on which
either it intends to enter a Reverse Repurchase Agreement and/or otherwise
borrow from a third party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repurchase Agreement or
such a borrowing, it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify the Series to which
the same relates, and shall not incur any indebtedness, including pursuant to
any Reverse Repurchase Agreement, not so specified other than from the
Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a
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separate agreement, the Custodian) from which it borrows money for investment or
for temporary or emergency purposes using Securities held by the Custodian
hereunder as collateral for such borrowings, a notice or undertaking in the form
currently employed by any such bank setting forth the amount which such bank
will loan to the Fund against delivery of a stated amount of collateral. The
Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to each such borrowing: (a) the Series to which such borrowing relates;
(b) the name of the bank, (c) the amount and terms of the borrow- ing, which may
be set forth by incorporating by reference an attached promissory note, duly
endorsed by the Fund, or other loan agreement, (d) the time and date, if known,
on which the loan is to be entered into, (e) the date on which the loan becomes
due and payable, (f) the total amount payable to the Fund on the borrowing date,
(g) the market value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing
date specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at the option of the
lending bank, keep such collateral in its possession, but such collateral shall
be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered as
collateral by the Custodian, to any such bank, the Custodian shall not be under
any obligation to deliver any Securities.
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ARTICLE XV
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of its
duties hereunder, and, except as hereinafter provided, neither the Custodian nor
its nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence, bad faith, or willful misconduct or that of its
officers, employees, or agents. The Custodian may, with respect to questions of
law arising hereunder or under any Margin Account Agreement, apply for and
obtain the advice and opinion of counsel to the Fund, at the expense of the
Fund, or of its own counsel, at its own expense, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the Fund for any loss
or damage resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the part of the
Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall be under no
obligation to inquire into, and shall not be liable for:
(a) The validity (but not the authenticity) of the issue of any
Securities purchased, sold, or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount paid or
received therefor, as specified in a Certificate, Oral Instructions, or Written
Instructions;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor, as specified in a
Certificate;
(c) The legality of the declaration or payment of any dividend by the
Fund, as specified in a resolution, Certificate, Oral Instructions, or Written
Instructions;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that the cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the
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Fund is adequate collateral for the Fund against any loss it might sustain as a
result of such loan, except that this sub-paragraph shall not excuse any
liability the Custodian may have for failing to act in accordance with Article X
hereof or any Certificate, Oral Instructions, or Written Instructions given in
accordance with this Agreement. The Custodian specifically, but not by way of
limitation, shall not be under any duty or obligation periodically to check or
notify the Fund that the amount of such cash collateral held by it for the Fund
is sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the termina-
tion of such loan, provided, however, that the Custodian shall promptly notify
the Fund in the event that such dividends or interest are not paid and received
when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund, except that this
sub-paragraph shall not excuse any liability the Custodian may have for failing
to establish, maintain, make deposits to or withdrawals from such accounts in
accordance with this Agreement. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer, futures commission merchant
or Clearing Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. With respect to Securities held in a Depository, except as otherwise
provided in paragraph 5(b) of Article III hereof, the Custodian shall have no
responsibility and shall not be liable for ascertaining or acting upon any
calls, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to such Securities, unless the Custodian shall have actually
received timely notice from the
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Depository in which such Securities are held. In no event shall the Custodian
have any responsibility or liability for the failure of a Depository to collect,
or for the late collection or late crediting by a Depository of any amount pay-
able upon Securities deposited in a Depository which may mature or be redeemed,
retired, called or otherwise become payable. However, upon receipt of a
Certificate from the Fund of an overdue amount on Securities held in a
Depository the Custodian shall make a claim against the Depository on behalf of
the Fund, except that the Custodian shall not be under any obligation to appear
in, prosecute or defend any action suit or proceeding in respect to any
Securities held by a Depository which in its opinion may involve it in expense
or liability, unless indemnity satisfactory to it against all expense and
liability be furnished as often as may be required, or alternatively, the Fund
shall be subrogated to the rights of the Custodian with respect to such claim
against the Depository should it so request in a Certificate. This paragraph
shall not, however, excuse any failure by the Custodian to act in accordance
with a Certificate, Oral Instructions, or Written Instructions given in
accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after the Custodian has timely
and properly, in accordance with this Agreement, made due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action, but the Custodian
shall have such a duty if the Securities were not in default on the payable date
and the Custodian failed to timely and properly make such demand for payment and
such failure is the reason for the non-receipt of payment.
7. The Custodian may appoint one or more banking institutions as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians including,
but not limited to, banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed institution.
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8. The Custodian agrees to indemnify the Fund against and save the Fund
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of the negligence, bad
faith or willful misconduct of any Sub-Custodian of the Securities and moneys
owned by the Fund, provided such Sub-Custodian is a banking institution located
in a foreign country and appointed by the Custodian pursuant to paragraph 7 of
this Article.
9. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it, for
the account of the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the provisions of its then
current prospectus, or (b) to ascertain whether any transactions by the Fund,
whether or not involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all reasonable out-of-pocket expenses and such compensation as
may be agreed upon from time to time between the Custodian and the Fund. The
Custodian may charge such compensation, and any such expenses with respect to a
Series incurred by the Custodian in the performance of its duties under this
Agreement against any money specifically allocated to such Series. The Custodian
shall also be entitled to charge against any money held by it for the account of
a Series the amount of any loss, damage, liability or expense, including counsel
fees, for which it shall be entitled to reimbursement under the provisions of
this Agreement attributable to, or arising out of, its serving as Custodian for
such Series. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund. Notwithstanding the foregoing or anything else contained
in this Agreement to the contrary, the Custodian shall, prior to effecting any
charge for compensation, expenses, or any overdraft or indebtedness or interest
thereon, submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing, Oral Instructions, or Written Instructions
received by the Custodian and reasonably believed by the Custodian to be
genuine. The Fund agrees to forward to the Custodian a Certificate or facsimile
thereof confirming Oral Instructions or Written Instructions in such manner so
that such Certificate or facsimile thereof is received by the Custodian, whether
by hand delivery, telecopier or other similar device,
- 34 -
<PAGE>
or otherwise, by the close of business of the same day that such Oral
Instructions or Written Instructions are given to the Custodian. The Fund agrees
that the fact that such confirming instructions are not received by the
Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions thereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions or Written Instructions given to the Custodian hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member. This paragraph shall not excuse any failure by the Custodian to
have acted in accordance with any Margin Agreement it has executed or any
Certificate, Oral Instructions, or Written Instructions given in accordance with
this Agreement.
13. The books and records pertaining to the Fund, as described in Appendix
E hereto, which are in the possession of the Custodian shall be the property of
the Fund. Such books and records shall be prepared and maintained by the
Custodian as required by the Investment Company Act of 1940, as amended, and
other applicable securities laws and rules and regulations. The Fund, or the
Fund's authorized representatives, shall have access to such books and records
during the Custodian's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by the Custodian to
the Fund or the Fund's authorized representative, and the Fund shall reimburse
the Custodian its expenses of providing such copies. Upon reasonable request of
the Fund, the Custodian shall provide in hard copy or on micro-film, whichever
the Custodian elects, any records included in any such delivery which are
maintained by the Custodian on a computer disc, or are similarly maintained, and
the Fund shall reimburse the Custodian for its expenses of providing such hard
copy or micro-film.
14. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
each Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
- 35 -
<PAGE>
15. The Custodian shall furnish upon request annually to the Fund a letter
prepared by the Custodian's accountants with respect to the Custodian's internal
systems and controls in the form generally provided by the Custodian to other
investment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising out of, or related to, the
Custodian's performance of its obligations under this Agreement, except for any
such liability, claim, loss and demand arising out of the Custodian's own
negligence, bad faith, or willful misconduct or that of its officers, employees,
or agents.
17. Subject to the foregoing provisions of this Agreement, the Custodian
shall deliver and receive Securities, and receipts with respect to such
Securities, and shall make and receive payments only in accordance with the
customs prevailing from time to time among brokers or dealers in such Securi-
ties and, except as may otherwise be provided by this Agreement or as may be in
accordance with such customs, shall make payment for Securities only against
delivery thereof and deliveries of Securities only against payment therefor.
18. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XVI
TERMINATION
1. Except as provided in paragraph 3 of this Article, this Agreement
shall continue until terminated by either the Custodian giving to the Fund, or
the Fund giving to the Custodian, a notice in writing specifying the date of
such termination, which date shall be not less than 60 days after the date of
the giving of such notice. In the event such notice or a notice pursuant to
paragraph 3 of this Article is given by the Fund, it shall be accompanied by a
copy of a resolution of the Board of Trustees of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be eligible to serve as a custodian for the securities of a
management investment company under the Investment Company Act of 1940. In the
event such notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the Board
of Trustees
- 36 -
<PAGE>
of the Fund, certified by the Secretary, the Clerk, any Assistant Secretary or
any Assistant Clerk, designating a successor custodian or custodians. In the
absence of such designation by the Fund, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall upon receipt
of a notice of acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and moneys then owned by the
Fund and held by it as Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this Agreement
upon the date specified in a written notice in the event of the "Bankruptcy" of
The Bank of New York. As used in this sub-paragraph, the term "Bankruptcy" shall
mean The Bank of New York's making a general assignment, arrangement or
composition with or for the benefit of its creditors, or instituting or having
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or the entry of a order for relief under any applicable bankruptcy
law or any other relief under any bankruptcy or insolvency law or other similar
law affecting creditors' rights, or if a petition is presented for the winding
up or liquidation of the party or a resolution is passed for its winding up or
liquidation, or it seeks, or becomes subject to, the appointment of an
administrator, receiver, trustee, custodian or other similar official for it or
for all or substantially all of its assets or its taking any action in
furtherance or, or indicating its consent to approval of, or acquiescence in,
any of the foregoing.
- 37 -
<PAGE>
ARTICLE XVII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to
have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to and to receive notices
from the Custodian.
2. The parties hereto shall utilize the Terminal Link only for the
purpose of the Fund providing Certificates to the Custodian and the Custodian
providing notices to the Fund and only after the Fund and the Custodian shall
have established access codes and internal safekeeping procedures to safeguard
and protect the confidentiality and availability of such access codes. Each use
of the Terminal Link by the Fund shall constitute a representation and warranty
that at least two such access codes have been utilized and that such procedures
have been established.
3. Each party shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the other party shall not be
responsible for the reliability or availability of any such equipment or
services, except that the Custodian shall not pay any communications costs of
any line leased by the Fund, even if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made available as part of,
or through the Terminal and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, each Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its control, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
- 38 -
<PAGE>
6. The Custodian reserves the right to modify the Terminal Link from time
to time without notice to the Fund, except that the Custodian shall give the
Fund notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees not to
modify or attempt to modify the Terminal Link without the Bank's prior written
consent. The Fund acknowledges that the Terminal Link is the property of the
Custodian and, accordingly, the Fund agrees that any modifications to the
Terminal Link, whether by the Fund or the Custodian and whether with or without
the Custodian's consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes
or the Fund utilizes in connection with the Terminal Link makes any warranties
or representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. Each party will, and will cause its officers and employees to, treat
the user and authorization codes, passwords and authentication keys applicable
to Terminal Link with extreme care. Each party hereby irrevocably authorizes the
other to act in accordance with and rely on Certificates and notices received by
it through the Terminal Link. Each party acknowledges that it is its
responsibility to assure that only its authorized persons use the Terminal Link
on its behalf, and that a party shall not be responsible nor liable for use of
the Terminal Link on its behalf of the other party by unauthorized persons
except that the other party shall be liable for such use thereof by unauthorized
persons who have obtained access thereto as a result of the bad faith or willful
misconduct of such party or any of its officers or employees.
9. Notwithstanding anything else in this Agreement to the contrary,
neither party shall have any liability to the other for any losses, damages,
injuries, claims, costs or expenses arising as a result of a delay, omission or
error in the transmission of a Certificate or notice by use of the Terminal Link
except for money damages for those suffered as the result of the negligence, bad
faith or willfull misconduct of such party or its officers, employees or agents
in an amount not exceeding for any incident $100,000, provided, however, that a
party shall have no liability under this Section 9 if the other party fails to
comply with the provisions of Section 11.
10. Without limiting the generality of the foregoing, it is hereby agreed
that in no event shall either party or any manufacturer or supplier of its
computer equipment, software or services relating to the Terminal Link be
responsible for
- 39 -
<PAGE>
any special, indirect, incidental or consequential damages which the other party
may incur or experience by reason of its use of the Terminal Link even if such
party, manufacturer or supplier has been advised of the possibility of such
damages, nor with respect to the use of the Terminal Link shall either party or
any such manufacturer or supplier be liable for acts of God, or with respect to
the following to the extent beyond such person's reasonable control: machine or
computer breakdown or malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the business day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the Custodian learns
of any errors, omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. Each party shall, as soon as practicable after its receipt of a
Certificate or of any notice transmitted by the Terminal Link, verify to the
other party by use of the Terminal Link its receipt of such Certificate or
notice, and in the absence of such verification a party to whom a Certificate or
notice is sent shall not be liable for any failure to act in accordance with
such Certificate or notice, and the sending party may not claim that such
Certificate or notice was received by the other.
ARTICLE XVIII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be entitled to rely and to
act upon Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in the last delivered Certificate to the extent
provided by this Agreement.
- 40 -
<PAGE>
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
Officer ceases to be an Officer of the Fund, or in the event that other or
additional Officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be entitled to rely and to act upon the
signatures of the Officers as set forth in the last delivered Certificate to the
extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, other than any Certificate or
Written Instructions, shall be sufficiently given if addressed to the Custodian
and mailed or delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from time to time
designate in writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund,
except that Appendices A and B may be amended unilaterally by the Fund without
such an approving resolution.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian or The Bank of New York without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Trustees. For purposes of this paragraph, no merger,
consolidation, or amalgamation of the Custodian, The Bank of New York, or the
Fund shall be deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
- 41 -
<PAGE>
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
- 42 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DEAN WITTER CONVERTIBLE
SECURITIES TRUST
[SEAL] By: /s/ illegible
----------------------------
Attest: /s/ illegible
---------------------------
THE BANK OF NEW YORK
[SEAL] By: /s/ illegible
----------------------------
Attest: /s/ illegible
---------------------------
- 43 -
<PAGE>
APPENDIX A
I, , President and I,
, of , a Massachusetts
business trust (the "Fund"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of Trust and
By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund, except that those persons designated as being an "Officer of DWTC" shall
be an Authorized Person only for purposes of Articles XII and XIII. The
signatures set forth opposite their respective names are their true and correct
signatures:
Name Position Signature
_________________ ________________ _________________
<PAGE>
APPENDIX B
I, , President and I,
, of , a
Massachusetts business trust (the "Fund"), do hereby certify that:
The following individuals for whom a position other than "Officer of DWTC"
is specified serve in the following positions with the Fund and each has been
duly elected or appointed by the Board of Trustees of the Fund to each such
position and qualified therefor in conformity with the Fund's Declaration of
Trust and By-Laws. With respect to the following individuals for whom a position
of "Officer of DWTC" is specified, each such individual has been designated by a
resolution of the Board of Trustees of the Fund to be an Officer for purposes of
the Fund's Custody Agreement with The Bank of New York, but only for purposes of
Articles XII and XIII thereof and a certified copy of such resolution is
attached hereto. The signatures of each individual below set forth opposite
their respective names are their true and correct signatures:
Name Position Signature
____________________ ___________________ _________________
<PAGE>
APPENDIX C
The undersigned, hereby
certifies that he or she is the duly elected and acting
of (the "Fund"), further certifies that the following
resolutions were adopted by the Board of Trustees of the Fund at a meeting duly
held on ,1991, at which a quorum at all times present and that such
resolutions have not been modified or rescinded and are in full force an effect
as of the date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of
, 1991 (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to act in accordance with, and to rely on
instructions by the Fund to the Custodian communicated by a Terminal Link as
defined in the Custody Agreement.
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to officers of the Fund as defined in the Custody Agreement,
and shall establish internal safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes.
