<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1994
FILE NOS.: 33-18983
811-5415
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 7 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 9 /X/
------------------------
DEAN WITTER UTILITIES FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after this
Post-Effective
Amendment becomes effective
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
___ immediately upon filing pursuant to paragraph (b)
_X_ on February 24, 1994 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of rule 485
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (A)(1) OF RULE 24F-2 OF THE
INVESTMENT COMPANY ACT OF 1940. PURSUANT TO SECTION (B)(2) OF RULE 24F-2, THE
REGISTRANT FILED A RULE 24F-2 NOTICE FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1993
WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 1994.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
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<PAGE>
DEAN WITTER UTILITIES FUND
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- ---------------------------------------------- ---------------------------------------------------------------------
<S> <C>
PART A PROSPECTUS
1. ......................................... Cover Page
2. ......................................... Summary of Fund Expenses; Prospectus Summary
3. ......................................... Financial Highlights; Performance Information
4. ......................................... Investment Objective and Policies; The Fund and its Management, Cover
Page; Investment Restrictions; Prospectus Summary; Financial
Highlights
5. ......................................... The Fund and Its Management; Back Cover; Investment Objective and
Policies
6. ......................................... Dividends, Distributions and Taxes; Additional Information
7. ......................................... Purchase of Fund Shares; Shareholder Services; Prospectus Summary
8. ......................................... Redemptions and Repurchases; Shareholder Services
9. ......................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. ......................................... Cover Page
11. ......................................... Table of Contents
12. ......................................... The Fund and Its Management
13. ......................................... Investment Practices and Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. ......................................... The Fund and Its Management; Trustees and Officers
15. ......................................... The Fund and Its Management; Trustees and Officers
16. ......................................... The Fund and Its Management; The Distributor; Shareholder Services;
Custodian and Transfer Agent; Independent Accountants
17. ......................................... Portfolio Transactions and Brokerage
18. ......................................... Description of Shares
19. ......................................... The Distributor; Redemptions and Repurchases; Financial Statements;
Determination of Net Asset Value; Shareholder Services
20. ......................................... Dividends, Distributions and Taxes
21. ......................................... The Distributor
22. ......................................... Performance Information
23. ......................................... Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
FEBRUARY 24, 1994
Dean Witter Utilities Fund (the "Fund") is an open-end
diversified management investment company, whose investment objective is to
provide current income and long-term growth of income and capital. The Fund
seeks to achieve its investment objective by investing in equity and
fixed-income securities of companies engaged in the public utilities industry.
See "Investment Objective and Policies."
Shares of the Fund are continuously offered at net asset value.
However, redemptions and/or repurchases are subject in most cases to a
contingent deferred sales charge, scaled down from 5% to 1% of the amount
redeemed, if made within six years of purchase, which charge will be paid to the
Fund's Distributor, Dean Witter Distributor Inc. (See "Redemptions and
Repurchases--Contingent Deferred Sales Charge.") In addition, the Fund pays the
Distributor a distribution fee pursuant to a Rule 12b-1 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 February 24, 1994, which has been filed with
the Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed below. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER
UTILITIES FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR
(800) 526-3143
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
Investment Restrictions/7
Purchase of Fund Shares/8
Shareholder Services/10
Redemptions and Repurchases/12
Dividends, Distributions and Taxes/14
Performance Information/15
Additional Information/15
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 Distributors Inc.
Distributor
<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
The The Fund is organized as a Trust, commonly known as a
Fund Massachusetts business trust, and is an open-end, diversified
management investment company. The Fund invests in equity and
fixed-income securities of companies engaged in the public
utilities industry.
</TABLE>
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<TABLE>
<S> <C>
Shares Shares of beneficial interest with $0.01 par value (see page 15).
Offered
</TABLE>
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<TABLE>
<S> <C>
Offering At net asset value without sales charge (see page 8). Shares
Price redeemed within six years of purchase are subject to a contingent
deferred sales charge under most circumstances (see page 11).
</TABLE>
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<TABLE>
<S> <C>
Minimum The minimum initial investment is $1,000 and the minimum
Purchase subsequent investment is $100 (see page 8).
</TABLE>
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<TABLE>
<S> <C>
Investment The investment objective of the Fund is to provide current income
Objective and long-term growth of income and capital.
</TABLE>
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<TABLE>
<S> <C>
Investment Dean Witter InterCapital Inc., the Investment Manager of the
Manager Fund, and its wholly-owned subsidiary, Dean Witter Services
Company Inc., serve in various investment management, advisory,
management and administrative capacities to eighty-one investment
companies and other portfolios with assets of approximately $71.2
billion at December 31, 1993.
</TABLE>
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<TABLE>
<S> <C>
Management The Investment Manager receives a monthly fee at the annual rate
Fee of 0.65% of daily net assets up to $500 million, scaled down at
various asset levels to 0.45% of the Fund's daily net assets on
assets exceeding $3.5 billion (see page 5).
</TABLE>
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<TABLE>
<S> <C>
Dividends Dividends from net investment income are declared and paid
quarterly. Distributions from net short-term and long-term
capital gains are paid at least annually. Dividends and capital
gains distributions are automatically reinvested in additional
shares at net asset value unless the shareholder elects to
receive cash (see page 14).
</TABLE>
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<TABLE>
<S> <C>
Distributor Dean Witter Distributors Inc. (the "Distributor"). For its
and services as Distributor, which include payment of sales
Distribution commissions to account executives and various other promotional
Fee and sales related expenses, 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 services
provided in distributing shares of the Fund and for its sales
related expenses. The Distributor also receives the proceeds of
any contingent deferred sales charges (see page 9).
</TABLE>
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<TABLE>
<S> <C>
Redemption- At net asset value; redeemable involuntarily if total value of
Contingent the account is less than $100. Although no commission or sales
Deferred load is imposed upon the purchase of shares, a contingent
Sales deferred sales charge (scaled down from 5% to 1%) is imposed on
Charge 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 page 10).
</TABLE>
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<TABLE>
<S> <C>
Special The net asset value of the Fund's shares will fluctuate with
Risk changes in the market value of its portfolio securities. The
Considerations public utilities industry has certain characteristics and risks,
and developments within that industry will affect the Fund's
portfolio (see page 7). The value of public utility debt
securities (and, to a lesser extent, equity securities) tends to
have an inverse relationship to the movement of interest rates.
</TABLE>
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THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended December 31, 1993.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases....................................... None
Maximum Sales Charge Imposed on Reinvested Dividends............................ None
Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption
proceeds)...................................................................... 5.0%
A deferred sales charge is imposed at the following declining rates:
</TABLE>
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- -------------------------------------------------------------- ----------------
<S> <C>
First......................................................... 5.0%
Second........................................................ 4.0%
Third......................................................... 3.0%
Fourth........................................................ 2.0%
Fifth......................................................... 2.0%
Sixth......................................................... 1.0%
Seventh and thereafter........................................ None
Redemption Fee................................................ None
Exchange Fee.................................................. None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Management Fee................................................................................................. 0.52%
12b-1 Fees*:................................................................................................... 0.83%
Other Expenses................................................................................................. 0.11%
Total Fund Operating Expenses.................................................................................. 1.46%
<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.......................... $ 65 $ 76 $ 100 $ 174
You would pay the following expenses on the
same investment,
assuming no redemption.................... $ 15 $ 46 $ 80 $ 174
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, notes thereto, and the unqualified report of the
independent accountants which are contained in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to Shareholders, which may be obtained without
charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 29,
1988*
FOR THE YEAR ENDED DECEMBER 31, THROUGH
-------------------------------------------------------------------- DECEMBER 31,
1993 1992 1991 1990 1989 1988
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period...................... $ 13.37 $ 12.93 $ 11.48 $ 12.22 $ 10.41 $ 10.00
------------ ------------ ------------ ------------ ------------ --------------
Net investment income....... 0.61 0.63 0.65 0.65 0.63 0.40
Net realized and unrealized
gain (loss) on
investments................ 1.09 0.47 1.45 (0.71) 1.86 0.38
------------ ------------ ------------ ------------ ------------ --------------
Total from investment
operations.................. 1.70 1.10 2.10 (0.06) 2.49 0.78
------------ ------------ ------------ ------------ ------------ --------------
Less dividends and
distributions:
Dividends from net
investment income.......... (0.61) (0.63) (0.65) (0.65) (0.67) (0.36)
Distributions from net
realized gains on
investments................ (0.12) (0.03) 0.00 (0.03) (0.01) (0.01)
------------ ------------ ------------ ------------ ------------ --------------
Total dividends and
distributions............... (0.73) (0.66) (0.65) (0.68) (0.68) (0.37)
------------ ------------ ------------ ------------ ------------ --------------
Net asset value, end of
period...................... $ 14.34 $ 13.37 $ 12.93 $ 11.48 $ 12.22 $ 10.41
------------ ------------ ------------ ------------ ------------ --------------
------------ ------------ ------------ ------------ ------------ --------------
TOTAL INVESTMENT RETURN+ ..... 12.79 % 8.75 % 18.89 % (0.27 )% 24.51 % 7.90 %(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).................. $ 3,881,114 $ 2,925,831 $ 1,959,042 $ 1,369,038 $ 1,131,119 $ 457,845
Ratio of expenses to average
net assets.................. 1.46 % 1.59 % 1.59 % 1.67 % 1.68 % 1.84 %(2)
Ratio of net investment income
to average net assets....... 4.32 % 5.05 % 5.58 % 5.85 % 6.07 % 6.69 %(2)
Portfolio turnover rate....... 16 % 14 % 13 % 13 % 25 % 12 %
<FN>
- ---------------
* DATE OF COMMENCEMENT OF OPERATIONS.
+ 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
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Dean Witter Utilities Fund (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 December 8, 1987.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Dean Witter Discover & Co. ("DWDC"), a
balanced financial services organization providing a broad range of nationally
marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to eighty-one investment companies, twenty-nine of
which are listed on the New York Stock Exchange, with combined total assets of
approximately $71.2 billion at December 31, 1993. The Investment Manager also
manages and advises 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. InterCapital has retained Dean Witter Services Company Inc. to perform
the aforementioned administrative services for the Fund.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
following annual rates to the net assets of the Fund as of the close of each
business day: 0.65% of the portion of the daily net assets not exceeding $500
million, scaled down at various asset levels to 0.45% of the portion of daily
net assets exceeding $3.5 billion. For the fiscal year ended December 31, 1993,
the Fund accrued total compensation to the Investment Manager amounting to 0.52%
of the Fund's average daily net assets and the Fund's total expenses amounted to
1.46% of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to provide current income and
long-term growth of income and capital. This objective is fundamental and may
not be changed without shareholder approval. There can be no assurance that the
investment objective will be achieved. The Fund seeks to achieve its investment
objective by investing primarily in equity and fixed-income securities of
companies engaged in the public utilities industry. The term "public utilities
industry" consists of companies engaged in the manufacture, production,
generation, transmission, sale and distribution of gas and electric energy, as
well as companies engaged in the communications field, including telephone,
telegraph, satellite, microwave and other companies providing communication
facilities for the public, but excluding public broadcasting companies.
The Fund invests in both equity securities (common stocks and securities
convertible into common stock) and fixed income securities (bonds and preferred
stock) in the public utilities industry. The Fund does not have any set policies
to concentrate within any particular segment of the utilities industry.
Fixed-income securities in which the Fund may invest are debt securities and
preferred stocks, which are rated at the time of purchase Baa or better by
Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard &
Poor's Corporation ("S&P"), or which, if unrated, are deemed to be of
5
<PAGE>
comparable quality by the Fund's Trustees. The Fund may also purchase equity and
fixed-income securities issued by foreign issuers.
Investments in fixed-income securities rated either BBB by S&P or Baa by
Moody's (the lowest credit ratings designated "investment grade") may have
speculative characteristics and, therefore, changes in economic conditions or
other circumstances are more likely to weaken their capacity to make principal
and interest payments than would be the case with investments in securities with
higher credit ratings. If a fixed-income security held by the Fund is rated BBB
or Baa and is subsequently downgraded by a rating agency, the Fund will retain
such security in its portfolio until the Investment Manager determines that it
is practicable to sell the security without undue market or tax consequences to
the Fund. In the event that such downgraded securities constitute 5% or more of
the Fund's total assets, the Investment Manager will sell immediately securities
sufficient to reduce the total to below 5%.
While the Fund will invest primarily in the securities of public utility
companies, under ordinary circumstances it may invest up to 35% of its total
assets in U.S. Government securities (securities issued or guaranteed as to
principal and interest by the United States or its agencies and
instrumentalities), money market instruments, repurchase agreements and options
and futures, as described below. U.S. Government securities in which the Fund
may invest include zero coupon securities.
There may be periods during which, in the opinion of the Investment Manager,
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 net assets are invested in cash or
money market instruments.
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.
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.
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.
FOREIGN SECURITIES. The Fund may invest up to 10% of the value of its total
assets, at the time of purchase, in securities issued by foreign issuers.
Foreign securities investments may be affected by changes in currency rates or
exchange control regulations, changes in governmental administration or economic
or monetary policy (in the United States and abroad) or changed circumstances in
dealings between nations. Costs may be incurred in connection with conversions
between various currencies held by the Fund.
PUBLIC UTILITIES INDUSTRY
The public utilities industry as a whole has certain characteristics and
risks particular to that industry. Unlike industrial companies, the rates which
utility companies may charge their customers generally are subject to review and
limitation by governmental regulatory commissions. Although
6
<PAGE>
rate changes of a utility usually fluctuate in approximate correlation with
financing costs, due to political and regulatory factors rate changes ordinarily
occur only following a delay after the changes in financing costs. This factor
will tend to favorably affect a utility company's earnings and dividends in
times of decreasing costs, but conversely will tend to adversely affect earnings
and dividends when costs are rising. In addition, the value of public utility
debt securities (and, to a lesser extent, equity securities) tends to have an
inverse relationship to the movement of interest rates.
Among the risks affecting the utilities industry are the following: risks of
increases in fuel and other operating costs; the high cost of borrowing to
finance capital construction during inflationary periods; restrictions on
operations and increased costs and delays associated with compliance with
environmental and nuclear safety regulations; the difficulties involved in
obtaining natural gas for resale or fuel for generating electricity at
reasonable prices; the risks in connection with the construction and operation
of nuclear power plants; the effects of energy conservation and the effects of
regulatory changes, such as the possible adverse effects on profits of recent
increased competition among telecommunications companies and the uncertainties
resulting from such companies' diversification into new domestic and
international businesses, as well as agreements by many such companies linking
future rate increases to inflation or other factors not directly related to the
actual operating profits of the enterprise.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, including Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital, the views of
Trustees of the Fund and others regarding economic developments and interest
rate trends, and the Investment Manager's own analysis of factors it deems
relevant. The Fund's portfolio is managed within InterCapital's Large
Capitalization Equities Group, which manages twenty-four equity funds and fund
portfolios with approximately $16.3 billion in assets as of December 31, 1993.
Edward F. Gaylor, Senior Vice President of InterCapital and a member of
InterCapital's Large Capitalization Equity Group, has been the primary portfolio
manager of the Fund since its inception and has been a portfolio manager at
InterCapital for over five years.
Orders for transactions in portfolio securities and commodities 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.
Except as specifically noted, the Fund's investment 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 which
have been adopted by the Fund as fundamental policies. A fundamental policy may
not be changed without the vote of the Fund's shareholders.
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).
7
<PAGE>
2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry, except that the Fund will concentrate in the
public utilities industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities.
4. Invest more than 10% of its total assets in "illiquid securities"
(securities for which market quotations are not readily available) and
repurchase agreements which have a maturity of longer than seven days.
5. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation issued or guaranteed by the United States Government, its
agencies or instrumentalities.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other brokers and dealers who have entered into agreements with the Distributor
("Selected Broker-Dealers"). The principal executive office of the Distributor
is located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000 and subsequent purchases of $100 or
more may be made by sending a check, payable to Dean Witter Utilities Fund,
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 five
business day settlement basis; that is, payment is due on the fifth business day
(settlement date) after the order is placed with the Distributor. Shares of the
Fund purchased through the Distributor are entitled to any dividends declared
beginning on the next business day following settlement date. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. Shares purchased through the Transfer Agent are entitled to any
dividends declared beginning on the next business day following receipt of an
order. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. The offering price will be the net asset value per share
next determined following receipt of an order (see "Determination of Net Asset
Value"). While no sales charge is imposed at the time shares are purchased, a
contingent deferred sales charge may be imposed at the time of redemption (see
"Redemptions and Repurchases"). 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
rein-
8
<PAGE>
vestments 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. Amounts paid under the Plan are
paid to the Distributor to compensate it for the services provided and the
expenses borne by the Distributor and others in the distribution of the Fund's
shares, including the payment of commissions for sales of the Fund's shares and
incentive compensation to and expenses of DWR's account executives and others
who engage in or support distribution of shares or who service shareholder
accounts, including overhead and telephone expenses; printing and distribution
of prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders; and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan to compensate DWR and
other Selected Broker-Dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed expenses incurred.
For the fiscal year ended December 31, 1993, the Fund accrued payments under
the Plan amounting to $29,856,959, which amount is equal to .83% of the Fund's
average daily net assets for the fiscal year. The payments accrued under the
Plan were calculated pursuant to clause (a) of the compensation formula under
the Plan. Of the amount accrued under the Plan, 0.25% of the Fund's average net
assets is characterized as a service fee within the meaning of NASD guidelines.
At any given time, the Distributor may incur expenses in distributing shares
of the Fund which 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 the excess
distribution expenses, including the carrying charge described above, totalled
$116,843,183 at December 31, 1993, which equalled 3.01% of the Fund's net assets
at such date. Because there is no requirement under the Plan that the
Distributor be reimbursed for all expenses or any requirement that the Plan be
continued from year to year, 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 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 is valued
at its latest sale price on that exchange (if there were no sales that day, the
security is valued at the closing 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,
9
<PAGE>
including circumstances under which it is determined by the Investment Manager
that sale or bid prices are not reflective of a security's market value,
portfolio securities are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of 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' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain securities in the Fund's portfolio may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations, in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the shareholder
requests that they be paid in cash. Shares so acquired are not subject to the
imposition of a contingent deferred sales charge upon their redemption (see
"Redemptions and Repurchases").
INVESTMENT OF DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who receives a
cash payment representing a dividend or capital gains distribution may invest
such dividend or distribution at the net asset value per share next determined
after receipt by the Transfer Agent, by returning the check or the proceeds to
the Transfer Agent within thirty days after the payment date. Shares so acquired
are not subject to the imposition of a contingent deferred sales charge upon
their redemption (see "Redemptions and Repurchases").
EASYINVEST-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 amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on shares redeemed under the
Withdrawal Plan (See "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). Therefore, any shareholder participating in the Withdrawal Plan will
have sufficient shares redeemed from his or her account so that the proceeds
(net of any applicable contingent deferred sales charge) to the shareholder will
be the designated monthly or quarterly amount.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent.
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
10
<PAGE>
period for exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share of
each fund after the exchange order is received. When exchanging into a money
market fund from the Fund, shares of the Fund are redeemed out of the Fund at
their next calculated net asset value and the proceeds of the redemption are
used to purchase shares of the money market fund at their net asset value
determined the following day. Subsequent exchanges between any of the money
market funds and any of the CDSC funds can be effected on the same basis. No
contingent deferred sales charge ("CDSC") is imposed at the time of any
exchange, although any applicable CDSC will be imposed upon ultimate redemption.
Shares of the Fund acquired in exchange for shares of another CDSC Fund having a
different CDSC schedule than that of this Fund will be subject to the CDSC
schedule of this Fund, even if such shares are subsequently 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 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, if any, incurred on or after the date which are
attributable to those shares. (Exchange Fund 12b-1 distribution fees are
described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may be limited by the Fund's refusal to
accept additional purchases and/ or exchanges from the investor. Although the
Fund does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests of
the Fund and its other shareholders, investors should be aware that the Fund and
each of the other Dean Witter Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such restriction will be made by the Fund on a prospective basis
only, upon notice to the shareholder not later than ten days following such
shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the Fund
and/or any of such Dean Witter Funds for which shares of the Fund 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
11
<PAGE>
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their DWR or other Selected Broker-Dealer account
executive (no Exchange Privilege Authorization Form is required). Other
shareholders (and those shareholders who are clients of DWR or another Selected
Broker-Dealer but who wish to make exchanges directly by 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 any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the case
with the Dean Witter Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds may
be reduced by the amount of any applicable contingent deferred sales charges
(see below). If shares are held in a shareholder'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
shareholders, the shares may be redeemed by surrendering the certificates with a
written request for redemption, along with any additional documentation required
by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any charge upon redemption.
Shares redeemed sooner than six years after purchase may, however, be subject to
a charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), and it will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
YEAR SINCE CHARGE
PURCHASE AS A PERCENTAGE OF AMOUNT
PAYMENT MADE REDEEMED
- -------------------------------------------------- -------------------------
<S> <C>
First............................................. 5.0 %
Second............................................ 4.0 %
Third............................................. 3.0 %
Fourth............................................ 2.0 %
Fifth............................................. 2.0 %
Sixth............................................. 1.0 %
Seventh and thereafter............................ None
</TABLE>
12
<PAGE>
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 were purchased by the employee
benefit plans established by DWR and SPS Transaction Services, Inc. (an
affiliate of DWR) for their employees as qualified under Section 401(k) of the
Internal Revenue Code.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of: (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 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-Dealers,
reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund, the Distributor,
DWR or other Selected Broker-Dealers. The offers by DWR and other Selected
Broker-Dealers to repurchase shares may be suspended without notice by them at
any time. In that event, shareholders may redeem their shares through the Fund's
Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED.__Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased
13
<PAGE>
and has not previously exercised this reinstatement privilege may, within thirty
days after the date of the redemption or repurchase, reinstate any portion or
all of the proceeds of such redemption or repurchase in shares of the Fund at
net asset value next determined after a reinstatement request, together with the
proceeds, is received by the Transfer Agent and receive a pro-rata credit for
any CDSC paid in connection with such redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem, at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100 or such lesser amount as may
be fixed by the Trustees. 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 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 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 remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code, it
is not expected that the Fund will be required to pay any federal income tax.
Shareholders who are required to pay taxes on their income will normally have to
pay federal income taxes, and any state income taxes, on the dividends and
distributions they receive from the Fund. Such dividends and distributions, to
the extent that they are derived from net investment income or net 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.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes,
including information as to the portion taxable as long-term capital gains and
the amount of dividends eligible for the Federal dividends received deduction
available to corporations. To avoid being subject to a 31% federal backup
withholding tax on taxable dividends, capital gains distributions and the
proceeds of redemptions and repurchases, shareholders' taxpayer identification
numbers must be furnished and certified as to their accuracy.
Long-term and short-term capital gains may be generated by the sale of
portfolio securities by the Fund. Distributions of net long-term capital gains,
if any, are taxable to shareholders as long-term capital gains regardless of how
long a shareholder has held the Fund's shares and regardless of whether the
distribution is received in additional shares or in cash. Capital gains
distributions are not eligible for the corporate dividends received deduction.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
14
<PAGE>
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 a period of one year, and 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 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, year-by-year or other
types of total return figures. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund.
Such calculations may or may not reflect the deduction of the contingent
deferred sales charge which, if reflected, would reduce the performance quoted.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations
(such as mutual fund performance rankings of Lipper Analytical Services, Inc.,
the S&P 500 Stock Index and the Dow Jones Industrial Average).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders for action
by shareholder vote as may be required by the Act or the Declaration of Trust.
Under ordinary circumstances, the Trustees may be removed by action of the
Trustees or by the shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for obligations of
the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that notice
of such Fund obligations include such disclaimer, and provides for
indemnification 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, 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 number or address set forth on the front cover of
this Prospectus.
15
<PAGE>
Dean Witter
Utilities Fund
Two World Trade Center
New York, New York 10048
TRUSTEES
Jack F. Bennett
DEAN WITTER
Charles A. Fiumefreddo
Edwin J. Garn
UTILITIES FUND
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Edward F. Gaylor
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
110 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1117 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc. Prospectus
February 24, 1994
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 24, 1994 [LOGO]
- --------------------------------------------------------------------------------
Dean Witter Utilities Fund (the "Fund") is an open-end, diversified
management investment company whose investment objective is to provide current
income and long-term growth of income and capital. The Fund seeks to attain its
investment objective by investing in equity and fixed-income securities of
companies in the public utilities industry.
A Prospectus for the Fund dated February 24, 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
Utilities Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............................................................ 3
Trustees and Officers.................................................................. 6
Investment Practices and Policies...................................................... 9
Investment Restrictions................................................................ 24
Portfolio Transactions and Brokerage................................................... 25
The Distributor........................................................................ 27
Determination of Net Asset Value....................................................... 30
Shareholder Services................................................................... 30
Redemptions and Repurchases............................................................ 34
Dividends, Distributions and Taxes..................................................... 37
Performance Information................................................................ 39
Description of Shares.................................................................. 40
Custodian and Transfer Agent........................................................... 40
Independent Accountants................................................................ 40
Reports to Shareholders................................................................ 41
Legal Counsel.......................................................................... 41
Experts................................................................................ 41
Registration Statement................................................................. 41
Financial Statements--December 31, 1993................................................ 42
Report of Independent Accountants...................................................... 55
Appendix............................................................................... 56
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
THE FUND
The Fund is a Trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts on
December 8, 1987.
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 is conducted by or under the direction of officers of the
Fund and of the Investment Manager, subject to review by the Fund's Board of
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 the investment adviser) of
the following investment companies: Dean Witter Liquid Asset Fund Inc.,
InterCapital Income Securities Inc., InterCapital Insured Municipal Bond Trust,
InterCapital Quality Municipal Investment Trust, InterCapital Insured Municipal
Trust, Dean Witter High Yield Securities Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter Developing Growth Securities Trust, Dean Witter Tax-Exempt
Securities Trust, Dean Witter Natural Resource Development Securities Inc., Dean
Witter Dividend Growth Securities Inc., Dean Witter American Value Fund, Dean
Witter U.S. Government Money Market Trust, Dean Witter Variable Investment
Series, Dean Witter World Wide Investment Trust, Dean Witter Select Municipal
Reinvestment Fund, Dean Witter U.S. Government Securities Trust, Dean Witter
California Tax-Free Income Fund, Dean Witter Equity Income Trust, Dean Witter
New York Tax-Free Income Fund, Dean Witter Convertible Securities Trust, Dean
Witter Federal Securities Trust, Dean Witter Value-Added Market Series, High
Income Advantage Trust, Dean Witter Government Income Trust, Dean Witter Managed
Assets Trust, High Income Advantage Trust II, Dean Witter California Tax-Free
Daily Income Trust, Dean Witter Strategist Fund, High Income Advantage Trust
III, Dean Witter World Wide Income Trust, Dean Witter Intermediate Income
Securities, Dean Witter Capital Growth Securities, Dean Witter New York
Municipal Money Market Trust, Dean Witter European Growth Fund Inc., Dean Witter
Precious Metals and Minerals Trust, Dean Witter Global Short-Term Income Fund
Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter Multi-State Municipal
Series Trust, Dean Witter Premier Income Trust, Dean Witter Short-Term U.S.
Treasury Trust, Dean Witter Diversified Income Trust, Dean Witter Health
Sciences Trust, Dean Witter Retirement Series, InterCapital Quality Municipal
Income Trust, InterCapital Insured Municipal Income Trust, InterCapital
California Insured Municipal Income Trust, InterCapital Quality Municipal
Securities, InterCapital California Quality Municipal Securities, InterCapital
New York Quality Municipal Securities, Dean Witter Global Dividend Growth
Securities, Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term
Bond Fund, InterCapital Insured Municipal Securities, InterCapital Insured
California Municipal Securities, Active Assets Money Trust, Active Assets
Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, Municipal Income Trust, Municipal Income Trust II,
Municipal Income Trust III, Municipal Income Opportunities Trust, Municipal
Income Opportunities Trust II, Municipal Income Opportunities Trust III, Prime
Income Trust and Municipal Premium Income Trust. The foregoing investment
companies, together with the Fund, are collectively referred to as the Dean
Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following companies for
which TCW Funds Management, Inc. is the investment adviser: TCW/DW Core Equity
Trust, TCW/DW North American Government Income Trust,
3
<PAGE>
TCW/DW Latin American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small
Cap Growth Fund, TCW/DW Balanced Fund, 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 company may not be offered in the United States or
purchased by American citizens outside the United States.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective and policies.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund may
reasonably require in the conduct of its business, including the preparation of
prospectuses, 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 Management Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Dean Witter Distributors Inc.
("Distributors" or the "Distributor") (see "The Distributor"), will be paid by
the Fund. The expenses borne by the Fund include, but are not limited to:
expenses of the Plan of Distribution pursuant to Rule 12b-1 (see "The
Distributor"); charges and expenses of any registrar, custodian, stock transfer
and dividend disbursing agent; brokerage commissions; taxes; engraving and
printing 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 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
4
<PAGE>
on property or personnel (including officers and Trustees) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates to the net assets of the Fund as of the close of each
business day: 0.65% of the portion of the daily net assets not exceeding $500
million; 0.55% of the portion of the daily net assets exceeding $500 million but
not exceeding $1 billion; 0.525% of the portion of the daily net assets
exceeding $1 billion but not exceeding $1.5 billion; 0.50% of the portion of the
daily net assets exceeding $1.5 billion but not exceeding $2.5 billion; 0.475%
of the portion of daily net assets exceeding $2.5 billion but not exceeding $3.5
billion; and 0.45% of the portion of the daily net assets exceeding $3.5
billion. Total compensation accrued to the Investment Manager for the fiscal
years ended December 31, 1991, 1992 and 1993 amounted to $8,978,330, $12,938,801
and $18,894,620, respectively.
Pursuant to the Agreement, total operating expenses of the Fund are subject
to applicable limitations under rules and regulations of states where the Fund
is authorized to sell its shares. Therefore, operating expenses are effectively
subject to the most restrictive of such limitations as the same may be amended
from time to time. Presently, the most restrictive limitation is as follows. If,
in any fiscal year, the Fund's total operating expenses, exclusive of taxes,
interest, brokerage fees, distribution fees and extraordinary expenses (to the
extent permitted by applicable state securities laws and regulations), exceed
2 1/2% of the first $30,000,000 of average daily net assets, 2% of the next
$70,000,000 of average daily net assets and 1 1/2% of any excess over
$100,000,000, the Investment Manager will reimburse the Fund for the amount of
such excess. Such amount, if any, will be calculated daily and credited on a
monthly basis. The Fund did not exceed such limitation during the fiscal years
ended December 31, 1991, 1992 and 1993.
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 Investment Manager paid the organizational expenses of the Fund, in the
amount of approximately $141,000, incurred prior to the offering of the Fund's
shares. The Fund reimbursed the Investment Manager for such expenses, in
accordance with the terms of the Underwriting Agreement between the Fund and
DWR. The Fund has deferred and is amortizing the reimbursed expenses on the
straight line method over a period of five years from the date of commencement
of the Fund's operations.
The Agreement was initially approved by the Trustees on October 30, 1992,
and by the shareholders at a Meeting of Shareholders on January 12, 1993. The
Agreement is substantially identical to a prior investment management agreement,
as amended, which was initially approved by the Trustees on January 14, 1988,
and by DWR as the then sole shareholder on June 28, 1989. At their meeting held
on April 28, 1993, the Trustees of the Fund, including all the Trustees of the
Fund who are not parties to the Agreement or "interested persons" (as defined in
the Investment Company Act of 1940, as amended (the "Act")) of any such party
(the "Independent Trustees"), approved an amendment to the Agreement to lower
the management fees charged on the Fund's net assets in excess of $3.5 billion.
The Agreement took effect on June 30, 1993 upon the spin-off by Sears, Roebuck
and Co. of its remaining shares of DWDC. The Agreement may be terminated at any
time, without penalty, on thirty days' notice by the 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 Investment Manager. The Agreement will automatically
terminate in the event of its assignment (as defined in the Act).
5
<PAGE>
Under its terms, the Agreement will continue in effect until April 30, 1994,
and provides that the Agreement 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, which vote must be cast in person at a meeting called for the purpose
of voting on such approval.
The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that DWR or its parent companies may use, or at any
time permit others to use, the name "Dean Witter". The Fund has also agreed that
in the event the investment management contract between InterCapital and the
Fund is terminated, or if the affiliation between InterCapital and/or DWR and
its parent company is terminated, the Fund will eliminate the name "Dean Witter"
from its name if InterCapital and/or DWR or its parent companies shall
so request.
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the Dean Witter Funds and the TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
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 Company; director
or trustee of various not-for-profit and business
organizations.
Charles A. Fiumefreddo* Chairman, Chief Executive Officer and Director of
Chairman, President, Chief InterCapital, Distributors and DWSC; Executive Vice
Executive Officer and Trustee President and Director of DWR; Chairman, Director or
Two World Trade Center Trustee, President and Chief Executive Officer of the Dean
New York, New York Witter Funds; Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Chairman and Director of Dean
Witter Trust Company; 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.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
John R. Haire Chairman of the Audit Committee and Chairman of the
Trustee Committee of 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 (until
Chicago, Illinois July, 1989); 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
McLean, 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.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
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 31, 1985) and President
Chicago, Illinois (from January, 1981-March, 1982 and from February,
1984-August, 1984) of Sears, Roebuck and Co.
Sheldon Curtis Senior Vice President and General Counsel of InterCapital
Vice President, Secretary and DWSC; Senior Vice President and Secretary of Dean
and General Counsel Witter Trust Company; Senior Vice President, Assistant
Two World Trade Center Secretary and Assistant General Counsel of Distributors;
New York, New York Assistant Secretary of DWDC and DWR; Vice President,
Secretary and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Edward F. Gaylor Senior Vice President of InterCapital and Vice President
Vice President of various Dean Witter Funds.
Two World Trade Center
New York, New York
Paula LaCosta Vice President of InterCapital and various Dean Witter
Vice President Funds.
Two World Trade Center
New York, New York
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 and
New York, New York Treasurer of the Dean Witter Funds and the TCW/DW Funds;
previously Vice President of InterCapital.
<FN>
- ---------
*Denotes Trustees who are "interested persons" of the Fund, as defined in the
Act.
</TABLE>
In addition, Robert M. Scanlan, President of InterCapital and DWSC, David A.
Hughey, Executive Vice President of InterCapital and DWSC, Edmund C. Puckhaber,
Executive Vice President of InterCapital, Thomas H. Connelly, Kenton J.
Hinchliffe and Ira N. Ross, Senior Vice Presidents of InterCapital, are Vice
Presidents of the Fund, and Barry Fink, First Vice President and Assistant
General Counsel of InterCapital, and Marilyn K. Cranney, Lawrence S. Lafer, Lou
Anne D. McInnis and Ruth Rossi, Vice Presidents and Assistant General Counsels
of InterCapital, are Assistant Secretaries of the Fund.
The Fund pays each Trustee who is not an employee or former employee of the
Investment Manager or an affiliated company an annual fee of $1,200 plus $50 for
each meeting of the Board of
8
<PAGE>
Trustees, the Audit Committee or the Committee of Independent Trustees attended
by the Trustee in person (the Fund pays the Chairman of the Audit Committee an
additional annual fee of $1,000 and pays the Chairman of the Committee of
Independent Trustees an annual fee of $2,400, in each case inclusive of the
Committee meeting fees). The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by the
Investment Manager or an affiliated company receive no compensation or expense
reimbursement from the Fund. The Fund has adopted a retirement program under
which a Trustee who is not an "interested person" of the Fund and who retires
after a minimum required period of service would be entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72) based upon length of service and computed as a percentage of one-fifth
of the total compensation earned by such Trustee for service to the Fund in the
five-year period prior to the date of the Trustee's retirement. No Independent
Trustee has retired since the adoption of the program and no payments by the
Fund have been made under the program to any Trustee. For the fiscal year ended
December 31, 1993, the Fund accrued a total of $34,810 for Trustees' fees and
expenses and benefits under the 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 1
percent of the Fund's shares of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
As stated in the Prospectus, the investment objective of the Fund is to
provide current income and long-term growth of income and capital. This
objective is fundamental and may not be changed without shareholder approval.