RESOLVED, that Officers of the Fund as defined in the Custody Agreement
shall, following the establishment of such access codes and such internal
safekeeping procedures, advise the Custodian that the same have been established
by delivering a Certificate, as defined in the Custody Agreement, and the
Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of
, as of the day of , 1991.
____________________________
<PAGE>
APPENDIX D
I, , an Assistant Vice
President with THE BANK OF NEW YORK do hereby designate the following
publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be prepared and
maintained by the Custodian and shall be the property of the Fund:
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts business trust (the
"Fund"), and further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on , 1991, at
which a quorum was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1991.
________________________
,
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting of
, a Massachusetts business Trust (the "Fund"), and further certifies
that the following resolution was adopted by the Board of Trustees of the Fund
at a meeting duly held on , 1991, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agree- ment, to the contrary to
deposit in The Depository Trust Company ("DTC"), as a "Depository" as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize DTC to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1991.
_____________________
,
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of , a Massachusetts business Trust (the
"Fund"), and further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on , 1991, at
which a quorum was at all times present and that such resolution has not been
modified or rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it receives
a Certificate, as defined in the Custody Agree- ment, to the contrary to
deposit in the Participants Trust Company as a Depository, as defined in
the Custody Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically allocated, and
to utilize the Participants Trust Company to the extent possible in
connection with its performance thereunder, including, without limita-
tion, in connection with settlements of purchases and sales of securities,
loans of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1991.
_____________________
,
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting of
, a Massachusetts business trust (the "Fund"), and
further certifies that the following resolution was adopted by the Board of
Trustees of the Fund at a meeting duly held on , 1991, at which a quorum
was at all times present and that such resolution has not been modified or
rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it receives
a Certificate, as defined in the Custody Agreement, to the contrary, to
accept, utilize and act with respect to Clearing Member confirmations for
Options and transaction in Options, regardless of the Series to which the
same are specifically allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
, as of the day of , 1991.
---------------------
,
[SEAL]
<PAGE>
[Letterhead]
August 28, 1995
Dean Witter Convertible Securities Trust
Two World Trade Center
New York, New York 10048
Ladies and Gentlemen:
This opinion is being furnished to Dean Witter Convertible Securities
Trust, a Massachusetts business trust (the "Trust"), in connection with the
Registration Statement on Form N-14 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "1933 Act"), to be filed by the Trust in
connection with the acquisition by the Trust of substantially all the assets of
Dean Witter Global Convertible Trust ("Global Convertible") in exchange for
shares of beneficial interest, par value $.01, of the Trust ("Shares") and the
assumption by the Trust of certain stated liabilities of Global Convertible
pursuant to an Agreement and Plan of Reorganization dated as of August 24, 1995,
between the Trust and Global Convertible (the "Reorganization Agreement"). As
counsel for the Trust, we have examined such statutes, regulations, corporate
records and other documents and reviewed such questions of law that we deemed
necessary or appropriate for the purposes of this opinion.
As to matters of Massachusetts law contained in this opinion, we have
relied upon the opinion of Lane Altman & Owens, dated August 28, 1995.
<PAGE>
Dean Witter Convertible Securities Trust
August 28, 1995
Page 2
Based upon the foregoing, we are of the opinion that the Shares to be
issued as described in the Registration Statement have been duly authorized and,
assuming receipt of the consideration to be paid therefor, upon delivery as
provided in the Reorganization Agreement, will be legally issued, fully paid and
non-assessable (except for the potential liability of shareholders described in
the Trust's Prospectus dated November 22, 1994, under the caption "Additional
Information").
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. We do
not thereby admit that we are within the category of persons whose consent is
required under Section 7 of the 1933 Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Gordon Altman Butowsky
Weitzen Shalov & Wein
<PAGE>
LANE ALTMAN & OWENS 101 Federal Street Telephone
COUNSELLORS AT LAW Boston, Massachusetts 617 345-9800
02110
Telefax
617 345-0400
Reference
95786
August 28, 1995
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, NY 10036
Dear Sir:
We understand that the trustees (the "Trustees") of Dean
Witter Convertible Securities Trust, a Massachusetts business
trust (the "Trust"), intend, on or about August 28, 1995, to
cause to be filed on behalf of the Trust a Registration Statement
on Form N-14 (the "Registration Statement") in connection with
the acquisition (the "Acquisition") by the Trust of substantially
all the assets of TCW/DW Global Convertible Trust ("Global
Convertible"), in exchange for shares of beneficial interest of
the Trust (the "Shares"), and the assumption by the Trust of
certain stated liabilities of Global Convertible pursuant to an
Agreement and Plan of Reorganization dated as of August 24, 1995
between the Trust and Global Convertible (the "Agreement"). We
further understand that the Shares will be issued pursuant to the
Agreement.
You have requested that we act as special counsel to the
Trust with respect to the laws of the Commonwealth of
Massachusetts on certain specified matters, and in such capacity
we are furnishing you with this opinion. You have not asked for,
and we do not offer, an opinion on any other matter or
transaction related to the Trust, Global Convertible, the
Acquisition, the Agreement or any matter related thereto, except
as specifically set forth below.
The Trust is a business trust created under an [Amended and
Restated] Agreement and Declaration of Trust finally executed and
delivered in Boston, Massachusetts on May 21, 1985 (the "Trust
Agreement"). The Board of Trustees of the Trust (as defined in
the Trust Agreement) (the "Trustees") have the powers set forth
in the Trust Agreement, subject to the terms, provisions and
conditions provided therein.
<PAGE>
Gordon Altman Butowsky
Weitzen Shalov & Wein
August 28, 1995
Page 2
In connection with our opinions delivered herein, we have
examined the following items some of which have been provided to
us by, or on behalf of, you: (i) a copy of the Agreement in the
form to be executed by the Trust and Global Convertible; (ii) a
copy of the Trust Agreement; (iii) a copy of the Amended and
Restated By-laws of the Trust effective as of January 25, 1995;
(iv) a Certificate of Legal Existence for the Trust provided by
the Secretary of State of the Commonwealth of Massachusetts dated
August 23, 1995; (v) a certificate of the Secretary of the Trust
attesting to, among other matters, the due adoption on August 24,
1995 by the Trustees of resolutions approving certain actions and
regarding certain factual matters regarding the Acquisition; and
(vi) copies of the Registration Statement on Form N-14 to be
filed by the Trust and the Trust's Prospectus and Statement of
Additional Information each dated November 22, 1994.
In rendering this opinion we have assumed, without
independent verification, (i) the due authority of all
individuals signing in representative capacities and the
genuineness of signatures, (ii) the authenticity, completeness
and continued effectiveness of all documents or copies furnished
to us, (iii) that the resolutions provided have been duly adopted
by the Trustees, (iv) that no amendments, agreements, resolutions
or actions have been approved, executed or adopted which would
limit, supersede or modify the items described above, and (v)
that the by-laws filed as an exhibit to the Registration
Statement have been duly adopted by the Trustees. We have also
examined such questions of law as we have concluded necessary or
appropriate for purposes of the opinions expressed below. Where
documents are referred to in resolutions approved by the
Trustees, or in the Registration Statement, we assume such
documents are the same as in the most recent form provided to us,
whether as an exhibit to the Registration Statement, or
otherwise. When any opinion set forth below relates to the
existence or standing of the Trust, such opinion is based
entirely upon and is limited by the items referred to above, and
we understand that the foregoing assumptions, limitations and
qualifications are acceptable to you. We understand that the
foregoing assumptions, limitations and qualifications are
acceptable to you.
Based upon the foregoing, and with respect to Massachusetts
law only (except that no opinion is herein expressed with respect
to compliance with the Massachusetts Uniform Securities Act), to
the extent that Massachusetts law may be applicable, and without
reference to the laws of any of the other several states or of
the United States of America, including State and Federal
securities laws, we are of the opinion that:
<PAGE>
Gordon Altman Butowsky
Weitzen Shalov & Wein
August 28, 1995
Page 3
1. The Trust is a business trust with transferable shares,
organized in compliance with the requirements of The Commonwealth
of Massachusetts, and the Trust Agreement is legal and valid.