The Fund seeks to achieve its investment objective by investing in equity and
fixed-income securities of companies engaged in the public utilities industry.
The term "public utilities industry" consists of companies engaged in the
manufacture, production, generation, transmission, sale and distribution of gas
and electric energy, as well as companies engaged in the communications field,
including telephone, telegraph, satellite, microwave and other companies
providing communication facilities for the public, but excluding public
broadcasting companies. For purposes of the Fund, a company will be considered
to be in the public utilities industry if, during the most recent twelve month
period, at least 50% of the company's gross revenues, on a consolidated basis,
is derived from the public utilities industry. Under ordinary circumstances, at
least 65% of the Fund's total assets will be invested in securities of companies
in the public utilities industry.
The Investment Manager believes the Fund's investment policies are suited to
benefit from certain characteristics and historical performance of the
securities of public utility companies. Many of these companies have
historically set a pattern of paying regular dividends and increasing their
common stock dividends over time, and the average common stock dividend yield of
utilities historically has substantially exceeded that of industrial stocks. The
Investment Manager believes that these factors may not only provide current
income but also generally tend to moderate risk and thus may enhance the
opportunity for appreciation of securities owned by the Fund, although the
potential for capital appreciation has historically been lower for many utility
stocks compared with most industrial stocks. There can be no assurance that the
historical investment performance of the public utilities industry will be
indicative of future events and performance.
The Fund invests in both equity securities (common stocks and securities
convertible into common stock) and fixed-income securities (bonds and preferred
stock) in the public utilities industry. The Fund does not have any set policies
to concentrate within any particular segment of the utilities industry. The Fund
will shift its asset allocation without restriction between types of utilities
and between equity and fixed-income securities based upon the Investment
Manager's determination of how to achieve the Fund's investment objective in
light of prevailing market, economic and financial conditions. For example, at a
particular time the Investment Manager may choose to allocate up to 100% of the
Fund's assets in a particular type of security (for example, equity securities)
or in a specific utility industry segment (for example, electric utilities).
9
<PAGE>
Criteria utilized by the Investment Manager in the selection of equity
securities include the following screens: earnings and dividend growth; book
value; dividend discount; and price/earnings relationships. In addition, the
Investment Manager makes continuing assessments of management, the prevailing
regulatory framework and industry trends. The Investment Manager may also
utilize computer-based equity selection models in connection with stock
allocation in the equity portion of the Fund's portfolio. In keeping with the
Fund's objective, if in the opinion of the Investment Manager favorable
conditions for capital growth of equity securities are not prevalent at a
particular time, the Fund may allocate its assets predominantly or exclusively
in debt securities with the aim of obtaining current income as well as
preserving capital and thus benefiting long term growth of capital.
The Fund may purchase equity securities sold on the New York, American and
other stock exchanges and in the over-the-counter market. Fixed-income
securities in which the Fund may invest are debt securities and preferred
stocks, which are rated at the time of purchase Baa or better by Moody's
Investors Service Inc. ("Moody's") or BBB or better by Standard & Poor's
Corporation ("S&P"), or which, if unrated, are deemed to be of comparable
quality by the Fund's Trustees. The Fund may also purchase equity and
fixed-income securities issued by foreign issuers. Under normal circumstances
the average weighted maturity of the debt portion of the Fund's portfolio is
expected to be in excess of seven years. A description of corporate bond ratings
is contained in the Appendix to the Statement of Additional Information.
There may be periods during which, in the opinion of the Investment Manager,
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 net assets are invested in cash or
money market instruments. Money market instruments in which the Fund may invest
are securities issued or guaranteed by the U.S. Government (Treasury bills,
notes and bonds, including zero coupon securities); bank obligations; Eurodollar
certificates of deposit; obligations of savings institutions; fully insured
certificates of deposit; and commercial paper rated within the two highest
grades by Moody's or S&P or, if not rated, are issued by a company having an
outstanding debt issue rated at least AA by S&P or Aa by Moody's.
U.S. GOVERNMENT SECURITIES
As discussed in the Prospectus, the Fund may invest up to 35% of its total
assets 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.
10
<PAGE>
(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 with respect to 35% of its
total assets.
ZERO COUPON TREASURY SECURITIES
A portion of the U.S. Government securities purchased by the Fund may be
"zero coupon" Treasury securities. These are U.S. Treasury bills, notes and
bonds which have been stripped of their unmatured interest coupons and receipts
or which are certificates representing interests in such stripped debt
obligations and coupons. Such securities are purchased at a discount from their
face amount, giving the purchaser the right to receive their full value at
maturity. A zero coupon security pays no interest to its holder during its life.
Its value to an investor consists of the difference between its face value at
the time of maturity and the price for which it was acquired, which is generally
an amount significantly less than its face value (sometimes referred to as a
"deep discount" price).
The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant rate
eliminates the risk of receiving lower yields upon reinvestment of interest if
prevailing interest rates decline, the owner of a zero coupon security will be
unable to participate in higher yields upon reinvestment of interest received if
prevailing interest rates rise. For this reason, zero coupon securities are
subject to substantially greater market price fluctuations during periods of
changing prevailing interest rates than are comparable debt securities which
make current distributions of interest. Current federal tax law requires that a
holder (such as the Fund) of a zero coupon security accrue a portion of the
discount at which the security was purchased as income each year even though the
Fund receives no interest payments in cash on the security during the year. See
"Dividends, Distributions and Taxes" for a discussion of the tax treatment of
zero coupon Treasury securities.
Currently the only U.S. Treasury security issued without coupons is the
Treasury bill. However, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of the U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a custodial or
trust account).
FOREIGN SECURITIES
As stated in the Prospectus, the Fund may invest in securities issued by
foreign issuers. Investors should carefully consider the risks of investing in
securities of foreign issuers and securities denominated in non-U.S. currencies.
Fluctuations in the relative rates of exchange between the currencies of
different nations will affect the value of the Fund's investments. Changes in
foreign currency exchange rates relative to the U.S. dollar will affect the U.S.
dollar value of the Fund's assets denominated in that currency and thereby
impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade.
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Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of Fund trades effected in such markets. Inability to dispose of
portfolio securities due to settlement delays could result in losses to the Fund
due to subsequent declines in value of such securities and the inability of the
Fund to make intended security purchases due to settlement problems could result
in a failure of the Fund to make potentially advantageous investments. The Fund
may invest up to 10% of the value of its total assets, at the time of purchase,
in securities issued by foreign issuers.
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 days'
notice, or by the Fund on four business days' notice. If the borrower fails to
deliver the loaned securities within four days after receipt of notice, the Fund
could use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made to
firms deemed by the Fund's management to be creditworthy and when the income
which can be earned from such loans justifies the attendant risks. Upon
termination of the loan, the borrower is required to return the securities to
the Fund. Any gain or loss in the market price during the loan period would
inure to the Fund. The credit worthiness 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
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 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 year ended December
31, 1993.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
As stated in the Prospectus, from time to time the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are negotiated,
the price is fixed at the time of the commitment, but delivery and payment
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<PAGE>
can take place a month or more after the date of commitment. While the Fund will
only purchase securities on a when-issued, delayed delivery or forward
commitment basis with the intention of acquiring the securities, the Fund may
sell the securities before the settlement date, if it is deemed advisable. The
securities so purchased or sold are subject to market fluctuation and no
interest or dividends accrue to the purchaser prior to the settlement date. At
the time the Fund makes the commitment to purchase or sell securities on a
when-issued, delayed delivery or forward commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. The Fund will also establish a
segregated account with its custodian bank in which it will continually maintain
cash or cash equivalents or other high grade debt portfolio securities equal in
value to commitments to purchase securities on a when-issued, delayed delivery
or forward commitment basis. Subject to the foregoing restrictions, the Fund may
purchase securities on such basis without limit. The Investment Manager and the
Board of Trustees do not believe that the Fund's net asset value will be
adversely affected by the purchase of securities on such basis.
WHEN, AS AND IF ISSUED SECURITIES
As stated 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 the
sale.
PRIVATE PLACEMENTS
The Fund may invest up to 5% of its total assets in securities which are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or which are
otherwise not readily marketable. (Securities eligible for resale pursuant to
Rule 144A of the Securities Act, and determined to be liquid pursuant to the
procedures discussed in the following paragraph, are not subject to the
foregoing restriction.) These securities are generally referred to as private
placements or restricted securities. Limitations on the resale of such
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale and the risk of
substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. If a restricted security is determined to be "liquid", such security will
not be included within the category "illiquid securities",
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<PAGE>
which is limited by the Fund's investment restrictions to 10% of the Fund's
total assets. The Fund did not purchase any restricted securities during the
fiscal year ended December 31, 1993 and has no intention of doing so during the
foreseeable future.
REPURCHASE AGREEMENTS
As discussed in the Prospectus, when cash may be available for only a few
days, it may be invested by the Fund in repurchase agreements until such time as
it may otherwise be invested or used for payments of obligations of the Fund.
These agreements, which may be viewed as a type of secured lending by the Fund,
typically involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
("collateral") at a specified price and at a fixed time in the future, usually
not more than seven days from the date of purchase. The collateral will be
maintained in a segregated account and will be marked to market daily to
determine that the value of the collateral, as specified in the agreement, does
not decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although such
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions whose
financial condition will be continually monitored by the Investment Manager
subject to procedures established by the Board of 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 10% of its net assets.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may write covered call options against securities held in its
portfolio and covered put options on eligible portfolio securities and stock
indexes and purchase options of the same series to effect closing transactions,
and may hedge against potential changes in the market value of investments (or
anticipated investments) 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.
Call and put options on U.S. Treasury notes, bonds and bills and equity
securities are listed on Exchanges and are written in over-the-counter
transactions ("OTC options"). Listed options are issued by the Options Clearing
Corporation ("OCC"). Ownership of a listed call option gives the Fund the right
to buy from the OCC the underlying security covered by the option at the stated
exercise price (the price per unit of the underlying security) by filing an
exercise notice prior to the expiration date of the option. The writer (seller)
of the option would then have the obligation to sell to the OCC the underlying
security at that exercise price prior to the expiration date of the option,
regardless of its then current market price. Ownership of a listed put option
would give the Fund the right to sell the underlying security to the OCC at the
stated exercise price. Upon notice of exercise of the put option, the writer of
the put would have the obligation to purchase the underlying security from the
OCC at the exercise price. The Fund did not enter into any options or futures
transactions during the fiscal year ended December 31, 1993 and does not intend
to enter into any such transactions during its fiscal year ending December 31,
1994.
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<PAGE>
OPTIONS ON TREASURY BONDS AND NOTES. Because trading in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the exchanges on which such securities trade will not continue indefinitely to
introduce options with new expirations to replace expiring options 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.
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 income
received from the premium 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 income received from premiums 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 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 and OTC 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
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<PAGE>
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 for on the option less the commission
paid.
Options written by a Fund normally have expiration dates of from up to nine
months (equity securities) to eighteen months (fixed-income securities) from the
date written. The exercise price of a call option may be below, equal to or
above the current market value of the underlying security at the time the option
is written. See "Risks of Options and Futures Transactions," below.
COVERED PUT WRITING. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period, at
the purchaser's election (certain listed and OTC put options written by the Fund
will be exercisable by the purchaser only on a specific date). A put is
"covered" if, at all times, the Fund maintains, in a segregated account
maintained on its behalf at the Fund's Custodian, cash, U.S. Government
securities or other high grade obligations in an amount equal to at least the
exercise price of the option, at all times during the option period. Similarly,
a short put position could be covered by the Fund by its purchase of a put
option on the same security as the underlying security of the written option,
where the exercise price of the purchased option is equal to or more than the
exercise price of the put written or less than the exercise price of the put
written if the mark to market difference is maintained by the Fund in cash, U.S.
Government securities or other high grade debt obligations which the Fund holds
in a segregated account maintained at its Custodian. In writing puts, the Fund
assumes the risk of loss should the market value of the underlying security
decline below the exercise price of the option (any loss being decreased by the
receipt of the premium on the option written). In the case of listed options,
during the option period, the Fund may be required, at any time, to make payment
of the exercise price against delivery of the underlying security. The operation
of and limitations on covered put options in other respects are substantially
identical to those of call options.
The Fund will write put options for two purposes: (1) to receive the income
derived from the premiums paid by purchasers; and (2) when the Investment
Manager wishes to purchase the security underlying the option at a price lower
than its current market price, in which case it will write the covered put at an
exercise price reflecting the lower purchase price sought. The potential gain on
a covered put option is limited to the premium received on the option (less the
commissions paid on the transaction) while the potential loss equals the
difference between the exercise price of the option and the current market price
of the underlying securities when the put is exercised, offset by the premium
received (less the commissions paid on the transaction).
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PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC call
and put options in amounts equaling up to 5% 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 purchase of the call option to effect a
closing transaction on a call written over-the-counter may be a listed or an OTC
option. In either case, the call purchased is likely to be on the same
securities and have the same terms as the written option. If purchased
over-the-counter, the option would generally be acquired from the dealer or
financial institution which purchased the call written by the Fund.
The Fund may purchase put options on securities which it holds (or has the
right to acquire) in its portfolio only to protect itself against a decline in
the value of the security. If the value of the underlying security were to fall
below the exercise price of the put purchased in an amount greater than the
premium paid for the option, the Fund would incur no additional loss. The Fund
may also purchase put options to close out written put positions in a manner
similar to call options closing purchase transactions. In addition, the Fund may
sell a put option which it has previously purchased prior to the sale of the
securities underlying such option. Such a sale would result in a net gain or
loss depending on whether the amount received on the sale is more or less than
the premium and other transaction costs paid on the put option which is sold.
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 or to purchase
an offsetting over-the-counter option, it cannot sell the underlying security
until the option expires or the option is exercised. Accordingly, a covered call
option writer may not be able to sell an underlying security at a time when it
might otherwise be advantageous to do so. A secured put option writer who is
unable to effect a closing purchase transaction or to purchase an offsetting
over-the-counter option would continue to bear the risk of decline in the market
price of the underlying security until the option expires or is exercised. In
addition, a secured put writer would be unable to utilize the amount held in
cash or U.S. Government or other high grade short-term debt obligations as
security for the put option for other investment purposes until the exercise or
expiration of the option.
As discussed in the Prospectus, the Fund's ability to close out its position
as a writer of an option is dependent upon the existence of a liquid secondary
market on option Exchanges. There is no assurance that such a market will exist,
particularly in the case of OTC options, as such options will generally only be
closed out by entering into a closing purchase transaction with the purchasing
dealer. However, the Fund may be able to purchase an offsetting option which
does not close out its position as a writer but constitutes an asset of equal
value to the obligation under the option written. If the Fund is not able to
either enter into a closing purchase transaction or purchase an offsetting
position, it will be required to maintain the securities subject to the call, or
the collateral underlying the put, even though it might not be advantageous to
do so, until a closing transaction can be entered into (or the option is
exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
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<PAGE>
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.
Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to take or make delivery of the instruments underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
the Fund's ability to effectively hedge its portfolio.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, 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.
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.
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 interest rate
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.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
STOCK INDEX OPTIONS. Options on stock indexes are similar to options on
stock except that, rather than the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the stock index upon which the option is based is greater than, in the case of a
call, or less than, in the case of a
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<PAGE>
put, the exercise price of the option. This amount of cash is equal to such
difference between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple (the "multiplier"). The
multiplier for an index option performs a function similar to the unit of
trading for a stock option. It determines the total dollar value per contract of
each point in the difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indexes may have
different multipliers. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Unlike stock options, all
settlements are in cash and a gain or loss depends on price movements in the
stock market generally (or in a particular segment of the market) rather than
the price movements in individual stocks. Currently, options are traded on the
S&P 100 Index and the S&P 500 Index on the Chicago Board Options Exchange, the
Major Market Index and the Computer Technology Index, Oil Index and
Institutional Index on the American Stock Exchange and the NYSE Index and NYSE
Beta Index on the New York Stock Exchange, The Financial News Composite Index on
the Pacific Stock Exchange and the Value Line Index, National O-T-C Index and
Utilities Index on the Philadelphia Stock Exchange, each of which and any
similar index on which options are traded in the future which include stocks
that are not limited to any particular industry or segment of the market is
referred to as a "broadly based stock market index." Options on stock indexes
provide the Fund with a means of protecting the Fund against the risk of market
wide price movements. If the Investment Manager anticipates a market decline,
the Fund could purchase a stock index put option. If the expected market decline
materialized, the resulting decrease in the value of the Fund's portfolio would
be offset to the extent of the increase in the value of the put option. If the
Investment Manager anticipates a market rise, the Fund may purchase a stock
index call option to enable the Fund to participate in such rise until
completion of anticipated common stock purchases by the Fund. Purchases and
sales of stock index options also enable the Investment Manager to more speedily
achieve changes in the Fund's equity positions.
The Fund will write put options on stock indexes only if such positions are
covered by cash, U.S. Government securities or other high grade debt obligations
equal to the aggregate exercise price of the puts, which cover is held for the
Fund in a segregated account maintained for it by the Fund's Custodian. All call
options on stock indexes written by the Fund will be covered either by a
portfolio of stocks substantially replicating the movement of the index
underlying the call option or by holding a separate call option on the same
stock index with a strike price no higher than the strike price of the call
option sold by the Fund.
RISKS OF OPTIONS ON INDEXES. Because exercises of stock index options are
settled in cash, call writers such as the Fund cannot provide in advance for
their potential settlement obligations by acquiring and holding the underlying
securities. A call writer can offset some of the risk of its writing position by
holding a diversified portfolio of stocks similar to those on which the
underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk that the value of the securities
held will vary from the value of the index. Even if an index call writer could
assemble a stock portfolio that exactly reproduced the composition of the
underlying index, the writer still would not be fully covered from a risk
standpoint because of the "timing risk" inherent in writing index options. When
an index option is exercised, the amount of cash that the holder is entitled to
receive is determined by the difference between the exercise price and the
closing index level on the date when the option is exercised. As with other
kinds of options, the writer will not learn that it has been assigned until the
next business day, at the earliest. The time lag between exercise and notice of
assignment poses no risk for the writer of a covered call on a specific
underlying security, such as a common stock, because there the writer's
obligation is to deliver the underlying security, not to pay its value as of a
fixed time in the past. So long as the writer already owns the underlying
security, it can satisfy its settlement obligations by simply delivering it, and
the risk that its value may have declined since the exercise date is borne by
the exercising holder. In contrast, even if the writer of an index call holds
stocks that exactly match the composition of the underlying index, it will not
be able to satisfy its assignment obligations by delivering those stocks against
payment of the exercise price. Instead, it will be required to pay cash in an
amount based on the closing index value on the exercise date; and by the time it
learns that it has been assigned, the index
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may have declined, with a corresponding decrease in the value of its stock
portfolio. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure by holding stock positions.
A holder of an index option who exercises it before the closing index value
for that day is available runs the risk that the level of the underlying index
may subsequently change. If such a change causes the exercised option to fall
out-of-the-money, the exercising holder will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
If dissemination of the current level of an underlying index is interrupted,
or if trading is interrupted in stocks accounting for a substantial portion of
the value of an index, the trading of options on that index will ordinarily be
halted. If the trading of options on an underlying index is halted, an exchange
may impose restrictions prohibiting the exercise of such options.
FUTURES CONTRACTS. The Fund may purchase and sell interest rate and stock
index futures contracts ("futures contracts") that are traded on U.S. commodity
exchanges on such underlying securities as U.S. Treasury bonds, notes and bills
("interest rate" futures) and such indexes as the S&P 500 Index, the Moody's
Investment-Grade Corporate Bond Index and the New York Stock Exchange Composite
Index ("index" futures).
As a futures contract purchaser, the Fund incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, the Fund incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
The Fund will purchase or sell interest rate futures contracts and bond
index futures contracts for the purpose of hedging its fixed-income portfolio
(or anticipated portfolio) securities against changes in prevailing interest
rates. If the Investment Manager anticipates that interest rates may rise and,
concomitantly, the price of fixed-income securities fall, the Fund may sell an
interest rate futures contract or a bond index futures contract. If declining
interest rates are anticipated, the Fund may purchase an interest rate futures
contract to protect against a potential increase in the price of U.S. Government
securities the Fund intends to purchase. Subsequently, appropriate fixed-income
securities may be purchased by the Fund in an orderly fashion; as securities are
purchased, corresponding futures positions would be terminated by offsetting
sales of contracts.
The Fund will purchase or sell stock index futures contracts for the purpose
of hedging its equity portfolio (or anticipated portfolio) securities against
changes in their prices. If the Investment Manager anticipates that the prices
of stock held by the Fund may fall, the Fund may sell a stock index futures
contract. Conversely, if the Investment Manager wishes to hedge against
anticipated price rises in those stocks which the Fund intends to purchase, the
Fund may purchase stock index futures contracts. In addition, interest rate and
stock index futures contracts will be bought or sold in order to close out a
short or long position in a corresponding futures contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Index futures
contracts provide for the delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the open or
close of the last trading day of the contract and the futures contract price. A
futures contract sale is closed out by effecting a futures contract purchase for
the same aggregate amount of the specific type of equity security and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same aggregate amount of the specific
type of equity security and
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<PAGE>
the same delivery date. If the offsetting sale price exceeds the purchase price,
the purchaser would realize a gain, whereas if the purchase price exceeds the
offsetting sale price, the purchaser would realize a loss. There is no assurance
that the Fund will be able to enter into a closing transaction.
INTEREST RATE FUTURES CONTRACTS. When the Fund enters into an interest rate
futures contract, it is initially required to deposit with the Fund's Custodian,
in a segregated account in the name of the broker performing the transaction, an
"initial margin" of cash or U.S. Government securities or other high grade
short-term debt obligations equal to approximately 2% of the contract amount.
Initial margin requirements are established by the Exchanges on which futures
contracts trade and may, from time to time, change. In addition, brokers may
establish margin deposit requirements in excess of those required by the
Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a brokers' client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits called "variation margin", with
the Fund's Custodian, in the account in the name of the broker, which are
reflective of price fluctuations in the futures contract. Currently, interest
rates futures contracts can be purchased on debt securities such as U.S.
Treasury Bills and Bonds, U.S. Treasury Notes with maturities between 6 1/2 and
10 years, GNMA Certificates and Bank Certificates of Deposit.
INDEX FUTURES CONTRACTS. The Fund may invest in index futures contracts. An
index futures contract sale creates an obligation by the Fund, as seller, to
deliver cash at a specified future time. An index futures contract purchase
would create an obligation by the Fund, as purchaser, to take delivery of cash
at a specified future time. Futures contracts on indexes do not require the
physical delivery of securities, but provide for a final cash settlement on the
expiration date which reflects accumulated profits and losses credited or
debited to each party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirement is approximately 5% of the contract amount for index futures.
In addition, due to current industry practice, daily variations in gains and
losses on open contracts are required to be reflected in cash in the form of
variation margin payments. The Fund may be required to make additional margin
payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may elect
to close the position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or a gain.
Currently, index futures contracts can be purchased or sold with respect to,
among others, the Standard & Poor's 500 Stock Price Index and the Standard &
Poor's 100 Stock Price Index on the Chicago Mercantile Exchange, the New York
Stock Exchange Composite Index on the New York Futures Exchange, the Major
Market Index on the American Stock Exchange, the Moody's Investment-Grade
Corporate Bond Index on the Chicago Board of Trade and the Value Line Stock
Index on the Kansas City Board of Trade.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect to
such options to terminate an existing position. An option on a futures contract
gives the purchaser the right (in return for the premium paid), and the writer
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option is accompanied by delivery of the accumulated balance in
the writer's futures
21
<PAGE>
margin account, which represents the amount by which the market price of the
futures contract at the time of exercise exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the futures
contract.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the Investment
Manager wished to protect against an increase in interest rates and the
resulting negative impact on the value of a portion of its fixed-income
portfolio, it might write a call option on an interest rate futures contract,
the underlying security of which correlates with the portion of the portfolio
the Investment Manager seeks to hedge. Any premiums received in the writing of
options on futures contracts may, of course, augment the total return of the
Fund and thereby provide a further hedge against losses resulting from price
declines in portions of the Fund's portfolio.
The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
However, there is no overall limitation on the percentage of the Fund's assets
which may be subject to a hedge position. In addition, in accordance with the
regulations of the Commodity Futures Trading Commission ("CFTC") under which the
Fund is exempted from registration as a commodity pool operator, the Fund may
only enter into futures contracts and options on futures contracts transactions
for purposes of hedging a part or all of its portfolio. If the CFTC changes its
regulations so that the Fund would be permitted to write options on futures
contracts for purposes other than hedging the Fund's investments without CFTC
registration, the Fund may engage in such transactions for those purposes.
Except as described above, there are no other limitations on the use of futures
and options thereon by the Fund.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The Fund
may sell a futures contract to protect against the decline in the value of
securities held by the Fund. However, it is possible that the futures market may
advance and the value of securities held in the portfolio of the Fund may
decline. If this occurred, the Fund would lose money on the futures contract and
also experience a decline in value of its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio will tend to move in the same direction as
the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Fund may determine not to invest in the securities as
planned and will realize a loss on the futures contract that is not offset by a
reduction in the price of the securities.
In 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.
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<PAGE>
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 (in the
case of a stock index futures contract a portfolio of securities substantially
replicating the relevant index), or by holding a call option permitting the Fund
to purchase the same contract at a price no higher than the price at which the
short position was established.
Exchanges may limit the amount by which the price of futures contracts may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased.
The extent to which the Fund may enter into transactions involving options
and futures contracts may be limited by the Internal Revenue Code's requirements
for qualification as a regulated investment company and the Fund's intention to
qualify as such. See "Dividends, Distributions and Taxes" in the Prospectus and
the Statement of Additional Information.
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.
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.
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.
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
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Fund's portfolio, the Investment Manager will rely on information from various
sources, including research, analysis and appraisals of brokers and dealers,
including DWR; 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. It is anticipated that the Fund's portfolio
turnover rate 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 acquisitions 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. 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 issuers.
2. Purchase or sell real estate or interests therein, (including
limited partnership interests) although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured by
real estate or interests therein.
3. Purchase 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.
4. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or aquisition of
assets.
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 its total assets (not including the
amount borrowed).
6. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(5). For the purpose of this restriction, collateral arrangements with
respect to the writing of options and collateral arrangements with respect
to initial or variation margin for futures are not deemed to be pledges of
assets.
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 borrowing
money in accordance with restrictions described above.
8. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations in which the Fund may invest
consistent with its investment objective and policies; (b) by investment in
repurchase agreements; or (c) by lending its portfolio securities.
9. Make short sales of securities.
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<PAGE>
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.
12. Invest for the purpose of exercising control or management of any
other issuer.
In addition, the Fund, as a non-fundamental policy, will not invest in
warrants, although it may acquire warrants attached to other securities
purchased by the Fund.
With respect to the investment restrictions listed above and those listed in
the Prospectus, 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 Board of Trustees, the Investment
Manager is responsible for decisions to buy and sell securities for the Fund,
the selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a stock exchange are effected through brokers who charge a commission for
their services. In the over-the-counter market, securities are generally traded
on a "net" basis with dealers acting as principal for their own accounts without
a stated commission, although the price of the security usually includes a
profit to the dealer. Securities may be purchased at times in underwriting
offerings where the price includes a fixed amount of compensation, generally
referred to as the underwriter's concession or discount. Options and futures
transactions will usually be effected through a broker and a commission will be
charged. On occasion, the Fund may also purchase certain money market
instruments directly from an issuer, in which case no commissions or discounts
are paid.
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 amounts of brokerage commissions paid by the Fund during the
fiscal years ended December 31, 1991, 1992 and 1993 were $930,348, $1,391,109
and $899,273, respectively.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager from obtaining a high quality of
brokerage and research services. In seeking to determine the reasonableness of
brokerage commissions paid in any transaction, the Investment Manager relies
upon its experience and knowledge regarding commissions generally charged by
various brokers and on its judgment in evaluating the brokerage and research
services received from the broker effecting the transaction. Such determinations
are necessarily subjective and imprecise, as in most cases an exact dollar value
for those services is not ascertainable.
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<PAGE>
In seeking to implement the Fund's policies, the Investment Manager effects
transactions with those brokers and dealers who the Investment Manager believes
provide the most favorable prices and are capable of providing efficient
executions. If the Investment Manager believes such prices and executions are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Investment Manager. Such services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities. During the
fiscal year ended December 31, 1993, the Fund directed the payment of $687,188
in brokerage commissions in connection with transactions in the aggregate amount
of $357,302,590 to brokers because of research services provided.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the management fee paid to the Investment
Manager is not reduced by any amount that may be attributable to the value of
such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR. In order for DWR to effect any portfolio transactions for
the Fund, the commissions, fees or other remuneration received by DWR must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow DWR to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Board of Trustees of the
Fund, including a majority of the Trustees who are not "interested" persons of
the Fund, as defined in the Act, have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to DWR
are consistent with the foregoing standard. During the fiscal years ended
December 31, 1991, 1992 and 1993, the Fund paid a total of $155,135, $259,425
and $129,600, 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 December
31, 1993, the brokerage commissions paid to DWR represented approximately 14.41%
of the total brokerage commissions paid by the Fund during the period and were
paid on account of transactions having an aggregate dollar value equal to
approximately 17.34% of the aggregate dollar value of all portfolio transactions
of the Fund during the period for which commissions were paid.
During the fiscal year ended December 31, 1993, the Fund purchased
securities issued by Goldman, Sachs & Co. In its capacity as a broker-dealer,
this firm, or its brokerage affiliates, were among the ten broker-dealers who
executed, on a principal basis, the largest dollar amounts of portfolio
securities transactions for the Fund. At December 31, 1993, the Fund held
securities issued by Goldman Sachs & Co. with a total value of $16,875,061 at
such date.
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THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of DWDC. The Trustees of the
Fund, including a majority of the Trustees who are not, and were not at the time
they voted, interested persons of the Fund, as defined in the Act (the
"Independent Trustees"), approved, at their meeting held on October 30, 1992, a
Distribution Agreement appointing the Distributor exclusive distributor of the
Fund's shares and providing for the Distributor to bear distribution expenses
not borne by the Fund. The Distribution Agreement took effect on June 30, 1993
upon the spin-off by Sears, Roebuck and Co. of its remaining shares of DWDC. By
its terms, the Distribution Agreement has an initial term ending April 30, 1994,
and provides that it will remain in effect from year to year thereafter if
approved by the Board.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor will also pay 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 will bear the costs of registering the Fund and
its shares under federal and state securities laws. The Fund and the Distributor
have agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. Under the Distribution
Agreement, the Distributor uses its best efforts in rendering services to the
Fund, but in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations, the Distributor is not liable to the Fund
or any of its shareholders for any error of judgment or mistake of law or for
any act or omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
To compensate the Distributor for the services it 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 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
$3,172,000, $3,476,000 and $6,187,000, none of which was retained by the
Distributor in contingent deferred sales charges for the fiscal years ended
December 31, 1991, 1992 and 1993.
Under its terms, the Plan had an initial term ending April 30, 1988, 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 Trustees of the Fund, including a majority of the
Independent 12b-1 Trustees, at their meeting held on January 14, 1988 and
subsequently by the shareholders at the Meeting of Shareholders on June 28,
1989. Continuation of the Plan was most recently approved by the Trustees,
including a majority of the Independent 12b-1 Trustees, on April 28,
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1993 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, 1994. In making their determination to continue the Plan, the Trustees
considered: (1) the Fund's experience under the Plan and whether such experience
indicates that the Plan is operating as anticipated; (2) the benefits the Fund
had obtained, was obtaining and would be likely to obtain under the Plan; and
(3) what services had been provided and were continuing to be provided under the
Plan by DWR to the Fund and its shareholders. Based upon their review, the
Trustees of the Fund, including each of the Independent 12b-1 Trustees,
determined that continuation of the Plan would be in the best interest of the
Fund and would have a reasonable likelihood of continuing to benefit the Fund
and its shareholders. In the Trustees' quarterly reviews of the Plan, they will
consider its continued appropriateness and the level of compensation provided
therein.
At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the independent 12b-1 Trustees, approved certain amendments to
the Plan which took effect in January, 1993 and were designed to reflect the
fact that upon the reorganization described above the share distribution
activities theretofore performed for the Fund by DWR were assumed by the
Distributor and that 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 they had been 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.
The Distributor has informed the Fund that a portion of the fees payable by
the Fund each year pursuant to the Plan equal to 0.25% of the Fund's average
daily net assets is characterized as a "service fee" under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (of which the
Distributor is a member). Such portion of the fee is a payment made for personal
service and/or the maintenance of shareholder accounts. The remaining portion of
the Plan fees payable by the Fund is characterized as an "asset-based sales
charge" as defined in the aforementioned Rules of Fair Practice.
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 by the Distributor under the Plan and
the purpose for which such expenditures were made. The Fund accrued amounts
payable to the Distributor under the Plan, during the fiscal year ended December
31, 1993 of $29,856,959. 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 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. 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 of up to .25 of 1% of the current value (not including reinvested
dividends or distributions) of the amount sold. The gross sales credit is a
charge which reflects commissions paid by DWR to its account executives and
DWR's Fund associated distribution-related expenses, including sales
compensation and overhead and other branch office distribution-related expenses
including: (a) the expenses of operating DWR's branch offices in connection with
the sale of Fund shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and
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<PAGE>
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.
The distribution fee that the Distributor receives from the Fund under the Plan,
in effect, offsets distribution expenses incurred on behalf of the Fund and
opportunity costs, such as the gross sales credit and an assumed interest charge
thereon ("carrying charge"). In the Distributor's reporting of the distribution
expenses to the Fund, such assumed interest (computed at the "broker's call
rate") has been calculated on the gross sales credit as it is reduced by amounts
received by the Distributor under the Plan and any contingent deferred sales
charges received by the Distributor upon redemption of shares of the Fund. No
other interest charge is included as a distribution expense in the Distributor's
calculation of 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 $29,856,959 accrued under the Plan for the fiscal
year ended December 31, 1993, to DWR, the distributor of the Fund's shares. DWR
estimates that it has spent, pursuant to the Plan, $221,228,143 on behalf of the
Fund since the inception of the Plan. It is estimated that this amount was spent
in approximately the following ways: (i) 0.93% ($2,058,159) -- advertising and
promotional expenses; (ii) .13% ($296,508) -- printing of prospectuses for
distribution to other than current shareholders; and (iii) 98.94% ($218,873,476)
- -- other expenses, including the gross sales credit and the carrying charge, of
which 6.70% ($14,664,205) represents carrying charges, 36.73% ($80,397,190)
represents commission credits to DWR branch offices for payments of commissions
to account executives and 56.57% ($123,812,081) represents overhead and other
branch office distribution-related expenses.
At any given time, the expenses of distributing shares of the Fund which may
be more or less than the total of (i) the payments made by the Fund pursuant to
the Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. DWR has advised the Fund that such excess
amount, including the carrying charge designed to approximate the opportunity
costs incurred by DWR which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's shares, totalled $116,843,183 as of December 31, 1993. Because there is
no requirement under the Plan that the Distributor be reimbursed for all its
expenses or any requirement that the Plan be continued from year to year, this
excess amount does not constitute a liability of the Fund. Although there is no
legal obligation for the Fund to pay distribution expenses in excess of payments
made to the Distributor under the Plan and the proceeds of contingent deferred
sales charges paid by investors upon redemption of shares, if for any reason the
Plan is terminated, the Trustees will consider at that time the manner in which
to treat such expenses. Any cumulative expenses incurred, but not yet recovered
through distribution fees or contingent deferred sales charges, may or may not
be recovered through future distribution fees 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, had any direct or indirect
financial interest in the operation of the Plan except to the extent that the
Distributor, InterCapital, DWR or certain of their employees may be deemed to
have such an interest as a result of benefits derived from the successful
operation of the Plan 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 of the shareholders of the
Fund, and all material amendments of 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 Trustees shall be committed to the discretion of the
Independent Trustees.
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DETERMINATION OF NET ASSET VALUE
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As stated in the Prospectus, short-term debt securities with remaining
maturities of 60 days or less at the time of purchase are valued at amortized
cost, unless the 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. 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
that 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 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 the Fund's
Transfer Agent (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 other selected
broker-dealer, which will be forwarded to the shareholder, upon the receipt of
proper instructions.