2. The Shares to be issued as described in the Registration
Statement, including any Exhibits thereto, have been duly
authorized and, assuming receipt of the consideration to be paid
therefor, upon delivery as provided in the Agreement, will be
validly issued, fully paid and nonassessable (except for the
potential liability of shareholders described in the Trust's
Prospectus dated November 22, 1994 under the caption "Additional
Information".)
We understand that you will rely on this opinion solely in
connection with your opinion to be filed with the Securities and
Exchange Commission as an Exhibit to the Registration Statement.
We hereby consent to such use of this opinion and we also consent
to the filing of said opinion with the Securities and Exchange
Commission. In so consenting, we do not thereby admit to be
within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ Lane Altman & Owens
LANE ALTMAN & OWENS
KMK/DEANW/.AA7
<PAGE>
[Letterhead]
August 28, 1995
Dean Witter Convertible Securities Trust
Two World Trade Center
New York, New York 10048
TCW/DW Global Convertible Trust
Two World Trade Center
New York, New York 10048
Gentlemen:
You have requested our opinion as to the Federal income tax
consequences of the transaction (the "Reorganization") described below pursuant
to which (i) Dean Witter Convertible Securities Trust, a Massachusetts business
trust ("Convertible Trust"), will acquire all of the assets of TCW/DW Global
Convertible Trust ("Global Convertible"), a Massachusetts business trust, in
exchange for shares of beneficial interest, par value $.01 per share, of
Convertible Trust (the "Convertible Trust Shares"), and the assumption by
Convertible Trust of certain liabilities of Global Convertible (the
"Liabilities"), (ii) Global Convertible will be liquidated, and (iii) the
Convertible Trust Shares will be distributed to the holders ("Global Convertible
Shareholders") of shares in Global Convertible ("Global Convertible Shares")
pursuant to such liquidation.
We have examined and are familiar with such documents, records and
other instruments as we have deemed appropriate for purposes of this opinion
letter, including the Registration Statement being filed with the Securities and
Exchange Commission under the Securities Act of 1933 on Form N-14, relating to
the Convertible Trust Shares (the "Registration Statement") which includes, as a
part thereof, the proxy statement of Global Convertible (the "Global Convertible
Proxy") which will be used to solicit proxies of Global Convertible Shareholders
in connection with the Special Meeting of Global Convertible Shareholders and
the proposed Agreement and Plan of Reorganization by and between Global
Convertible and Convertible Trust (the "Plan"). In rendering this opinion, we
have assumed that such documents as yet unexecuted, will, when executed, conform
to the proposed forms of such documents that we have examined. We
<PAGE>
August 28, 1995
Page 2
have further assumed that the Reorganization will be carried out pursuant to the
terms of the Plan, that factual statements and information contained in the
Registration Statement, the Global Convertible Proxy and other documents,
records, and instruments supplied to us are correct and that there will be no
material change with respect to such facts or information prior to the time of
the Reorganization. In rendering our opinion we have also relied on the
representations and facts discussed below which have been provided to us by
Convertible Trust and Global Convertible, and we have assumed that such
representations and facts will remain correct at the time of the Reorganization.
FACTS
Convertible Trust is an open-end diversified management investment
company engaged in the continuous offering of its shares to the public. Since
its inception, Convertible Trust has conducted its affairs so as to qualify, and
has elected to be taxed, as a regulated investment company under Section 851 of
the Internal Revenue Code of 1986, as amended (the "Code").
Global Convertible is an open-end diversified management investment
company engaged in the continuous offering of its shares to the public. Since
its inception, Global Convertible has conducted its affairs so as to qualify,
and has elected to be taxed, as a regulated investment company under Section 851
of the Code.
The Board of Trustees of Convertible Trust and of Global Convertible
have each determined, for valid business reasons, that it is advisable to
combine the assets of Global Convertible and Convertible Trust into one fund.
In view of the above, the Board of Trustees of Global Convertible
adopted the Plan, subject to, among other things, approval by Global Convertible
Shareholders.
Pursuant to the Plan, Global Convertible will transfer all of its
assets to Convertible Trust in exchange for the Convertible Trust Shares
(including fractional
<PAGE>
August 28, 1995
Page 3
Convertible Trust Shares) and the assumption by Convertible Trust of the
Liabilities. Immediately thereafter, Global Convertible will distribute the
Convertible Trust Shares to Global Convertible Shareholders in exchange for and
in cancellation of their Global Convertible Shares and in complete liquidation
of Global Convertible.
Each of the following representations, among other representations,
has been made to us in connection with the Reorganization by Global Convertible
and by Convertible Trust.
(1) To the best of the knowledge of the management of Dean Witter
InterCapital, Inc., TCW Funds Management, Inc., Global Convertible, Convertible
Trust, and their affiliates (collectively, "Dean Witter"), there is no plan or
intention on the part of Global Convertible Shareholders, to redeem, sell,
exchange or otherwise dispose of a number of Convertible Trust Shares that would
reduce Global Convertible Shareholders' ownership of Convertible Trust Shares to
a number of Convertible Trust Shares having a value, as of the date of the
Reorganization, of less than 50 percent of the value of all of the formerly
outstanding Global Convertible Shares as of such date;
(2) Convertible Trust has no plan or intention to reacquire any of
the Convertible Trust Shares to be issued pursuant to the Reorganization except
to the extent necessary to comply with its legal obligation to redeem its own
shares;
(3) The Liabilities to be assumed by or transferred to Convertible
Trust were incurred by Global Convertible in the ordinary course of business and
are associated with the assets being transferred to Convertible Trust;
(4) The amount of the Liabilities will not exceed the aggregate
adjusted basis of Global Convertible for its assets transferred to Convertible
Trust;
(5) Convertible Trust has no plan or intention to sell or otherwise
dispose of more than fifty percent of the assets of Global Convertible acquired
in the Reorganization,
<PAGE>
August 28, 1995
Page 4
except for dispositions made in the ordinary course of business;
(6) There is no indebtedness between Global Convertible and
Convertible Trust that was issued, acquired or will be settled at a discount;
(7) Global Convertible has been a regulated investment company within
the meaning of Section 851 of the Code since the date of its organization
through the end of its last complete taxable year and will qualify as a
regulated investment company for its taxable year ending on the date of the
Reorganization;
(8) Convertible Trust has been a regulated investment company within
the meaning of Section 851 of the Code since the date of its organization
through the date hereof and will qualify as a regulated investment company for
its taxable year ending September 30, 1996; and
(9) Global Convertible will have no accumulated earnings and profits
as of the close of its taxable year ending on the date of the Reorganization.
OPINION
Based on the Code, Treasury Regulations issued thereunder, Internal
Revenue Service Rulings and the relevant case law, as of the date hereof, and on
the facts, representations and assumptions set forth above, and the documents,
records and other instruments we have reviewed, it is our opinion that the
Federal income tax consequences of the Reorganization to Convertible Trust,
Global Convertible, and the Global Convertible Shareholders will be as follows:
(1) The transfer of substantially all of Global Convertible's assets
in exchange for Convertible Trust Shares and the assumption by Convertible Trust
of the Liabilities, followed by the distribution by Global Convertible of the
Convertible Trust Shares to the Global Convertible Shareholders in exchange for
their Global Convertible
<PAGE>
August 28, 1995
Page 5
Shares, will constitute a "reorganization" within the meaning of Section
368(a)(1) of the Code, and Global Convertible and Convertible Trust will each be
a "party to a reorganization" within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Convertible Trust upon the
receipt of the assets of Global Convertible solely in exchange for Convertible
Trust Shares and the assumption of the Liabilities by Convertible Trust;
(3) No gain or loss will be recognized by Global Convertible upon the
transfer of the assets of Global Convertible to Convertible Trust, in exchange
for the Convertible Trust Shares and the assumption of the Liabilities by
Convertible Trust, or upon the distribution of the Convertible Trust Shares to
Global Convertible Shareholders in exchange for their Global Convertible Shares;
(4) No gain or loss will be recognized by Global Convertible
Shareholders upon the exchange of their Global Convertible Shares for the
Convertible Trust Shares;
(5) The aggregate tax basis for the Convertible Trust Shares received
by each Global Convertible Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Global Convertible Shares held by
each such Global Convertible Shareholder immediately prior to the
Reorganization;
(6) The holding period of the Convertible Trust Shares to be received
by each Global Convertible Shareholder will include the period during which the
Global Convertible Shares surrendered in exchange therefor were held (provided
such Global Convertible Shares were held as capital assets on the date of the
Reorganization);
(7) The tax basis of the assets of Global Convertible acquired by
Convertible Trust will be the same as the tax basis of such assets to Global
Convertible immediately prior to the Reorganization; and
<PAGE>
August 28, 1995
Page 6
(8) The holding period of the assets of Global Convertible in the
hands of Convertible Trust will include the period during which those assets
were held by Global Convertible.