TARGETED DIVIDENDS.SM In states where such 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 the
Dean Witter Utilities Fund. Such investment will be made as described above for
automatic investment in shares of the Fund, at the net asset value per share of
the selected Dean Witter Fund as of the close of business on the payment date of
the dividend or distribution and will begin
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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 Dean Witter Utilities 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
EasyInvst, shareholders should contact their DWR or other selected dealer
account executive or the Transfer Agent.
INVESTMENT OF DISTRIBUTIONS RECEIVED IN CASH. As discussed in the
Prospectus, any shareholder who receives a cash payment representing a dividend
or distribution may invest such dividend or distribution at net asset value 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 proceeds by the Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a 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.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for Federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six years
(see "Redemptions and Repurchases-- Contingent Deferred Sales Charge").
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 on the tenth or
twenty-fifth day (or next following business day) of the relevant month or
quarter and normally a check for the proceeds will be mailed by the Transfer
Agent, or amounts credited to a shareholder's DWR brokerage account, within five
business days after the date of redemption. The Systematic Withdrawal Plan may
be terminated at any time by the Transfer Agent.
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 and the
address to which checks are mailed may be changed by written notification to the
Transfer Agent. In
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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 Shareholder
Investment Account. The shareholder may also redeem all or part of the shares
held in the Systematic Withdrawal Plan account (see "Redemptions and
Repurchases") at any time.
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 the Distributor or the Fund.
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
Utilities Fund, directly to the Fund's Transfer Agent. Such amounts will be
applied to the purchase of Fund shares at the net asset value per share next
computed after receipt of the check or purchase payment by the Transfer Agent.
The shares so purchased will be credited to the investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of the Fund may exchange their shares
for shares of other Dean Witter Funds sold with a contingent deferred sales
charge ("CDSC funds"), and for shares of Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond
Fund and five Dean Witter Funds which are money market funds (the foregoing
eight non-CDSC Funds are hereinafter referred to as "Exchange Funds"). Exchanges
may be made after the shares of the Fund acquired by purchase (not by exchange
or dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
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 investment period or "year since
purchase payment made" is frozen. When shares are redeemed out of the Exchange
Fund they will be subject to a CDSC which would be based upon the period of time
the shareholder held shares in a CDSC fund. However, in the case of shares of
the Fund exchanged into 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,
if any, incurred on or after that date which
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<PAGE>
are attributable to those shares. Shareholders acquiring shares of an Exchange
Fund pursuant to this exchange privilege may exchange those shares back into a
CDSC fund from the Exchange Fund, with no CDSC being imposed on such exchange.
The investment period previously frozen when shares were first exchanged for
shares of the Exchange Fund resumes on the last day of the month in which shares
of a CDSC fund are reacquired. A CDSC is imposed only upon an ultimate
redemption, based upon the time (calculated as described above) the shareholder
was invested in a CDSC fund.
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund, or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon redemption,
will be the last day of the month in which the shares being exchanged were
originally purchased. In allocating the purchase payments between funds for
purposes of the 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
acquired prior to April 30, 1984, shares of Dean Witter Dividend Growth
Securities Inc. and Dean Witter Natural Resource Development Securities Inc.
acquired prior to July 2, 1984, and shares of Dean Witter Strategist Fund
acquired prior to November 8, 1989, are also considered Free Shares and will be
the first Free Shares to be exchanged. After an exchange, all dividends earned
on shares in an Exchange Fund will be considered Free Shares. If the exchanged
amount exceeds the value of such Free Shares, an exchange is made, on a
block-by-block basis, of non-Free Shares held for the longest period of time
(except that if shares held for identical periods of time but subject to
different CDSC schedules are held in the same Exchange Privilege account, the
shares of that block that are subject to a lower CDSC rate will be exchanged
prior to the shares of that block that are subject to a higher CDSC rate).
Shares equal to any appreciation in the value of non-Free Shares exchanged will
be treated as Free Shares, and the amount of the purchase payments for the
non-Free Shares of the fund exchanged into will be equal to the lesser of (a)
the purchase payments for, or (b) the current net asset value of, the exchanged
non-Free Shares. If an exchange between funds would result in exchange of only
part of a particular block of non-Free Shares, then shares equal to any
appreciation in the value of the block (up to the amount of the 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.
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With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
fund and the general administration of the Exchange Privilege. No commission or
discounts will be paid to the Distributor or any selected broker-dealer for any
transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000 for
Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income Trust,
Dean Witter California Tax-Free Daily Income Trust and Dean Witter New York
Municipal Money Market Trust although those funds may, at their discretion,
accept initial investments of as low as $1,000. The minimum initial investment
is $10,000 for Dean Witter Short-Term U.S. Treasury Trust, although that fund,
in its discretion, may accept initial purchases of as low as $5,000. The minimum
initial investment for all other Dean Witter Funds for which the Exchange
Privilege is available is $1,000.) Upon exchange into an Exchange Fund, the
shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of 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 the Exchange Privilege, and provided further that the
Exchange Privilege may be terminated or materially revised without notice at
times (a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c) when
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, (d) during any
other period when the Securities and Exchange Commission by order so permits
(provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist) or (e) if the Fund would be unable to invest amounts effectively in
accordance with its investment objective, policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
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 shareholders, the shares may be
redeemed by surrendering the certificates with a written request for redemption.
34
<PAGE>
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 a means of a new
prospectus.
CONTINGENT DEFERRED SALES CHARGE. As stated in the Prospectus, a contingent
deferred sales charge ("CDSC") will be imposed on any redemption by an investor
if after such redemption the current value of the investor's shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Fund shares during the preceding six years. However, no CDSC will be
imposed to the extent that the net asset value of the shares redeemed does not
exceed (a) the current net asset value of shares purchased more than six years
prior to the redemption, plus (b) the current net asset value of shares
purchased through reinvestment of dividends or distributions of the Fund or
another Dean Witter Fund (see "Shareholder Services--Targeted Dividends"), plus
(c) the current net asset value of shares acquired in exchange for (i) shares of
Dean Witter front-end sales charge funds, or (ii) shares of other Dean Witter
Funds for which shares of front-end sales charge funds have been exchanged (see
"Shareholder Services--Exchange Privilege"), plus (d) increases in the net asset
value of the investor's shares above the total amount of payments for the
purchase of Fund shares made during the preceding six years. The CDSC will be
paid to the Distributor. In addition, no CDSC will be imposed on redemptions of
shares which were purchased by the employee benefit plans established by DWR and
SPS Transaction Services, Inc. (an affiliate of DWR) for their employees as
qualified under Section 401(k) of the Internal Revenue Code.
In determining the applicability of a CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will be
the amount which represents the net asset value of the investor's shares
purchased more than six years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions and/or shares acquired in
exchange for shares of Dean Witter front-end sales charge funds, or for shares
of other Dean Witter Funds for which shares of front-end sales charge funds have
been exchanged. Any 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
35
<PAGE>
determining the number of years from the time of any payment for the purchase of
shares, all payments made during a month will be aggregated and deemed to have
been made on the last day of the month. The following table sets forth the rates
of the CDSC:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- -------------------------------------------------------------------------------------------- -----------------------
<S> <C>
First....................................................................................... 5.0%
Second...................................................................................... 4.0%
Third....................................................................................... 3.0%
Fourth...................................................................................... 2.0%
Fifth....................................................................................... 2.0%
Sixth....................................................................................... 1.0%
Seventh and thereafter...................................................................... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable six-year period. This will result in any such CDSC being imposed at
the lowest possible rate. Accordingly, shareholders may redeem, without
incurring any CDSC, amounts equal to any net increase in the value of their
shares above the amount of their purchase payments made within the past six
years and amounts equal to the current value of shares purchased more than six
years prior to the redemption and shares purchased through reinvestment of
dividends or distributions or acquired in exchange for shares of Dean Witter
front-end sales charge funds, or for shares of other Dean Witter Funds for which
shares of front-end sales charge funds have been exchanged. The CDSC will be
imposed, in accordance with the table shown above, on any redemptions within six
years of purchase which are in excess of these amounts and which redemptions are
not (a) requested within one year of death or initial determination of
disability of a shareholder, or (b) made pursuant to certain taxable
distributions from retirement plans or retirement accounts, as described above.
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 to fairly 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 dealer are referred to their account executive regarding
restrictions on redemption of shares of the Fund pledged in the margin account.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the contingent deferred sales charge or free of such charge
(and with regard to the length of time shares subject to the charge have been
held), any transfer involving less than all of the shares in account will be
made on a pro-rata basis (that is, by transferring
36
<PAGE>
shares in the same proportion that the transferred shares bear to the total
shares in the account immediately prior to the transfer). The transferred shares
will continue to be subject to any applicable contingent deferred sales charge
as if they had not been so transferred.
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within thirty days after the date of
redemption or repurchase reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund at the net asset value next
determined after a reinstatement request, together with the proceeds, is
received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes,
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
INVOLUNTARY REDEMPTION. As discussed in the Prospectus, the Fund reserves
the right, on 60 days' notice, to redeem, at their net asset value, the shares
of any shareholder 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 60 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
- --------------------------------------------------------------------------------
The Fund will determine either to distribute or to retain all or part of any
net long-term capital gains in any year for reinvestment. If any such gains are
retained, the Fund will pay federal income tax thereon, and shareholders will be
able to claim their share of the tax paid by the Fund as a credit against their
individual federal income tax.
Because the Fund intends to distribute all of its net investment income and
capital gains to shareholders and otherwise continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, it is not
expected that the Fund will be required to pay any federal income tax.
Shareholders will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from the
net investment income or short-term capital gains, are taxable to the
shareholder as ordinary income regardless of whether the shareholder receives
such payments in additional shares or in cash. Any dividends declared in the
last quarter of any year which are paid in the 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.
Gains or losses on the Fund's transactions, if any, in listed options on
non-equity securities, 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 net short-term gains being available for
distribution.
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have a tax holding period of more than twelve
months. Gains or losses on the sale of securities with a tax holding period of
twelve months or less will be short-term gains or losses.
37
<PAGE>
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of its gross income be derived from
gains from the sale or other disposition of securities held for less than three
months. Accordingly, the Fund may be restricted in the writing of options on
securities held for less than three months, in the writing of options which
expire in less than three months, and in effecting closing transactions with
respect to call or put options which have been written or purchased less than
three months prior to such transactions. The Fund may also be restricted in its
ability to engage in transactions involving futures contracts.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction.
As stated under "Investment Practices and Policies", the Fund may invest up
to 35% of its portfolio in securities other than in the utilities industry,
including U.S. Government securities. Under current federal tax law, the Fund
will receive net investment income in the form of interest by virtue of holding
Treasury bills, notes and bonds, and will recognize income attributable to it
from holding zero coupon Treasury securities. Current federal tax law requires
that a holder (such as the Fund) of a zero coupon security accrue a portion of
the discount at which the security was purchased as income each year even though
the Fund receives no interest payment in cash on the security during the year.
As an investment company, the Fund must pay out substantially all of its net
investment income each year. Accordingly, the Fund, to the extent it invests in
zero coupon Treasury securities, may be required to pay out as an income
distribution each year an amount which is greater than the total amount of cash
receipts of interest the Fund actually received. Such distributions will be made
from the available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Investment Manager will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
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. Therefore, an investor should consider the
tax implications of purchasing Fund shares immediately prior to a dividend or
distribution record date.
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
for 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 to a Fund shareholder which incurs or continues indebtedness which is
directly attributable to its investment in the Fund.
At the end of the year, shareholders will be sent full information on their
dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the portion eligible for the dividends received
deduction. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and the proceeds of redemptions
and repurchases, shareholders' taxpayer identification numbers must be furnished
and certified as to their accuracy.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
38
<PAGE>
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
December 31, 1993, the Fund's yield, calculated pursuant to the formula
described above, was 4.29%.
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 year ended December 31, 1993, for the five years ended December
31, 1993 and for the life of the Fund were 7.79%, 12.36% and 12.44%,
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 year ended December 31,
1993, for the five years ended December 31, 1993 and for the life of the Fund
were 12.79%, 12.61% and 12.54%, respectively.
In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value (without the
reduction for any contingent deferred sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing
calculation, the Fund's total return for the year ended December 31, 1993, for
the five years ended December 31, 1993 and for the life of the Fund were 12.79%,
81.09% and 95.41%, respectively.
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 $19,541, $97,705 and $195,410,
respectively, at December 31, 1993.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes complied by independent organizations.
39
<PAGE>
DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the shareholders of the Fund are entitled to
a full vote for each full share held. 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 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 in the
Declaration of Trust concerning termination by action of the shareholders or the
Trustees.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 110 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager and Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts; disbursing
cash dividends and reinvesting dividends; processing account registration
changes; handling purchase and redemption transactions; mailing prospectuses and
reports; mailing and tabulating proxies; processing share certificate
transactions; and maintaining shareholder records and lists. For these services
Dean Witter Trust Company receives a per shareholder account fee from the Fund.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
40
<PAGE>
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on December 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund included in this Statement of
Additional Information and incorporated by reference in the Prospectus have been
so included and incorporated in reliance on the report of Price Waterhouse,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
41
<PAGE>
Dean Witter Utilities Fund
Portfolio of Investments DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- ----------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (31.2%)
ELECTRIC UTILITIES (22.8%)
$ 1,499 AEP Generating Co..................................................... 9.81% 12/ 7/22 $ 1,879,444
2,000 Arizona Public Service Company........................................ 7.625 6/15/99 2,147,840
7,000 Arizona Public Service Company........................................ 7.25 8/ 1/23 6,720,420
14,000 Arizona Public Service Company........................................ 8.00 2/ 1/25 14,592,760
17,000 Arkansas Power & Light Company........................................ 7.00 10/ 1/23 15,821,730
10,000 BVPS II Funding....................................................... 8.68 6/ 1/17 11,363,800
5,000 Carolina Power & Light Company........................................ 8.20 7/ 1/22 5,401,900
3,000 Central Hudson Gas & Electric Corp.................................... 9.25 5/ 1/21 3,502,410
5,000 Central Power & Light Company......................................... 7.50 4/ 1/23 5,069,900
6,000 Chugach Electric Company.............................................. 9.14 3/15/22 7,058,520
5,000 Cincinnati Gas & Electric Company..................................... 10.125 5/ 1/20 5,412,000
8,000 Cincinnati Gas & Electric Company..................................... 8.50 9/ 1/22 8,863,200
12,000 Cincinnati Gas & Electric Company..................................... 7.20 10/ 1/23 11,699,040
10,000 Commonwealth Edison Company........................................... 7.50 7/ 1/13 10,068,800
5,000 Commonwealth Edison Company........................................... 9.50 5/ 1/16 5,613,500
6,000 Commonwealth Edison Company........................................... 8.875 10/ 1/21 6,756,780
10,000 Commonwealth Edison Company........................................... 8.50 7/15/22 10,628,000
5,000 Commonwealth Edison Company........................................... 8.375 9/15/22 5,293,200
5,000 Commonwealth Edison Company........................................... 7.75 7/15/23 5,027,100
10,000 Consolidated Edison of New York....................................... 7.50 6/15/23 10,200,100
16,000 Consumer Power Company................................................ 7.375 9/15/23 15,465,920
10,000 CTC Beaver Valley Funding Corp........................................ 9.00 6/ 1/17 9,404,900
5,000 CTC Mansfield Funding Corp............................................ 10.25 3/30/03 5,150,000
5,000 CTC Mansfield Funding Corp............................................ 11.125 9/30/16 5,275,000
10,000 Dayton Power & Light Company.......................................... 8.15 1/15/26 10,703,400
5,000 Detroit Edison Company................................................ 7.74 6/ 1/18 5,069,600
5,000 Detroit Edison Company................................................ 8.27 8/ 1/22 5,382,750
10,000 Detroit Edison Company................................................ 7.77 3/15/23 10,218,100
20,000 DQU II Funding Corp................................................... 8.70 6/ 1/16 22,479,000
10,000 Duke Power Company.................................................... 8.75 3/ 1/21 10,469,000
5,000 Duke Power Company.................................................... 8.625 3/ 1/22 5,660,900
15,000 Duke Power Company.................................................... 7.00 7/ 1/33 14,476,650
5,000 Duquesne Lighting Company............................................. 7.625 4/15/23 5,035,900
5,000 Florida Power & Light Company......................................... 7.75 2/ 1/23 5,107,150
5,000 Florida Power & Light Company......................................... 7.625 6/ 1/24 5,063,450
1,000 GG1A Funding Corp..................................................... 11.07 1/15/04 1,056,930
3,000 GG1A Funding Corp..................................................... 11.50 1/15/14 3,263,700
10,000 Gulf States Utility Company........................................... 8.94 1/ 1/22 10,891,700
13,000 Gulf States Utility Company........................................... 8.70 4/ 1/24 14,254,630
5,000 Houston Light & Power Company......................................... 8.75 3/ 1/22 5,581,000
13,000 Houston Light & Power Company......................................... 7.75 3/15/23 13,343,850
12,000 Illinois Power Company................................................ 8.75 7/ 1/21 13,220,280
5,000 Illinois Power Company................................................ 8.00 2/15/23 5,136,850
10,000 Illinois Power Company................................................ 7.50 7/15/25 9,877,700
5,000 Jersey Central Power & Light Company.................................. 10.125 4/ 1/19 5,365,500
15,000 Jersey Central Power & Light Company.................................. 6.75 11/ 1/25 13,960,500
8,000 Long Island Lighting Company.......................................... 8.90 7/15/19 8,357,200
5,000 Long Island Lighting Company.......................................... 9.75 5/ 1/21 5,674,700
10,000 Long Island Lighting Company.......................................... 9.00 11/ 1/22 10,428,200
14,100 Long Island Lighting Company.......................................... 8.20 3/15/23 13,852,263
5,000 Long Island Lighting Company.......................................... 9.625 7/ 1/24 5,694,450
7,000 Louisiana Land & Exploration Co. (The)................................ 7.65 12/ 1/23 6,907,390
</TABLE>
42
<PAGE>
Dean Witter Utilities Fund
Portfolio of Investments DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- ----------------
<C> <S> <C> <C> <C>
$ 4,000 Monongahela Power Company............................................. 8.875% 8/ 1/19 $ 4,268,000
10,100 National Cooperative Services Corp.................................... 9.375 1/ 2/11 10,668,630
2,903 National Rural Utilities Finance Corp................................. 9.48 1/ 1/12 3,150,684
5,250 National Rural Utilities Finance Corp................................. 9.00 9/ 1/21 6,176,887
5,000 New York State Electric & Gas Corp.................................... 6.75 10/15/02 5,093,200
5,000 New York State Electric & Gas Corp.................................... 9.875 2/ 1/20 5,574,900
3,000 New York State Electric & Gas Corp.................................... 8.875 11/ 1/21 3,368,940