We are not expressing an opinion as to any aspect of the
Reorganization other than those opinions expressly stated above.
As noted above, this opinion is based upon our analysis of the Code,
Treasury Regulations issued thereunder, Internal Revenue Service Rulings and
case law which we deem relevant as of the date hereof. No assurances can be
given that there will not be a change in the existing law or that the Internal
Revenue Service will not alter its present views, either prospectively or
retroactively, or adopt new views with regard to any of the matters upon which
we are rendering this opinion, nor can any assurances be given that the Internal
Revenue Service will not audit or question the treatment accorded to the
Reorganization on the Federal income tax returns of Convertible Trust, Global
Convertible, or the Global Convertible Shareholders.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and any reference to our firm
in the Registration Statement and the Global Convertible Proxy constituting a
part thereof.
Very truly yours,
/s/ Gordon Altman Butowsky
Weitzen Shalov & Wein
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a Delaware
corporation (herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement")
with certain investment companies as set forth on Schedule A (each such
investment company being herein referred to as a "Fund" and, collectively, as
the "Funds") pursuant to which InterCapital is to perform, or supervise the
performance of, among other services, administrative services for the Funds
(and, in the case of Funds with multiple portfolios, the Series or Portfolios
of the Funds (such Series and Portfolio being herein individually referred to
as "a Series" and, collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice);
(ii) provide the Fund with full administrative services, including the
maintenance of certain books and records, such as journals, ledger accounts
and other records required under the Investment Company Act of 1940, as
amended (the "Act"), the notification to the Fund and InterCapital of
available funds for investment, the reconciliation of account information and
balances among the Fund's custodian, transfer agent and dividend disbursing
agent and InterCapital, and the calculation of the net asset value of the
Fund's shares; (iii) provide the Fund with the services of persons competent
to perform such supervisory, administrative and clerical functions as are
necessary to provide effective operation of the Fund; (iv) oversee the
performance of administrative and professional services rendered to the Fund
by others, including its custodian, transfer agent and dividend disbursing
agent, as well as accounting, auditing and other services; (v) provide the
Fund with adequate general office space and facilities; (vi) assist in the
preparation and the printing of the periodic updating of the Fund's
registration statement and prospectus (and, in the case of an open-end Fund,
the statement of additional information), tax returns, proxy statements, and
reports to its shareholders and the Securities and Exchange Commission; and
(vii) monitor the compliance of the Fund's investment policies and
restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to
perform administrative services hereunder, it shall notify DWS in writing. If
DWS is willing to render such services, it shall notify InterCapital in
writing, whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to
time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of DWS shall be deemed to include officers
of DWS and persons employed or otherwise retained by DWS (including officers
and employees of InterCapital, with the consent of InterCapital) to furnish
services, statistical and other factual data, information with respect to
technical and scientific developments, and such other information, advice and
assistance as DWS may desire. DWS shall maintain each Fund's records and
books of account (other than those maintained by the Fund's transfer agent,
registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, DWS
shall surrender to InterCapital or to the Fund such of the books and records
so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as DWS may
reasonably require in order to discharge its duties and obligations to the
Fund under this Agreement or to comply with any applicable law and regulation
or request of the Board of Directors/Trustees of the Fund.
1
<PAGE>
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of
a closed-end Fund) by applying the annual rate or rates set forth on Schedule
B to the net assets of each Fund. Except as hereinafter set forth, (i) in the
case of an open-end Fund, compensation under this Agreement shall be
calculated by applying 1/365th of the annual rate or rates to the Fund's or
the Series' daily net assets determined as of the close of business on that
day or the last previous business day and (ii) in the case of a closed-end
Fund, compensation under this Agreement shall be calculated by applying the
annual rate or rates to the Fund's average weekly net assets determined as of
the close of the last business day of each week. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before
the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth on Schedule B. Subject to the provisions
of paragraph 5 hereof, payment of DWS' compensation for the preceding month
shall be made as promptly as possible after completion of the computations
contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for
any fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund and/or any Series thereof
imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, or, in the case of
InterCapital Income Securities Inc. or Dean Witter Variable Investment Series
or any Series thereof, the expense limitation specified in the Fund's
Investment Management Agreement, the fee payable hereunder shall be reduced
on a pro rata basis in the same proportion as the fee payable by the Fund
under the Investment Management Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by
DWS, and such clerical help and bookkeeping services as DWS shall reasonably
require in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, DWS shall not be liable to the Fund or any of its
investors for any error of judgment or mistake of law or for any act or
omission by DWS or for any losses sustained by the Fund or its investors. It
is understood that, subject to the terms and conditions of the Investment
Management Agreement between each Fund and InterCapital, InterCapital shall
retain ultimate responsibility for all services to be performed hereunder by
DWS. DWS shall indemnify InterCapital and hold it harmless from any liability
that InterCapital may incur arising out of any act or failure to act by DWS
in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person
controlling, controlled by or under common control with DWS, and that DWS and
any person controlling, controlled by or under common control with DWS may
have an interest in the Fund. It is also understood that DWS and any
affiliated persons thereof or any persons controlling, controlled by or under
common control with DWS have and may have advisory, management,
administration service or other contracts with other organizations and
persons, and may have other interests and businesses, and further may
purchase, sell or trade any securities or commodities for their own accounts
or for the account of others for whom they may be acting.
9. This Agreement shall continue until April 30, 1995, and thereafter
shall continue automatically for successive periods of one year unless
terminated by either party by written notice delivered to the other party
within 30 days of the expiration of the then-existing period. Notwithstanding
the foregoing, this Agreement may be terminated at any time, by either party
on 30 days' written notice delivered to the other party. In the event that
the Investment Management Agreement between any Fund and InterCapital is
terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
2
<PAGE>
11. This Agreement may be assigned by either party with the written
consent of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By:
-------------------------------
Attest:
- -------------------------------
DEAN WITTER SERVICES COMPANY INC.
By:
-------------------------------
Attest:
- -------------------------------
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
AT APRIL 17, 1995
OPEN-END FUNDS
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter Balanced Growth Fund
7. Dean Witter Balanced Income Fund
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter California Tax-Free Income Fund