2,000 Niagara Mohawk Power Corp............................................. 9.75 11/ 1/05 2,496,700
4,955 Niagara Mohawk Power Corp............................................. 8.77 1/ 1/18 5,367,751
3,750 Niagara Mohawk Power Corp............................................. 8.75 4/ 1/22 4,127,175
14,000 Niagara Mohawk Power Corp............................................. 8.50 7/ 1/23 15,027,460
5,000 Niagara Mohawk Power Corp............................................. 7.875 4/ 1/24 5,082,050
5,000 Northeast Utilities................................................... 8.58 12/ 1/06 5,831,100
5,000 Ohio Edison Company................................................... 8.25 4/ 1/02 5,600,650
5,000 Ohio Edison Company................................................... 7.375 9/15/02 5,292,150
7,000 Old Dominion Electric Company......................................... 8.76 12/ 1/22 8,159,480
7,000 Pacific Gas & Electric Company........................................ 8.25 11/ 1/22 7,611,800
15,000 Pacific Gas & Electric Company........................................ 6.75 10/ 1/23 14,033,250
6,750 Pacific Gas & Electric Company........................................ 7.25 3/ 1/26 6,648,818
25,000 Pacific Gas & Electric Company........................................ 7.25 8/ 1/26 24,693,250
5,000 Pennsylvania Power & Light Company.................................... 10.00 1/ 1/19 5,374,000
3,000 Pennsylvania Power & Light Company.................................... 9.25 10/ 1/19 3,430,200
2,000 Pennsylvania Power & Light Company.................................... 9.375 7/ 1/21 2,374,260
5,000 Pennsylvania Power & Light Company.................................... 8.50 5/ 1/22 5,452,250
5,500 Pennsylvania Power & Light Company.................................... 7.875 2/ 1/23 5,768,675
15,000 Pennsylvania Power & Light Company.................................... 6.75 10/ 1/23 14,033,250
8,000 Philadelphia Electric Company......................................... 8.625 6/ 1/22 8,689,440
7,000 Philadelphia Electric Company......................................... 8.25 9/ 1/22 7,340,830
10,000 Philadelphia Electric Company......................................... 7.75 5/ 1/23 9,976,000
5,000 Philadelphia Electric Company......................................... 7.25 11/ 1/24 4,735,200
5,000 PNPP II (Perry Nuclear Power Plant) Funding Corp...................... 9.12 5/30/16 5,675,250
4,000 Potomac Edison Company................................................ 9.25 6/ 1/19 4,280,000
10,000 Potomac Electric Power Company........................................ 7.25 7/ 1/23 9,827,700
12,250 Public Service Company of Colorado.................................... 8.75 3/ 1/22 13,719,755
4,900 Public Service Electric & Gas Company................................. 9.75 7/ 1/20 5,328,750
20,000 Public Service Electric & Gas Company................................. 7.00 9/ 1/24 19,218,400
4,000 South Carolina Electric Company....................................... 8.875 8/15/21 4,498,920
7,000 South Carolina Electric Company....................................... 7.625 6/ 1/23 7,094,430
5,000 South Carolina Electric Company....................................... 7.50 6/15/23 5,005,550
8,000 Southern California Edison Company.................................... 8.875 5/ 1/23 8,956,320
5,000 Southern California Edison Company.................................... 8.875 6/ 1/24 5,590,000
14,000 Southern California Edison Company.................................... 7.25 3/ 1/26 13,827,800
2,000 Systems Energy Resource............................................... 11.375 9/ 1/16 2,107,960
4,000 Texas Utilities Electric Company...................................... 7.46 1/ 1/15 4,070,760
5,000 Texas Utilities Electric Company...................................... 10.00 8/ 1/19 5,447,700
8,000 Texas Utilities Electric Company...................................... 10.625 9/ 1/20 9,265,280
12,000 Texas Utilities Electric Company...................................... 8.875 2/ 1/22 13,283,760
5,000 Texas Utilities Electric Company...................................... 8.75 11/ 1/23 5,504,600
10,000 Texas Utilities Electric Company...................................... 7.875 4/ 1/24 10,202,300
9,000 Union Electric Company................................................ 8.25 10/15/22 9,875,610
8,000 United Illuminating Company........................................... 10.24 1/ 2/20 9,100,720
8,000 Utilicorp United, Inc................................................. 9.00 11/15/21 9,220,160
10,000 Utilicorp United, Inc................................................. 8.00 3/ 1/23 10,096,000
3,000 Western Resources, Inc................................................ 8.50 7/ 1/22 3,329,790
</TABLE>
43
<PAGE>
Dean Witter Utilities Fund
Portfolio of Investments DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- ----------------
<C> <S> <C> <C> <C>
$ 7,000 Western Resources, Inc................................................ 7.65% 4/15/23 $ 7,131,320
5,000 Wisconsin Electric Power Company...................................... 7.25 8/ 1/04 5,500,450
19,000 Wisconsin Electric Power Company...................................... 7.70 12/15/27 19,943,160
5,000 Wisconsin Power & Light Co............................................ 8.60 3/15/27 5,742,800
----------------
883,241,232
----------------
NATURAL GAS (3.3%)
3,000 Anadarko Petroleum Corp............................................... 8.75 2/15/98 3,322,140
5,000 ANR Pipeline Company.................................................. 9.625 11/ 1/21 5,975,850
7,000 Arkla, Inc............................................................ 10.00 11/15/19 7,970,340
14,500 Coastal Corp.......................................................... 9.625 5/15/12 16,963,550
5,000 Colorado Interstate Gas Co............................................ 10.00 6/15/05 6,161,650
5,000 El Paso Natural Gas Company........................................... 7.75 1/15/02 5,382,350
10,000 Enron Corp............................................................ 7.00 8/15/23 9,461,900
5,150 Mitchell Energy/Development Corp...................................... 11.25 2/15/99 5,356,000
5,000 Mitchell Energy/Development Corp...................................... 9.25 1/15/02 5,574,300
596 National Fuel Gas Company............................................. 9.50 7/ 1/19 641,296
5,000 Northern Illinois Gas Co.............................................. 9.00 7/ 1/19 5,352,000
5,000 Northwest Pipeline Corp............................................... 10.65 11/15/18 5,373,200
2,000 Northwest Pipeline Corp............................................... 9.00 8/ 1/22 2,233,840
9,000 Panhandle Eastern Pipeline Corp....................................... 7.95 3/15/23 9,219,780
3,000 Southwest Gas Corp.................................................... 9.375 2/ 1/17 3,183,750
5,000 Tennesse Gas Pipeline Co.............................................. 6.00 12/15/11 4,276,550
5,000 Texas Eastern Transmission Corp....................................... 10.375 11/15/00 6,102,250
10,000 The Williams Companies................................................ 8.875 9/15/12 11,411,500
8,000 The Williams Companies................................................ 9.375 11/15/21 9,451,280
3,000 Transco Energy Co..................................................... 9.625 6/15/00 3,281,550
1,550 Transcontinental Gas Pipeline Corp.................................... 9.125 2/ 1/17 1,635,250
----------------
128,330,326
----------------
TELECOMMUNICATIONS (5.1%)
10,000 ALLTEL Corp........................................................... 6.50 11/ 1/13 9,497,200
5,000 ALLTEL Corp........................................................... 9.50 3/ 1/21 5,777,550
10,000 American Telephone & Telegraph Company................................ 8.125 7/15/24 10,887,500
13,000 American Telephone & Telegraph Company................................ 8.625 12/ 1/31 14,811,550
2,000 Ameritech Capital Funding Corp........................................ 8.85 6/ 1/05 2,408,060
5,000 BellSouth Telecommunications.......................................... 8.25 7/ 1/32 5,488,000
10,000 BellSouth Telecommunications.......................................... 7.50 6/15/33 10,152,100
5,000 BellSouth Telecommunications.......................................... 6.75 10/15/33 4,680,500
6,000 General Telephone & Electric Corp..................................... 8.50 4/ 1/17 6,494,160
5,000 General Telephone & Electric Corp..................................... 10.25 11/ 1/20 6,250,600
5,000 General Telephone & Electric Corp..................................... 8.75 11/ 1/21 5,755,000
24,300 General Telephone & Electric Corp..................................... 7.83 5/ 1/23 25,449,147
5,000 MCI Communications Corp............................................... 8.25 1/20/23 5,483,250
15,000 MCI Communications Corp............................................... 7.75 3/15/24 15,605,100
5,000 New Jersey Bell....................................................... 6.80 12/15/24 4,801,000
5,000 Pacific Bell.......................................................... 7.25 7/ 1/02 5,330,550
5,000 Pacific Bell.......................................................... 8.50 8/15/31 5,583,950
5,500 Pacific Bell.......................................................... 7.75 9/15/32 5,628,645
5,000 South Central Bell.................................................... 8.50 8/ 1/29 5,358,000
7,000 Sprint Corporation.................................................... 8.125 7/15/02 7,691,040
10,000 Sprint Corporation.................................................... 9.25 4/15/22 11,920,100
5,000 Telephone & Data Systems, Inc......................................... 10.00 1/15/21 6,047,600
5,000 Telephone & Data Systems, Inc......................................... 9.58 11/19/21 5,911,000
</TABLE>
44
<PAGE>
Dean Witter Utilities Fund
Portfolio of Investments DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- ----------------
<C> <S> <C> <C> <C>
$ 6,000 U.S. West Communications, Inc......................................... 8.875% 6/ 1/31 $ 6,902,340
5,000 U.S. West Communications, Inc......................................... 6.875 9/15/33 4,669,500
----------------
198,583,442
----------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $1,142,450,298)....................................... 1,210,155,000
----------------
U.S. GOVERNMENT AGENCIES & OBLIGATIONS (2.5%)
1,000 Cooperative Utilities Trust (Cajun Electric).......................... 9.65 3/15/98 1,096,900
5,000 Cooperative Utilities Trust (Cajun Electric).......................... 8.92 3/15/19 5,829,500
2,741 Government National Mortgage Association.............................. 9.50 6/15/20 2,964,093
5,000 Tennessee Valley Authority............................................ 6.00 1/15/97 5,149,219
6,000 Tennessee Valley Authority............................................ 0.00 4/15/03 3,292,500
5,000 Tennessee Valley Authority............................................ 7.75 12/15/22 5,198,440
18,000 Tennessee Valley Authority............................................ 8.625 11/15/29 20,404,800
1,200 Tennessee Valley Authority............................................ 0.00 4/15/42 304,500
10,000 Tennessee Valley Authority............................................ 7.25 7/15/43 9,946,000
38,000 U.S. Treasury Bond.................................................... 6.25 8/15/23 37,501,250
5,000 U.S. Treasury Note.................................................... 4.75 9/30/98 4,917,187
----------------
TOTAL U.S. GOVERNMENT AGENCIES & OBLIGATIONS (IDENTIFIED COST $92,166,319)................... 96,604,389
----------------
<CAPTION>
NUMBER OF
SHARES
- -----------
<C> <S> <C> <C> <C>
PREFERRED STOCKS (0.8%)
ELECTRIC UTILITIES (0.6%)
144,500 Arizona Public Service Company 7.25%.................................................... 3,594,437
27,965 Gulf States Utilities Company 9.96%..................................................... 2,923,881
29,000 Illinois Power Company $8.24............................................................ 1,479,000
160,000 Long Island Lighting Company 7.95%...................................................... 4,240,000
125,000 Louisiana Power & Light Co. 8% Series 92................................................ 3,250,000
30,049 Louisiana Power & Light Co. 12.64%...................................................... 957,812
30,000 Public Service Electric & Gas Company 7.52%............................................. 2,970,000
25,000 Public Service Electric & Gas Company 7.40%............................................. 2,481,250
20,000 Western Resources, Inc. 7.58%........................................................... 2,142,500
----------------
24,038,880
----------------
NATURAL GAS (0.2%)
120,000 Atlanta Gas Light Co. 7.70%............................................................. 3,195,000
50,000 ENSERCH Corp. Series 'D' ARP............................................................ 2,562,500
9,100 ENSERCH Corp. Series 'E' ARP............................................................ 921,375
----------------
6,678,875
----------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $29,814,437).................................... 30,717,755
----------------
COMMON STOCKS (61.7%)
ELECTRIC UTILITIES (36.3%)
1,310,000 Allegheny Power Systems, Inc............................................................ 34,715,000
710,000 American Electric Power, Inc............................................................ 26,358,750
345,000 Atlantic Energy, Inc.................................................................... 7,503,750
860,000 Baltimore Gas & Electric Company........................................................ 21,822,500
655,000 Boston Edison Company................................................................... 19,486,250
280,000 Carolina Power & Light Company.......................................................... 8,435,000
</TABLE>
45
<PAGE>
Dean Witter Utilities Fund
Portfolio of Investments DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ----------------
<C> <S> <C> <C> <C>
555,000 Centerior Energy Corp................................................................... $ 7,284,375
990,000 Central & South West Corp............................................................... 29,947,500
955,000 Cincinnati Gas & Electric Company....................................................... 26,262,500
200,000 CIPSCO, Inc............................................................................. 6,150,000
640,000 CMS Energy Corp......................................................................... 16,080,000
1,015,000 Commonwealth Edison Company............................................................. 28,673,750
725,000 Consolidated Edison Company New York, Inc............................................... 23,290,625
335,000 Delmarva Power & Light Company.......................................................... 7,914,375
1,240,000 Detroit Edison Company.................................................................. 37,200,000
1,010,000 Dominion Resources, Inc................................................................. 45,828,750
1,200,000 DPL, Inc................................................................................ 24,750,000
370,000 DQE, Inc................................................................................ 12,765,000
500,000 Duke Power Company...................................................................... 21,187,500
325,000 Empresa Nacional De Electricidad S.A. ADR+.............................................. 15,437,500
150,000 Enersis S.A. ADR+....................................................................... 3,525,000
860,000 Entergy Corp............................................................................ 30,960,000
640,000 Florida Progress Corp................................................................... 21,520,000
850,000 FPL Group, Inc.......................................................................... 33,256,250
1,090,000 General Public Utilities Corp........................................................... 33,653,750
765,000 Houston Industries, Inc................................................................. 36,433,125
950,000 Illinois Power Company.................................................................. 21,018,750
1,065,000 Kansas City Power & Light Company....................................................... 24,495,000
1,320,000 Long Island Lighting Company............................................................ 32,175,000
260,000 Louisiana Land & Exploration Co. (The).................................................. 10,432,500
185,000 MDU Resources Group, Inc................................................................ 5,827,500
700,000 Montana Power Company................................................................... 18,025,000
960,000 New England Electric System............................................................. 37,560,000
650,000 New York State Electric & Gas Corp...................................................... 19,987,500
750,000 Niagara Mohawk Power Corp............................................................... 15,187,500
850,000 NIPSCO Industries, Inc.................................................................. 27,943,750
1,385,000 Northeast Utilities..................................................................... 32,893,750
305,000 Northern States Power Company, Minnesota................................................ 13,153,125
1,210,000 Ohio Edison Company..................................................................... 27,527,500
225,000 Oklahoma Gas & Electric Company......................................................... 8,325,000
1,040,000 Pacific Gas & Electric Company.......................................................... 36,530,000
1,005,000 Pacificorp.............................................................................. 19,346,250
1,060,000 Pennsylvania Power & Light Company...................................................... 28,620,000
930,000 Philadelphia Electric Company........................................................... 28,132,500
995,000 Pinnacle West Capital Corp.............................................................. 22,263,125
615,000 Portland General Corp................................................................... 12,607,500
605,000 Potomac Electric Power Company.......................................................... 16,183,750
890,000 PSI Resources, Inc...................................................................... 23,585,000
850,000 Public Service Company, Colorado........................................................ 27,306,250
1,260,000 Public Service Enterprise Group, Inc.................................................... 40,320,000
380,000 Puget Sound Power & Light Company....................................................... 9,452,500
550,000 Rochester Gas & Electric Corp........................................................... 14,437,500
1,050,000 San Diego Gas & Electric Company........................................................ 26,381,250
360,000 SCANA Corp.............................................................................. 17,910,000
1,795,000 SCEcorp................................................................................. 35,900,000
780,000 Southern Company........................................................................ 34,417,500
</TABLE>
46
<PAGE>
Dean Witter Utilities Fund
Portfolio of Investments DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ----------------
<C> <S> <C> <C> <C>
405,000 Southwestern Public Service Company..................................................... $ 12,403,125
420,000 TECO Energy, Inc........................................................................ 9,502,500
1,135,000 Texas Utilities Electric Company........................................................ 49,088,750
1,000,000 Union Electric Company.................................................................. 39,250,000
505,000 Utilicorp United, Inc................................................................... 16,033,750
830,000 Washington Water Power Company.......................................................... 15,562,500
----------------
1,410,226,875
----------------
NATURAL GAS (6.0%)
345,000 Atlanta Gas Light Company............................................................... 13,411,875
410,000 Burlington Resources, Inc............................................................... 17,373,750
565,000 Coastal Corp............................................................................ 15,890,625
350,000 Consolidated Natural Gas Company........................................................ 16,450,000
645,000 EL Paso Natural Gas Company............................................................. 23,220,000
940,000 Enron Corp.............................................................................. 27,260,000
610,000 ENSERCH Corp............................................................................ 9,912,500
235,000 New Jersey Resources Corp............................................................... 6,080,625
680,000 Panhandle Eastern Pipeline Corp......................................................... 16,065,000
365,000 Sonat, Inc.............................................................................. 10,539,375
790,000 Tenneco, Inc............................................................................ 41,573,750
1,220,000 The Williams Companies.................................................................. 29,737,500
150,000 Washington Gas Light Company............................................................ 6,187,500
----------------
233,702,500
----------------
TELECOMMUNICATIONS (19.4%)
1,260,000 ALLTEL Corp............................................................................. 37,170,000
1,040,000 American Telephone & Telegraph Company.................................................. 54,600,000
570,000 Ameritech Corp.......................................................................... 43,747,500
645,000 BCE Inc................................................................................. 22,494,375
540,000 Bell Atlantic Corp...................................................................... 31,860,000
500,000 BellSouth Corp.......................................................................... 28,937,500
305,000 British Telecommunications Plc, ADR+.................................................... 21,693,125
175,000 Cable & Wireless PLC-ADR+............................................................... 4,200,000
590,000 Century Telephone Enterprises, Inc...................................................... 15,192,500
215,000 Compania De Telefonos De Chile ADR+..................................................... 21,903,125
830,000 Comsat Corp............................................................................. 24,692,500
260,000 Ericsson (L.M.) TEL ADR+................................................................ 10,432,500
1,080,000 GTE Corp................................................................................ 37,800,000
480,000 Hong Kong Telecommunications Ltd. ADR+.................................................. 29,880,000
1,565,000 MCI Communications Corp................................................................. 44,015,625
1,260,000 NYNEX Corp.............................................................................. 50,557,500
750,000 Pacific Telesis Group, Inc.............................................................. 40,500,000
495,000 Rochester Telephone Corp................................................................ 22,336,875
980,000 Southwestern Bell Corp.................................................................. 40,670,000
915,000 Sprint Corporation...................................................................... 31,796,250
380,000 Telecommunications Corp. New Zealand Ltd. ADR+.......................................... 19,237,500
</TABLE>
47
<PAGE>
Dean Witter Utilities Fund
Portfolio of Investments DECEMBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ----------------
<C> <S> <C> <C> <C>
615,000 Telefonica Espana, S.A. ADR+............................................................ $ 23,985,000
865,000 Telefonos De Mexico S.A. Series L ADR+.................................................. 58,387,500
770,000 U.S. West, Inc.......................................................................... 35,323,750
----------------
751,413,125
----------------
TOTAL COMMON STOCKS (IDENTIFIED COST $1,913,133,900).................................... 2,395,342,500
----------------
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE
- ----------- -------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (3.0%)
COMMERCIAL PAPER (A)(1.8%)
AUTOMOTIVE FINANCE (0.3%)
$ 13,500 Ford Motor Credit Co.................................................. 3.352% 1/ 3/94 13,497,487
----------------
FINANCE - DIVERSIFIED (1.2%)
29,000 Heller Financial Inc.................................................. 3.352 1/ 5/94 28,989,206
16,500 Household Finance Corp................................................ 3.282 1/ 6/94 16,492,483
----------------
45,481,689
----------------
FINANCE - ENERGY (0.3%)
12,300 Chevron Oil Finance................................................... 3.352 1/ 4/94 12,296,566
----------------
TOTAL COMMERCIAL PAPER (AMORTIZED COST $71,275,742).......................................... 71,275,742
----------------
U.S. GOVERNMENT AGENCIES (0.9%)
19,000 Federal Home Loan Banks............................................... 3.116 1/14/94 18,978,662
16,900 Federal Home Loan Mortgage Corp....................................... 3.13 1/18/94 16,875,061
----------------
TOTAL U.S. GOVERNMENT AGENCIES (AMORTIZED COST $35,853,723).................................. 35,853,723
----------------
REPURCHASE AGREEMENT (0.3%)
9,184 The Bank of New York 2.75% due 1/3/94 ( dated 12/31/93; proceeds
$9,183,897; collateralized by $9,211,420 U.S. Treasury Note 5.125%
due 3/31/98 valued at $9,365,429) (Identified Cost $9,181,793)...... 9,181,793
----------
TOTAL SHORT-TERM INVESTMENTS (IDENTIFIED COST $116,311,258)........... 116,311,258
----------------
TOTAL INVESTMENTS (IDENTIFIED COST $3,293,876,212).......................................... 99.2% 3,849,130,902
OTHER ASSETS IN EXCESS OF LIABILITIES....................................................... 0.8 31,983,538
--- ----------------
NET ASSETS.................................................................................. 100% $ 3,881,114,440
--- ----------------
--- ----------------
<FN>
- ------------------
+ AMERICAN DEPOSITORY RECEIPT.
(A) COMMERCIAL PAPER WAS PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATES
SHOWN HAVE BEEN ADJUSTED TO REFLECT A BOND EQUIVALENT YIELD.
(B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $3,294,889,359; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $578,839,710 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $24,598,167, RESULTING IN NET UNREALIZED
APPRECIATION OF $554,241,543.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $3,293,876,212) (Note
1).................................... $ 3,849,130,902
Receivable for:
Interest.............................. 27,971,138
Shares of beneficial interest sold.... 11,632,162
Dividends............................. 10,497,486
Foreign withholding taxes reclaimed... 69,771
Prepaid expenses and other assets....... 89,580
---------------
TOTAL ASSETS.................... 3,899,391,039
---------------
LIABILITIES:
Payable for:
Investments purchased (Note 4)........ 7,238,954
Distributions to shareholders......... 3,788,035
Plan of distribution fee (Note 3)..... 2,853,921
Shares of beneficial interest
repurchased......................... 2,006,275
Investment management fee (Note 2).... 1,698,566
Accrued expenses and other payables
(Note 4).............................. 690,848
---------------
TOTAL LIABILITIES............... 18,276,599
---------------
NET ASSETS:
Paid-in-capital......................... 3,318,995,945
Accumulated undistributed net investment
income................................ 3,487,563
Accumulated undistributed net realized
gains................................. 3,376,242
Net unrealized appreciation............. 555,254,690
---------------
NET ASSETS...................... $ 3,881,114,440
---------------
---------------
NET ASSET VALUE PER SHARE, 270,689,008
shares outstanding (unlimited shares
authorized of $.01 par value).........
$14.34
---------------
---------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME
Dividends (net of $638,757 foreign
withholding tax).................... $ 111,717,369
Interest.............................. 97,512,514
-------------
TOTAL INCOME...................... 209,229,883
-------------
EXPENSES
Plan of distribution fee (Note 3)..... 29,856,959
Investment management fee (Note 2).... 18,894,620
Transfer agent fees and expenses (Note
4).................................. 3,147,475
Registration fees..................... 353,017
Custodian fees........................ 232,926
Shareholder reports and notices....... 173,530
Professional fees..................... 54,572
Trustees' fees and expenses (Note
4).................................. 34,810
Organizational expenses (Note 1)...... 9,289
Other................................. 55,301
-------------
TOTAL EXPENSES.................... 52,812,499
-------------
NET INVESTMENT INCOME........... 156,417,384
-------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (Note 1):
Net realized gain on investments...... 33,021,452
Net change in unrealized appreciation
on investments...................... 203,557,787
-------------
NET GAIN ON INVESTMENTS........... 236,579,239
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $ 392,996,623
-------------
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1992
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................ $ 156,417,384 $ 119,566,603
Net realized gain.................................................... 33,021,452 7,980,618
Net change in unrealized appreciation................................ 203,557,787 97,107,197
------------------ ------------------
Net increase in net assets resulting from operations............. 392,996,623 224,654,418
------------------ ------------------
Dividends and distributions to shareholders from:
Net investment income................................................ (155,892,059) (118,377,927)
Net realized gain.................................................... (31,752,536) (5,531,961)
------------------ ------------------
(187,644,595) (123,909,888)
------------------ ------------------
Net increase from transactions in shares of beneficial interest (Note
5).................................................................... 749,931,416 866,044,880
------------------ ------------------
Total increase................................................... 955,283,444 966,789,410
NET ASSETS:
Beginning of period.................................................... 2,925,830,996 1,959,041,586
------------------ ------------------
END OF PERIOD (including undistributed net investment income of
$3,487,563 and $2,943,467, respectively).............................. $ 3,881,114,440 $ 2,925,830,996
------------------ ------------------
------------------ ------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
49
<PAGE>
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--Dean Witter Utilities Fund (the
"Fund") was organized on December 8, 1987 as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as a diversified, open-end management investment company. The Fund commenced
operations on April 29, 1988.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS--(1) an equity portfolio security listed or
traded on the New York or American Stock Exchange is valued at its latest
sale price on that exchange prior to the time when assets are valued (if
there were no sales that day, the security is valued at the latest bid
price), and (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest 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 Fund's 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; and (5) the fair market
value of short-term debt securities which mature at a date less than
sixty-one days subsequent to the valuation date will be determined on an
amortized cost or amortized value method; other short-term debt securities
will be valued on a mark-to-market basis until such time as they reach a
maturity of 60 days, whereupon they will be valued at amortized value 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.
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. In computing net investment income, the Fund does not amortize
premiums or accrue discounts on fixed income securities in the portfolio,
except those original issue discounts for which amortization is required for
federal income tax purposes. Additionally, with respect to market discount
on bonds, a portion of any capital gain realized upon disposition may be
recharacterized as investment income. Dividend income is recorded on the
ex-dividend date. Interest income is accrued daily except where collection
is not expected.
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 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
50
<PAGE>
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
federal tax-basis treatment; temporary differences do not require
reclassifications. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized capital gains. To the
extent they exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES--The Fund's Investment Manager paid the
organizational expenses of the Fund in the amount of approximately $141,000.
The Fund had reimbursed the Investment Manager for these costs which were
deferred and amortized by the Fund on the straight line method over a period
of sixty months from the commencement of operations. As of December 31,
1993, these expenses were fully amortized.
F. 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.
2. INVESTMENT MANAGEMENT AGREEMENT--Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc. (the "Investment
Manager"), the Fund pays its Investment Manager a management fee, accrued daily
and payable monthly at an annual rate of 0.65% of the portion of the daily net
assets not exceeding $500 million; 0.55% of the portion of the daily net assets
exceeding $500 million but not exceeding $1 billion; 0.525% of the portion of
the daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.50%
of the portion of the daily net assets exceeding $1.5 billion but not exceeding
$2.5 billion; 0.475% of the portion of daily net assets exceeding $2.5 billion
but not exceeding $3.5 billion; and 0.45% of the portion of daily net assets
exceeding $3.5 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes office space and facilities, equipment, clerical,
bookkeeping and certain legal services, and pays the salaries of all personnel,
including officers of the Fund who are employees of the Investment Manager. The
Investment Manager also bears the cost of telephone services, heat, light, power
and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION--Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act under which the Fund pays the Distributor a fee which is accrued
daily and payable monthly at an annual rate of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's shares since the inception of
the Fund (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. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services provided and the expenses borne by
it and others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of Dean Witter
51
<PAGE>
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Reynolds, Inc.'s ("DWR"), an affiliate of the Investment Manager, account
executives and others 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; 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.
Provided that the Plan continues in effect, any cumulative expenses
incurred, but not yet recovered, may be recovered through future distribution
fees from the Fund and contingent deferred sales charges from the Fund's
shareholders.
The Distributor has informed the Fund that for the year ended December 31,
1993, it received approximately $6,187,000 in contingent deferred sales charges
from redemptions of the Fund's shares. The Fund's shareholders pay such charges
which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES--The cost of
purchases and the proceeds from sales of portfolio securities (excluding
short-term investments) for the year ended December 31, 1993 aggregated
$1,270,362,210 and $554,564,879, respectively. Included in the aforementioned
are purchases and sales of U.S. Government securities of $107,145,843 and
$58,693,944, respectively. For the same period, the Fund paid brokerage
commissions of approximately $129,600 to DWR for transactions executed on behalf
of the Fund. At December 31, 1993 the Fund's payable for investments purchased
included unsettled trades with DWR of approximately $456,000.
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 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 cost for the year ended
December 31, 1993 included in Trustees' fees and expenses in the Statement of
Operations, amounted to $12,232. At December 31, 1993 the Fund had an accrued
pension liability of $39,299 which is included in accrued expenses in the
Statement of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. During the year ended December 31,
1993, the Fund incurred transfer agent fees and expenses of approximately
$3,147,000, of which approximately $352,000 was payable at December 31, 1993.
5. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1992
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold.................................................. 88,274,539 $1,279,510,064 84,488,639 $1,087,444,874
Reinvestment of dividends and distributions........... 10,686,468 154,738,787 7,817,126 100,595,556
----------- -------------- ----------- --------------
98,961,007 1,434,248,851 92,305,765 1,188,040,430
Repurchased........................................... (47,067,729) (684,317,435) (25,035,527) (321,995,550)
----------- -------------- ----------- --------------
Net increase.......................................... 51,893,278 $ 749,931,416 67,270,238 $ 866,044,880
----------- -------------- ----------- --------------
----------- -------------- ----------- --------------
</TABLE>
52
<PAGE>
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
6. FEDERAL INCOME TAXES--The Fund had temporary book/tax differences which were
primarily attributable to realized capital loss deferrals on wash sales and
permanent book/tax differences primarily attributable to a distribution of
paid-in-capital. To reflect cumulative reclassifications arising from permanent
book/tax differences as of December 31, 1992, accumulated undistributed net
investment income was credited $626,248, accumulated undistributed net realized
gains was charged $17,973 and paid-in-capital was charged $608,275.
1993 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended December 31, 1993, the Fund paid to shareholders $0.07070
per share from long-term capital gains. For such period, 66% of the income
dividend qualifies for the dividends received deduction available to
corporations.
53
<PAGE>
Dean Witter Utilities Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data and ratios for a share of beneficial interest outstanding
throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 29,
1988*
FOR THE YEAR ENDED DECEMBER 31, THROUGH
-------------------------------------------------------------------- DECEMBER 31,
1993 1992 1991 1990 1989 1988
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period...................... $ 13.37 $ 12.93 $ 11.48 $ 12.22 $ 10.41 $ 10.00
------------ ------------ ------------ ------------ ------------ --------------
Net investment income....... 0.61 0.63 0.65 0.65 0.63 0.40
Net realized and unrealized
gain (loss) on
investments................ 1.09 0.47 1.45 (0.71) 1.86 0.38
------------ ------------ ------------ ------------ ------------ --------------
Total from investment
operations.................. 1.70 1.10 2.10 (0.06) 2.49 0.78
------------ ------------ ------------ ------------ ------------ --------------
Less dividends and
distributions:
Dividends from net
investment income.......... (0.61) (0.63) (0.65) (0.65) (0.67) (0.36)
Distributions from net
realized gains on
investments................ (0.12) (0.03) 0.00 (0.03) (0.01) (0.01)
------------ ------------ ------------ ------------ ------------ --------------
Total dividends and
distributions............... (0.73) (0.66) (0.65) (0.68) (0.68) (0.37)
------------ ------------ ------------ ------------ ------------ --------------
Net asset value, end of
period...................... $ 14.34 $ 13.37 $ 12.93 $ 11.48 $ 12.22 $ 10.41
------------ ------------ ------------ ------------ ------------ --------------
------------ ------------ ------------ ------------ ------------ --------------
TOTAL INVESTMENT RETURN+ ..... 12.79 % 8.75 % 18.89 % (0.27 )% 24.51 % 7.90 %(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).................. $ 3,881,114 $ 2,925,831 $ 1,959,042 $ 1,369,038 $ 1,131,119 $ 457,845
Ratio of expenses to average
net assets.................. 1.46 % 1.59 % 1.59 % 1.67 % 1.68 % 1.84 %(2)
Ratio of net investment income
to average net assets....... 4.32 % 5.05 % 5.58 % 5.85 % 6.07 % 6.69 %(2)
Portfolio turnover rate....... 16 % 14 % 13 % 13 % 25 % 12 %
</TABLE>
- ------------
* DATE OF COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
DEAN WITTER UTILITIES FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter Utilities Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Utilities Fund (the
"Fund") at December 31, 1993, 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 five years in the period
then ended and for the period April 29, 1988 (commencement of operations)
through December 31, 1988, 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 December 31, 1993 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York 10036
February 11, 1994
55
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
RATINGS
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.
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.
56
<PAGE>
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.
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.
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. 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.
57
<PAGE>
DEAN WITTER UTILITIES FUND
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
----------
Financial highlights from the period April 29, 1988
through December 31, 1988 and for the years ended
December 31, 1989, 1990, 1991, 1992 and 1993.............4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
---
Portfolio of Investments at December 31, 1993...........42
Statement of assets and liabilities at
December 31, 1993.......................................49
Statement of operations for the year
ended December 31, 1993.................................49
Statement of changes in net assets for the years
ended December 31, 1992 and 1993........................49
Notes to Financial Statements ..........................50
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
5. - Form of Investment Management Agreement between
Registrant and Dean Witter InterCapital Inc.
6.(a) - Form of Distribution Agreement between
Registrant and Dean Witter Distributors Inc.
(b) - Form of Selected Dealers Agreement
8. - Form of Amended and Restated Transfer Agency and
Service Agreement
1
<PAGE>
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services
Company Inc.
11. - Consent of Independent Accountants
15. - Form of Amended and Restated Plan of
Distribution pursuant to Rule 12b-1
16. - Schedules for Computation of Performance
Quotations
All other exhibits previously filed and incorporated
by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AT JANUARY 25, 1994
-------------- ------------------------
Shares of Beneficial Interest 277,050
Item 27. INDEMNIFICATION
Pursuant to Section 5.3 of the Registrant's Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the indemnification
of the Registrant's trustees, officers, employees and agents is permitted if
it is determined that they acted under the belief that their actions were in
or not opposed to the best interest of the Registrant, and, with respect to
any criminal proceeding, they had reasonable cause to believe their conduct
was not unlawful. In addition, indemnification is permitted only if it is
determined that the actions in question did not render them liable by reason
of willful misfeasance, bad faith or gross negligence in the performance of
their duties or by reason of reckless disregard of their obligations and
duties to the Registrant. Trustees, officers, employees and agents will be
indemnified for the expense of litigation if it is determined that they are
entitled to indemnification against any liability established in such
litigation. The Registrant may also advance money for these expenses provided
that they give their undertakings to repay the Registrant unless their conduct
is later determined to permit indemnification.