10. Dean Witter Capital Growth Securities
11. Dean Witter Convertible Securities Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter Diversified Income Trust
14. Dean Witter Dividend Growth Securities Inc.
15. Dean Witter European Growth Fund Inc.
16. Dean Witter Federal Securities Trust
17. Dean Witter Global Asset Allocation Fund
18. Dean Witter Global Dividend Growth Securities
19. Dean Witter Global Short-Term Income Fund Inc.
20. Dean Witter Global Utilities Fund
21. Dean Witter Health Sciences Trust
22. Dean Witter High Income Securities
23. Dean Witter High Yield Securities Inc.
24. Dean Witter Intermediate Income Securities
25. Dean Witter International Small Cap Fund
26. Dean Witter Limited Term Municipal Trust
27. Dean Witter Liquid Asset Fund Inc.
28. Dean Witter Managed Assets Trust
29. Dean Witter Mid-Cap Growth Fund
30. Dean Witter Multi-State Municipal Series Trust
31. Dean Witter National Municipal Trust
32. Dean Witter Natural Resource Development Securities Inc.
33. Dean Witter New York Municipal Money Market Trust
34. Dean Witter New York Tax-Free Income Fund
35. Dean Witter Pacific Growth Fund Inc.
36. Dean Witter Precious Metals and Minerals Trust
37. Dean Witter Premier Income Trust
38. Dean Witter Retirement Series
39. Dean Witter Select Dimensions Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Short-Term Bond Fund
42. Dean Witter Short-Term U.S. Treasury Trust
43. Dean Witter Strategist Fund
44. Dean Witter Tax-Exempt Securities Trust
45. Dean Witter Tax-Free Daily Income Trust
46. Dean Witter U.S. Government Money Market Trust
47. Dean Witter U.S. Government Securities Trust
48. Dean Witter Utilities Fund
49. Dean Witter Value-Added Market Series
50. Dean Witter Variable Investment Series
51. Dean Witter World Wide Income Trust
52. Dean Witter World Wide Investment Trust
CLOSED-END FUNDS
53. High Income Advantage Trust
54. High Income Advantage Trust II
55. High Income Advantage Trust III
56. InterCapital Income Securities Inc.
57. Dean Witter Government Income Trust
58. InterCapital Insured Municipal Bond Trust
59. InterCapital Insured Municipal Trust
60. InterCapital Insured Municipal Income Trust
61. InterCapital California Insured Municipal Income Trust
62. InterCapital Insured Municipal Securities
63. InterCapital Insured California Municipal Securities
64. InterCapital Quality Municipal Investment Trust
65. InterCapital Quality Municipal Income Trust
66. InterCapital Quality Municipal Securities
67. InterCapital California Quality Municipal Securities
68. InterCapital New York Quality Municipal Securities
4
<PAGE>
SCHEDULE B
DEAN WITTER SERVICES COMPANY INC.
SCHEDULE OF ADMINISTRATIVE FEES--APRIL 17, 1995
Monthly compensation calculated daily by applying the following annual rates
to a fund's net assets:
FIXED INCOME FUNDS
Dean Witter Balanced Income Fund 0.60% to the net assets.
Dean Witter California Tax-Free 0.055% of the portion of daily net
Income Fund assets not exceeding $500 million;
0.0525% of the portion exceeding $500
million but not exceeding $750 million;
0.050% of the portion exceeding $750
million but not exceeding $1 billion;
and 0.0475% of the portion of the daily
net assets exceeding $1 billion.
Dean Witter Convertible Securities 0.060% of the portion of the daily net
Securities Trust assets not exceeding $750 million; .055%
of the portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.050% of the portion of the
daily net assets of the exceeding $1
billion but not exceeding $1.5 billion;
0.0475% of the portion of the daily net
assets exceeding $1.5 billion but not
exceeding $2 billion; 0.045% of the
portion of the daily net assets
exceeding $2 billion but not exceeding
$3 billion; and 0.0425% of the portion
of the daily net assets exceeding $3
billion.
Dean Witter Diversified 0.040% of the net assets.
Income Trust
Dean Witter Federal Securities Trust 0.055% of the portion of the daily net
assets not exceeding $1 billion; 0.0525%
of the portion of the daily net assets
exceeding $1 billion but not exceeding
$1.5 billion; 0.050% of the portion of
the daily net assets exceeding $1.5
billion but not exceeding $2 billion;
0.0475% of the portion of the daily net
assets exceeding $2 billion but not
exceeding $2.5 billion; 0.045% of the
portion of daily net assets exceeding
$2.5 billion but not exceeding $5
billion; 0.0425% of the portion of the
daily net assets exceeding $5 billion
but not exceeding $7.5 billion; 0.040%
of the portion of the daily net assets
exceeding $7.5 billion but not exceeding
$10 billion; 0.0375% of the portion of
the daily net assets exceeding $10
billion but not exceeding $12.5 billion;
and 0.035% of the portion of the daily
net assets exceeding $12.5 billion.
Dean Witter Global Short-Term 0.055% of the portion of the daily net
Income Fund assets not exceeding $500 million; and
0.050% of the portion of the daily net
assets exceeding $500 million.
Dean Witter High Income 0.050% to the net assets.
Securities
Dean Witter High Yield 0.050% of the portion of the daily net
Securities Inc. assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of
B-1
<PAGE>
the daily net assets exceeding $1
billion but not exceeding $2 billion;
0.0325% of the portion of the daily net
assets exceeding $2 billion but not
exceeding $3 billion; and 0.030% of the
portion of daily net assets exceeding $3
billion.
Dean Witter Intermediate 0.060% of the portion of the daily net
Income Securities assets not exceeding $500 million;
0.050% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.040% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; and 0.030% of the portion of
the daily net assets exceeding $1
billion.
Dean Witter Limited Term 0.050% to the net assets.
Municipal Trust
Dean Witter Multi-State Municipal 0.035% to the net assets.
Series Trust (10)
Dean Witter National 0.035% to the net assets.
Municipal Trust
Dean Witter New York Tax-Free 0.055% to the net assets not exceeding
Income Fund $500 million and 0.0525% of the net
assets exceeding $500 million.
Dean Witter Premier 0.050% to the net assets.
Income Trust
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities Trust
Dean Witter Select Dimensions 0.65% to the net assets.
Series-North American Government
Securities Portfolio
Dean Witter Short-Term 0.070% to the net assets.
Bond Fund
Dean Witter Short-Term U.S. 0.035% to the net assets.
Treasury Trust
Dean Witter Tax-Exempt 0.050% of the portion of the daily net
Securities Trust assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; and 0.035% of the portion of
the daily net assets exceeding $1
billion but not exceeding $1.25 billion;
.0325% of the portion of the daily net
assets exceeding $1.25 billion.
Dean Witter U.S. Government 0.050% of the portion of such daily net
Securities Trust assets not exceeding $1 billion; 0.0475%
of the portion of such daily net assets
exceeding $1 billion but not exceeding
$1.5 billion; 0.045% of the portion of
such daily net assets exceeding $1.5
billion but not exceeding $2 billion;
0.0425% of the portion of such daily net
assets exceeding $2 billion but not
exceeding $2.5 billion; 0.040% of that
portion of such daily net assets
exceeding $2.5 billion but not exceeding
$5 billion; 0.0375% of that portion
B-2
<PAGE>
of such daily net assets exceeding $5
billion but not exceeding $7.5 billion;
0.035% of that portion of such daily net
assets exceeding $7.5 billion but not
exceeding $10 billion; 0.0325% of that
portion of such daily net assets
exceeding $10 billion but not exceeding
$12.5 billion; and 0.030% of that
portion of such daily net assets
exceeding $12.5 billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-High Yield
Dean Witter Variable Investment 0.050% to the net assets.
Series-Quality Income
Dean Witter World Wide Income 0.075% of the daily net assets up to
Trust $250 million; 0.060% of the portion of
the daily net assets exceeding $250
million but not exceeding $500 million;
0.050% of the portion of the daily net
assets of the exceeding $500 million but
not exceeding $750 milliion; 0.040% of
the portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; and 0.030% of the daily net
assets exceeding $1 billion.
Dean Witter Select Municipal 0.050% to the net assets.
Reinvestment Fund
EQUITY FUNDS
Dean Witter American Value 0.0625% of the portion of the daily net
Fund assets not exceeding $250 million and
0.050% of the portion of the daily net
assets exceeding $250 million.
Dean Witter Balanced Growth Fund 0.60% to the net assets.
Dean Witter Capital Growth 0.065% to the portion of daily net
Securities assets not exceeding $500 million;
0.055% of the portion exceeding $500
million but not exceeding $1 billion;
0.050% of the portion exceeding $1
billion but not exceeding $1.5 billion;
and 0.0475% of the net assets exceeding
$1.5 billion.
Dean Witter Developing Growth 0.050% of the portion of daily net
Securities Trust assets not exceeding $500 million; and
0.0475% of the portion of daily net
assets exceeding $500 million.
Dean Witter Dividend Growth 0.0625% of the portion of the daily net
Securities Inc. assets not exceeding $250 million;
0.050% of the portion exceeding $250
million but not exceeding $1 billion;
0.0475% of the portion of daily net
assets exceeding $1 billion but not
exceeding $2 billion; 0.045% of the
portion of daily net assets exceeding $2
billion but not exceeding $3 billion;
0.0425% of the portion of daily net
assets exceeding $3 billion but not
exceeding $4 billion; 0.040% of the
portion of daily net assets exceeding $4
billion but not exceeding $5 billion;
0.0375% of the portion of the daily net
assets exceeding $5 billion but not
exceeding $6 billion; 0.035% of the
portion of the daily net assets
exceeding $6 billion but not exceeding
$8 billion; and 0.0325% of the portion
of the daily net assets exceeding $8
billion.
B-3
<PAGE>
Dean Witter European Growth 0.060% of the portion of daily net
Fund Inc. assets not exceeding $500 million; and
0.057% of the portion of daily net
assets exceeding $500 million.
Dean Witter Global Asset Allocation 1.0% to the net assets.
Fund
Dean Witter Global Dividend 0.075% to the net assets.
Growth Securities
Dean Witter Global Utilities Fund 0.065% to the net assets.
Dean Witter Health Sciences Trust 0.10% to the net assets.
Dean Witter International 0.075% to the net assets.
Small Cap Fund
Dean Witter Managed Assets Trust 0.060% to the daily net assets not
exceeding $500 million and 0.055% to the
daily net assets exceeding $500 million.
Dean Witter Mid-Cap Growth Fund 0.75% to the net assets.
Dean Witter Natural Resource 0.0625% of the portion of the daily net
Development Securities Inc. assets not exceeding $250 million and
0.050% of the portion of the daily net
assets exceeding $250 million.
Dean Witter Pacific Growth 0.060% of the portion of daily net
Fund Inc. assets not exceeding $1 billion; and
0.057% of the portion of daily net
assets exceeding $1 billion.
Dean Witter Precious Metals 0.080% to the net assets.
and Minerals Trust
Dean Witter Retirement Series 0.085% to the net assets.
American Value
Dean Witter Retirement Series 0.085% to the net assets.
Capital Growth
Dean Witter Retirement Series 0.075% to the net assets.
Dividend Growth
Dean Witter Retirement Series 0.10% to the net assets.
Global Equity
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income Securities
Dean Witter Retirement Series 0.050% to the net assets.
Liquid Asset
Dean Witter Retirement Series 0.085% to the net assets.
Strategist
Dean Witter Retirement Series 0.050% to the net assets.
U.S. Government Money Market
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities
Dean Witter Retirement Series 0.075% to the net assets.
Utilities
B-4
<PAGE>
Dean Witter Retirement Series 0.050% to the net assets.
Value Added
Dean Witter Select Dimensions Series-
American Value Portfolio 0.625% to the net assets.
Balanced Portfolio 0.75% to the net assets.
Core Equity Portfolio 0.85% to the net assets.
Developing Growth Portfolio 0.50% to the net assets.
Diversified Income Portfolio 0.40% to the net assets.
Dividend Growth Portfolio 0.625% to the net assets.
Emerging Markets Portfolio 1.25% to the net assets.
Global Equity Portfolio 1.0% to the net assets.
Utilities Portfolio 0.65% to the net assets.
Value-Added Market Portfolio 0.50% to the net assets.
Dean Witter Strategist Fund 0.060% of the portion of daily net
assets not exceeding $500 million;
0.055% of the portion of the daily net
assets exceeding $500 million but not
exceeding $1 billion; and 0.050% of the
portion of the daily net assets
exceeding $1 billion.
Dean Witter Utilities Fund 0.065% of the portion of daily net
assets not exceeding $500 million;
0.055% of the portion exceeding $500
million but not exceeding $1 billion;
0.0525% of the portion exceeding $1
billion but not exceeding $1.5 billion;
0.050% of the portion exceeding $1.5
billion but not exceeding $2.5 billion;
0.0475% of the portion exceeding $2.5
billion but not exceeding $3.5 billion;
0.045% of the portion of the daily net
assets exceeding $3.5 but not exceeding
$5 billion; and 0.0425% of the portion
of daily net assets exceeding $5
billion.
Dean Witter Value-Added Market 0.050% of the portion of daily net
Series assets not exceeding $500 million; and
0.45% of the portion of daily net assets
exceeding $500 million.
Dean Witter Variable Investment 0.065% to the net assets.
Series-Capital Growth
Dean Witter Variable Investment 0.0625% of the portion of daily net
Series-Dividend Growth assets not exceeding $500 million; and
0.050% of the portion of daily net
assets exceeding $500 million.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Equity
Dean Witter Variable Investment 0.060% to the net assets.
Series-European Growth
Dean Witter Variable Investment 0.050% to the net assets.
Series-Managed
Dean Witter Variable Investment 0.065% of the portion of daily net
Series-Utilities assets exceeding $500 million and 0.055%
of the portion of daily net assets
exceeding $500 million.
Dean Witter World Wide 0.055% of the portion of daily net
Investment Trust assets not exceeding $500 million; and
0.05225% of the portion of daily net
assets exceeding $500 million.
B-5
<PAGE>
MONEY MARKET FUNDS
Active Assets Account (4) 0.050% of the portion of the daily net
assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.5 billion but not exceeding
$2 billion; 0.030% of the portion of the
daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding
$3 billion; and 0.025% of the portion of
the daily net assets exceeding $3
billion.
Dean Witter California Tax-Free 0.050% of the portion of the daily net
Daily Income Trust assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.5 billion but not exceeding
$2 billion; 0.030% of the portion of the
daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding
$3 billion; and 0.025% of the portion of
the daily net assets exceeding $3
billion.
Dean Witter Liquid Asset 0.050% of the portion of the daily net
Fund Inc. assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.35 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.35 billion but not
exceeding $1.75 billion; 0.030% of the
portion of the daily net assets
exceeding $1.75 billion but not
exceeding $2.15 billion; 0.0275% of the
portion of the daily net assets
exceeding $2.15 billion but not
exceeding $2.5 billion; 0.025% of the
portion of the daily net assets
exceeding $2.5 billion but not exceeding
$15 billion; 0.0249% of the portion of
the daily net assets exceeding $15
billion but not exceeding $17.5 billion;
and 0.0248% of the portion of the daily
net assets exceeding $17.5 billion.
Dean Witter New York Municipal 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.5 billion but not exceeding
$2 billion; 0.030% of the portion of the
daily net assets exceeding $2 bil-
B-6
<PAGE>
lion but not exceeding $2.5 billion;
0.0275% of the portion of the daily net
assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets
exceeding $3 billion.
Dean Witter Retirement Series 0.050% of the net assets.
Liquid Assets
Dean Witter Retirement Series 0.050% of the net assets.
U.S. Government Money Market
Dean Witter Select Dimensions Series- 0.50% to the net assets.
Money Market Portfolio
Dean Witter Tax-Free Daily 0.050% of the portion of the daily net
Income Trust assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.5 billion but not exceeding
$2 billion; 0.030% of the portion of the
daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding
$3 billion; and 0.025% of the portion of
the daily net assets exceeding $3
billion.
Dean Witter U.S. Government 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million;
0.0425% of the portion of the daily net
assets exceeding $500 million but not
exceeding $750 million; 0.0375% of the
portion of the daily net assets
exceeding $750 million but not exceeding
$1 billion; 0.035% of the portion of the
daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325%
of the portion of the daily net assets
exceeding $1.5 billion but not exceeding
$2 billion; 0.030% of the portion of the
daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding
$3 billion; and 0.025% of the portion of
the daily net assets exceeding $3
billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Money Market
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
CLOSED-END FUNDS
Dean Witter Government Income 0.060% to the average weekly net
Trust assets.
High Income Advantage Trust 0.075% of the portion of the average
weekly net assets not exceeding $250
million; 0.060% of the portion of
average weekly net assets exceeding $250
million and not exceeding $500 million;
0.050% of the portion of average weekly
net assets exceeding $500 million and
not exceeding $750 million; 0.040% of
the portion of average weekly net assets
exceeding
B-7
<PAGE>
$750 million and not exceeding $1
billion; and 0.030% of the portion of
average weekly net assets exceeding $1
billion.
High Income Advantage Trust II 0.075% of the portion of the average
weekly net assets not exceeding $250
million; 0.060% of the portion of
average weekly net assets exceeding $250
million and not exceeding $500 million;
0.050% of the portion of average weekly
net assets exceeding $500 million and
not exceeding $750 million; 0.040% of
the portion of average weekly net assets
exceeding $750 million and not exceeding
$1 billion; and 0.030% of the portion of
average weekly net assets exceeding $1
billion.
High Income Advantage Trust III 0.075% of the portion of the average
weekly net assets not exceeding $250
million; 0.060% of the portion of
average weekly net assets exceeding $250
million and not exceeding $500 million;
0.050% of the portion of average weekly
net assets exceeding $500 million and
not exceeding $750 million; 0.040% of
the portion of the average weekly net
assets exceeding $750 million and not
exceeding $1 billion; and 0.030% of the
portion of average weekly net assets
exceeding $1 billion.
InterCapital Income Securities Inc. 0.050% to the average weekly net assets.
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Bond Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital California Insured 0.035% to the average weekly net assets.
Municipal Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Investment Trust
InterCapital New York Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Securities
InterCapital California Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Securities
InterCapital Insured California 0.035% to the average weekly net assets.
Municipal Securities
B-8
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy Statement and
Prospectus and the Statement of Additional Information constituting parts of
this registration statement on Form N-14 (the "Registration Statement") of our
report dated November 10, 1994 relating to the September 30, 1994 financial
statements and financial highlights of Dean Witter Convertible Securities Trust
(the "Fund") and to the reference to us under the heading "Financial Statements
and Experts" in such Proxy Statement and Prospectus. We also consent to the
references to us under the headings "Independent Accountants" and "Experts" in
the Fund's Statement of Additional Information dated November 22, 1994 and to
the reference to us under the heading "Financial Highlights" in the Fund's
Prospectus dated November 22, 1994, which Statement of Additional Information
and Prospectus have been incorporated by reference into the Registration
Statement. We also consent to the incorporation by reference in the Proxy
Statement and Prospectus of our report dated August 14, 1995 relating to the
June 30, 1995 financial statements and financial highlights of TCW/DW Global
Convertible Trust and to the reference to us under the heading "Financial
Highlights" in that fund's Prospectus dated August 28, 1995, which is
incorporated by reference into the Registration Statement.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
August 28, 1995
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David M. Butowsky, Stuart M. Strauss and Ronald
M. Feiman and each and any one of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to the Registration Statement
on Form N-14 of Dean Witter Convertible Securities Trust, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ Jack F. Bennett Trustee August 24, 1995
/s/ Michael Bozic Trustee August 24, 1995
/s/ Edwin J. Garn Trustee August 24, 1995
/s/ John R. Haire Trustee August 24, 1995
/s/ Manuel H. Johnson Trustee August 24, 1995
/s/ Paul Kolton Trustee August 24, 1995
_________________
Michael E. Nugent Trustee ______ __, 1995
/s/ John L. Schroeder Trustee August 24, 1995
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Sheldon Curtis, Barry Fink and Marilyn K. Cranney
and each and any one of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to the Registration Statement on Form N-14
of Dean Witter Convertible Securities Trust, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ Charles A. Fiumefreddo Trustee August 24, 1995
/s/ Philip J. Purcell Trustee August 24, 1995
/s/ Thomas F. Caloia Trustee August 24, 1995
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
Two World Trade Center
New York, New York 10048
November 21, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Rule 24f-2 Notice for Dean Witter Convertible Securities Trust
(File No. 811-4310)
Dear Sir or Madam:
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, we are
electronically transmitting via Edgar for filing the following items in
connection with our previous registration of an indefinite number of shares of
this Fund:
1. A copy of the Rule 24f-2 Notice containing information required
pursuant to the Rule, and
2. An opinion of counsel required pursuant to paragraph b(1)(v) of the
Rule.
Very truly yours,
/s/ Sheldon Curtis
Sheldon Curtis
Vice President and
Secretary
Enc.
<PAGE>
DEAN WITTER CONVERTIBLE SECURITIES TRUST
Two World Trade Center
New York, NY 10048
November 21, 1994
Dean Witter Convertible Securities Trust
Two World Trade Center
72nd Floor
New York, NY 10048
Dear Sirs:
In connection with the public offering of shares of beneficial interest,
$.01 par value, of Dean Witter Convertible Securities Trust (the "Trust"), I
have examined such corporate records and documents and have made such further
investigation and examination as I have deemed necessary for the purpose of this
opinion.
It is my opinion, as Legal Counsel for the Trust, that the Trust is an
unincorporated business trust duly organized and validly existing under the laws
of the State of Massachusetts and that the shares of beneficial interest covered
by the Rule 24f-2 Notice, November 21, 1994 (File No. 2-97963 and 811-4310),
were issued and paid for in accordance with the terms of the offering, as set
forth in the prospectus filed as part of the Registration Statement, as amended,
of the Trust and were legally issued, fully paid and non-assessable by the
Trust.
I hereby consent to the filing of this opinion as an exhibit to the Notice
pursuant to Rule 24f-2. In giving this consent, I do not thereby admit that I am
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Sheldon Curtis
Sheldon Curtis
General Counsel
<PAGE>
RULE 24f-2 NOTICE
For
Dean Witter Convertible Securities Trust
(File No. 811-4310)
Fiscal Year for Which Notice is filed 09/30/94
Unsold balance at beginning of fiscal year
of shares of beneficial interest previously
registered under Securities Act of 1933
Number of shares registered during fiscal year
Number of shares sold during fiscal year 2,423,832
pursuant to indefinite registration
*Calculation of filing fee:
(1) Sale price of shares sold during $26,535,360
fiscal year pursuant to indefinite
registration
(2) Purchase price of shares redeemed $52,690,378
during fiscal year
(3) Purchase price of shares previously 0
applied pursuant to Section 24e-2(a)
(4) Item (2) less item (3) $52,690,378
(5) Item (1) less item (4) ($26,155,018)
(6) Amount of filing fee $0
By /s/Sheldon Curtis
----------------------------------
Sheldon Curtis
Vice President and General Counsel
Dated: November 21, 1994
<PAGE>
TCW/DW GLOBAL CONVERTIBLE TRUST
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 19, 1995
The undersigned shareholder of TCW/DW Global Convertible Trust ("Global
Convertible") does hereby appoint SHELDON CURTIS, EDMUND C. PUCKHABER and ROBERT
M. SCANLAN, and each of them, as attorneys-in-fact and proxies of the
undersigned, each with the full power of substitution, to attend the Special
Meeting of Shareholders of Global Convertible to be held on December 19, 1995,
at the Conference Center, 44th Floor, Two World Trade Center, New York, New York
at 10:00 A.M., New York time, and at all adjournments thereof and to vote the
shares held in the name of the undersigned on the record date for said meeting
for the Proposal specified on the reverse side hereof. Said attorneys-in-fact
shall vote in accordance with their best judgment as to any other matter.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES. THE BOARD OF TRUSTEES
RECOMMENDS A VOTE FOR THE PROPOSAL LISTED ON THE REVERSE SIDE HEREOF. THE SHARES
PRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO
CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return it
promptly in the accompanying envelope, which requires no postage if mailed in
the United States.
<PAGE>
PLEASE MARK BOXES / / OR /X/ IN BLUE OR BLACK INK.
The Proposal:
Approval of the Reorganization, including the Agreement and Plan of
Reorganization, which contemplates the combination of substantially all the
assets of Global Convertible with those of Dean Witter Convertible
Securities Trust ("Convertible Trust") in exchange for shares of Convertible
Trust and shareholders of Global Convertible becoming shareholders of
Convertible Trust and receiving shares in Convertible Trust equal to the
value of their holdings in Global Convertible.
FOR / / AGAINST / / ABSTAIN / /
Dated: , 1995
---------------------------
(Month) (Day)
----------------------------------
Signature(s)
----------------------------------
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S)
APPEAR HEREON. When signing as custodian,
attorney, executor, administrator, trustee,
etc., please give your full title as such.
All joint owners should sign this proxy. If
the account is registered in the name of a
corporation, partnership or other entity, a
duly authorized individual must sign on its
behalf and give his or her title.