2
<PAGE>
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the
case of bad faith, willful misfeasance, gross negligence or reckless disregard
of duties to the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the Registrant
by such trustee, officer or controlling person in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company
Act of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such
Act remains in effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was
a Trustee, officer, employee, or agent of Registrant, or who is or was serving
at the request of Registrant as a trustee, director, officer, employee or
agent of another trust or corporation, against any liability asserted against
him and incurred by him or arising out of his position. However, in no event
will Registrant maintain insurance to indemnify any such person for any act
for which Registrant itself is not permitted to indemnify him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the
3
<PAGE>
business of the investment adviser. The following information is given
regarding officers of Dean Witter InterCapital Inc. Information regarding the
other officers of InterCapital is included in Item 29(b) below. The term
"Dean Witter Funds" used below refers to the following Funds: (1)
InterCapital Income Securities Inc., (2) High Income Advantage Trust, (3) High
Income Advantage Trust II, (4) High Income Advantage Trust III, (5) Municipal
Income Trust, (6) Municipal Income Trust II, (7) Municipal Income Trust III,
(8) Dean Witter Government Income Trust, (9) Municipal Premium Income Trust,
(10) Municipal Income Opportunities Trust, (11) Municipal Income Opportunities
Trust II, (12) Municipal Income Opportunities Trust III, (13) Prime Income
Trust, (14) InterCapital Insured Municipal Bond Trust, (15) InterCapital
Quality Municipal Income Trust, (16) InterCapital Quality Municipal Investment
Trust, (17) InterCapital Insured Municipal Income Trust, (18) InterCapital
California Insured Municipal Income Trust, (19) InterCapital Insured Municipal
Trust, (20) InterCapital Quality Municipal Securities, (21) InterCapital New
York Quality Municipal Securities, (22) InterCapital California Municipal
Securities, (23) InterCapital Insured Municipal Securities and (24)
InterCapital Insured California Municipal Securities, registered closed-end
investment companies, and (1) Dean Witter Equity Income Trust, (2) Dean Witter
Tax-Exempt Securities Trust, (3) Dean Witter Tax-Free Daily Income Trust, (4)
Dean Witter Dividend Growth Securities Inc., (5) Dean Witter Convertible
Securities Trust, (6) Dean Witter Liquid Asset Fund Inc., (7) Dean Witter
Developing Growth Securities Trust, (8) Dean Witter Retirement Series, (9)
Dean Witter Federal Securities Trust, (10) Dean Witter World Wide Investment
Trust, (11) Dean Witter U.S. Government Securities Trust, (12) Dean Witter
Select Municipal Reinvestment Fund, (13) Dean Witter High Yield Securities
Inc., (14) Dean Witter Intermediate Income Securities, (15) Dean Witter New
York Tax-Free Income Fund, (16) Dean Witter California Tax-Free Income Fund,
(17) Dean Witter Health Sciences Trust, (18) Dean Witter California Tax-Free
Daily Income Trust, (19) Dean Witter Managed Assets Trust, (20) Dean Witter
American Value Fund, (21) Dean Witter Strategist Fund, (22) Dean Witter
Utilities Fund, (23) Dean Witter World Wide Income Trust, (24) Dean Witter New
York Municipal Money Market Trust, (25) Dean Witter Capital Growth Securities,
(26) Dean Witter Precious Metals and Minerals Trust, (27) Dean Witter European
Growth Fund Inc., (28) Dean Witter Global Short-Term Income Fund Inc., (29)
Dean Witter Pacific Growth Fund Inc., (30) Dean Witter Multi-State Municipal
Series Trust, (31) Dean Witter Premier Income Trust, (32) Dean Witter
Short-Term U.S. Treasury Trust, (33) Dean Witter Diversified Income Trust,
(34) Dean Witter U.S. Government Money Market Trust, (35) Dean Witter Global
Dividend Growth Securities, (36) Active Assets California Tax-Free Trust, (37)
Dean Witter Natural Resource Development Securities Inc., (38) Active Assets
Government Securities Trust, (39) Active Assets Money Trust, (40) Active
Assets Tax-Free Trust, (41) Dean Witter
4
<PAGE>
Limited Term Municipal Trust, (42) Dean Witter Variable Investment Series,
(43) Dean Witter Value-Added Market Series and (44) Dean Witter Short-Term
Bond Fund, registered open-end investment companies. InterCapital is a
wholly-owned subsidiary of Dean Witter, Discover & Co. The principal address
of the Dean Witter Funds is Two World Trade Center, New York, New York 10048.
The term "TCW/DW Funds" refers to the following Funds: (1) TCW/DW Core Equity
Trust, (2) TCW/DW North American Government Income Trust, (3) TCW/DW Latin
American Growth Fund, (4) TCW/DW Income and Growth Fund, (5) TCW/DW Small Cap
Growth Fund, (6) TCW/DW Balanced Fund, registered open-end investment
companies and (7) TCW/DW Term Trust 2000, (8) TCW/DW Term Trust 2002 and (9)
TCW/DW Term Trust 2003, registered closed-end investment companies.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS, PROFESSION,
POSITION WITH VOCATION OR EMPLOYMENT,
DEAN WITTER INCLUDING NAME, PRIN-
INTERCAPITAL CIPAL ADDRESS AND
NAME INC. NATURE OF CONNECTION
- ------------- ------------------ --------------------
<S> <C> <C>
Charles A. Chairman, Chief Executive Vice
Fiumefreddo Executive Officer President and Director
and Director of Dean Witter Reynolds
Inc.
("DWR"); Chairman,
Director or
Trustee,President and Chief
Executive Officer of
the Dean Witter Funds;
Chairman, Chief Executive
Officer and Trustee of the
TCW/DW Funds; Chairman and
Director of Dean Witter
Trust Company ("DWTC");
Chairman, Chief
Executive Officer and
Director of Dean Witter
Distributors Inc.
("Distributors") and
Dean Witter Services
Company Inc. ("DWSC");
Formerly Executive Vice
President and Director of
Dean Witter, Discover & Co.
("DWDC"); Director
and/or officer of DWDC
subsidiaries.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS, PROFESSION,
POSITION WITH VOCATION OR EMPLOYMENT,
DEAN WITTER INCLUDING NAME, PRIN-
INTERCAPITAL CIPAL ADDRESS AND
NAME INC. NATURE OF CONNECTION
---- -------------- -----------------------
<S> <C> <C>
Philip J. Director Chairman, Chief
Purcell Executive Officer and
Director of DWDC and
DWR; Director of
DWSC and Distributors.
Richard M. Director President and Chief
DeMartini Operating Officer of
Dean Witter Capital
and Director of DWDC,
DWR, DWSC and
Distributors.
James F. Director President and Chief
Higgins Operating Officer of
Dean Witter Financial;
Director of DWDC, DWR,
DWSC and Distributors.
Thomas C. Executive Vice Executive Vice
Schneider President, Chief President, Chief
Financial Officer Financial Officer
and Director and Director of
DWDC, DWR, DWSC
and Distributors.
Christine A. Director Executive Vice
Edwards President, Secretary,
General Counsel and
Director of DWDC, DWR,
DWSC and Distributors.
Robert M. Scanlan President and Vice President of
Chief Operating the Dean Witter Funds
Officer and the TCW/DW Funds;
President of DWSC;
Executive Vice
President of
Distributors;
Executive Vice
President and
Director of DWTC.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS, PROFESSION,
POSITION WITH VOCATION OR EMPLOYMENT,
DEAN WITTER INCLUDING NAME, PRIN-
INTERCAPITAL CIPAL ADDRESS AND
NAME INC. NATURE OF CONNECTION
- ------------- ------------------ --------------------
<S> <C> <C>
David A. Hughey Executive Vice Vice President of the
President and Dean Witter Funds and
Chief Administrative the TCW/DW Funds;
Officer Executive Vice
President, Chief
Administrative Officer
and Director of DWTC;
Executive Vice
President and Chief
Administrative Officer
of DWSC and
Distributors.
Edmund C. Executive Vice Vice President of the
Puckhaber President Dean Witter Funds.
John Van Heuvelen Executive Vice President and Chief
President Executive Officer of
DWTC.
Sheldon Curtis Senior Vice Vice President,
President, Secretary and
General Counsel General Counsel of the
and Secretary Dean Witter Funds and the
TCW/DW Funds; Senior Vice
President
and Secretary of
DWTC; Assistant Secretary
of DWR and
DWDC; Senior Vice
President, General
Counsel and Secretary
of DWSC; Senior Vice
President, Assistant
General Counsel
and Assistant Secretary
of Distributors.
Peter M. Avelar Senior Vice Vice President of
President various Dean Witter
Funds.
Thomas H. Connelly Senior Vice Vice President of
President various Dean Witter
Funds.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS, PROFESSION,
POSITION WITH VOCATION OR EMPLOYMENT,
DEAN WITTER INCLUDING NAME, PRIN-
INTERCAPITAL CIPAL ADDRESS AND
NAME INC. NATURE OF CONNECTION
- ------------- ------------------ --------------------
<S> <C> <C>
Edward Gaylor Senior Vice Vice President of
President various Dean Witter Funds.
Rajesh K. Gupta Senior Vice Vice President of
President various Dean Witter
Funds.
Kenton J. Senior Vice Vice President of
Hinchliffe President various Dean Witter
Funds.
John B. Kemp, III Senior Vice Director of the
President Provident Savings
Bank, Jersey City,
New Jersey.
Anita Kolleeny Senior Vice Vice President of
President various Dean Witter
Funds.
Jonathan R. Page Senior Vice Vice President of
President various Dean Witter
Funds.
Ira Ross Senior Vice Vice President of
President various Dean Witter
Funds.
Rochelle G. Siegel Senior Vice Vice President of
President various Dean Witter
Funds.
Paul D. Vance Senior Vice Vice President of
President various Dean Witter
Funds.
Elizabeth A. Senior Vice
Vetell President
James F. Willison Senior Vice Vice President of
President various Dean Witter
Funds.
Ronald Worobel Senior Vice Vice President of
President various Dean Witter
Funds.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS, PROFESSION,
POSITION WITH VOCATION OR EMPLOYMENT,
DEAN WITTER INCLUDING NAME, PRIN-
INTERCAPITAL CIPAL ADDRESS AND
NAME INC. NATURE OF CONNECTION
- ------------- ------------------ --------------------
<S> <C> <C>
Thomas F. Caloia First Vice Treasurer of the
President and Dean Witter Funds
Assistant Treasurer and the TCW/DW Funds;
First Vice President and
Assistant
Treasury of DWSC; Assistant
Treasurer of
Distributors.
Barry Fink First Vice Assistant Secretary
President of the Dean Witter
Funds and TCW/DW
Funds; First Vice President
and Assistant Secretary of
DWSC.
Michael First Vice First Vice President
Interrante President and and Controller of
Controller DWSC; Assistant Treasurer
of Distributors.
Robert Zimmerman First Vice
President
Joseph Arcieri Vice President
Douglas Brown Vice President
Rosalie Clough Vice President
B. Catherine Vice President
Connelly
Marilyn K. Cranney Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President and
Assistant Secretary of DWSC;
Assistant Secretary of DWR
and DWDC.
Salvatore DeSteno Vice President Vice President of DWSC.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS, PROFESSION,
POSITION WITH VOCATION OR EMPLOYMENT,
DEAN WITTER INCLUDING NAME, PRIN-
INTERCAPITAL CIPAL ADDRESS AND
NAME INC. NATURE OF CONNECTION
- ------------- ------------------ --------------------
<S> <C> <C>
Dwight Doolan Vice President
Bruce Dunn Vice President
Geoffrey D. Flynn Vice President Vice President of
DWSC.
Bette Freedman Vice President
Robert Geis Vice President
Deborah Genovese Vice President
Peter W. Gurman Vice President
Shant Harootunian Vice President
John Hechtlinger Vice President
David Johnson Vice President
Christopher Jones Vice President
Stanley Kapica Vice President
Paula LaCosta Vice President Vice President of
various Dean Witter
Funds.
Lawrence S. Lafer Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant Secretary of
DWSC.
Thomas Lawlor Vice President
Lou Anne D. McInnis Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President and
Assistant Secretary of DWSC.
James Mulcahy Vice President
James Nash Vice President
Hugh Rose Vice President
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS, PROFESSION,
POSITION WITH VOCATION OR EMPLOYMENT,
DEAN WITTER INCLUDING NAME, PRIN-
INTERCAPITAL CIPAL ADDRESS AND
NAME INC. NATURE OF CONNECTION
- ------------- ------------------ --------------------
<S> <C> <C>
Ruth Rossi Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
Howard A. Schloss Vice President
Rose Simpson Vice President
Diane Lisa Sobin Vice President Vice President of
various Dean Witter
Funds.
Kathleen Stromberg Vice President Vice President of
various Dean Witter
Funds.
Vinh Q. Tran Vice President Vice President of
various Dean Witter
Funds.
Alice Weiss Vice President Vice President of
various Dean Witter
Funds.
Marianne Zalys Vice President
</TABLE>
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware corporation,
is the principal underwriter of the Registrant. Distributors is also the
principal underwriter of the following investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Equity Income Trust
(15) Dean Witter Federal Securities Trust
11
<PAGE>
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Short-Term Bond Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of the
following persons has any position or office with the Registrant.
<TABLE>
<CAPTION>
POSITIONS AND
OFFICE WITH
NAME DISTRIBUTORS
- ---- ------------
<S> <C>
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Edward C. Oelsner III Vice President of Distributors.
Samuel Wolcott III Vice President of Distributors.
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained
12
<PAGE>
by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained by the Investment Manager at its offices, except
records relating to holders of shares issued by the Registrant, which are
maintained by the Registrant's Transfer Agent, at its place of business as
shown in the prospectus.
Item 31. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service
contract.
Item 32. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 23rd day of February, 1994.
DEAN WITTER UTILITIES FUND
By /S/ Sheldon Curtis
_______________________________
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /S/ Charles A. Fiumefreddo 02/23/94
--------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /S/ Thomas F. Caloia 02/23/94
--------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Edward R. Telling
By /S/ Sheldon Curtis 02/23/94
---------------------------
Sheldon Curtis
Attorney-in-Fact
Jack F. Bennett Paul Kolton
John R. Haire Michael E. Nugent
John E. Jeuck
Manuel H. Johnson Edwin J. Garn
By /S/ David M. Butowsky 02/23/94
---------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE>
DEAN WITTER UTILITIES FUND
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
5. - Investment Management Agreement between
Registrant and Dean Witter InterCapital Inc.
6.(a) - Distribution Agreement between Registrant and
Dean Witter Distributors Inc.
(b) - Form of Selected Dealers Agreement
8. - Amended and Restated Transfer Agency and Service Agreement
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services
Company Inc.
11. - Consent of Independent Accountants
15. - Form of Amended and Restated Plan of Distribution
pursuant to Rule 12b-1
16. - Schedules for Computation of Performance
Quotations
</TABLE>
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of June, 1993 by and between Dean Witter
Utilities Fund, an unincorporated business trust organized under the laws of the
Commonwealth of Massachusetts (hereinafter called the "Fund"), and Dean Witter
InterCapital Inc., a Delaware corporation (hereinafter called the "Investment
Manager"):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, and engages in the business of acting
as investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
anager of the Fund and, subject to the supervision of the Trustees, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities and commodities markets and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; shall continuously manage
the assets of the Fund in a manner consistent with the investment objectives and
policies of the Fund; shall determine the securities and commodities to be
purchased, sold or otherwise disposed of by the Fund and the timing of such
purchases, sales and dispositions; and shall take such further action, including
the placing of purchase and sale orders on behalf of the Fund, as the Investment
Manager shall deem necessary or appropriate. The Investment Manager shall also
furnish to or place at the disposal of the Fund such of the information,
evaluations, analyses and opinions formulated or obtained by the Investment
Manager in the discharge of its duties as the Fund may, from time to time,
reasonably request.
2. The Investment Manager shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons
as it shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Investment Manager
shall be deemed to include persons employed or otherwise retained by the
Investment Manager to furnish statistical and other factual data, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Investment Manager may desire. The Investment Manager shall, as agent for
the Fund, maintain the Fund's records and books of account (other than those
maintained by the Fund's transfer agent, registrar, custodian and other
agencies). All such books and records so maintained shall be the property of the
Fund and, upon request therefor, the Investment Manager shall surrender to the
Fund such of the books and records so requested.
3. The Fund will, from time to time, furnish or otherwise make available to
the Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Investment
Manager may reasonably require in order to discharge its duties and obligations
hereunder.
4. The Investment Manager shall bear the cost of rendering the investment
management and supervisory services to be performed by it under this Agreement,
and shall, at its own expense, pay the compensation of the officers and
employees, if any, of the Fund, and provide such office space, facilities and
equipment and such clerical help and bookkeeping services as the Fund shall
reasonably require in the conduct of its
<PAGE>
business. The Investment Manager shall also bear the cost of telephone service,
heat, light, power and other utilities provided to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses of
the Fund, including without limitation: fees pursuant to any plan of
distribution that the Fund may adopt; the charges and expenses of any registrar,
any custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities or commodities and other property, and any stock
transfer or dividend agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio transactions to which the
Fund is a party; all taxes, including securities or commodities issuance and
transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the Securities and Exchange Commission and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the cost and expense of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
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 the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Trustees of the Fund who are not interested
persons (as defined in the Act) of the Fund or the Investment Manager, and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
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 related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the
Investment Manager monthly compensation determined by applying the following
annual rates to the Fund's daily net assets: 0.65% of daily net assets up to
$500 million; 0.55% of the next $500 million; 0.525% of the next $500 million;
0.50% of the next $1 billion; 0.475% of the next $1 billion; and 0.45% of daily
net assets over $3.5 billion. Except as hereinafter set forth, compensation
under this Agreement shall be calculated and accrued daily and the amounts of
the daily accruals shall be paid monthly. Such calculations shall be made by
applying 1/365ths of the annual rates to the Fund's net assets each day
determined as of the close of business on that day or the last previous business
day. If this Agreement becomes effective subsequent to the first day of a month
or shall terminate before the last day of a month, compensation for that part of
the month this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fees as set forth above.
Subject to the provisions of paragraph 7 hereof, payment of the Investment
Manager's compensation for the preceding month shall be made as promptly as
possible after completion of the computations contemplated by paragraph 7
hereof.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to paragraph 6 hereof, for any
fiscal year ending on a date on which this Agreement is in effect, exceed
the expense limitations applicable to the Fund imposed by state securities laws
or regulations thereunder, as such limitations may be raised or lowered from
time to time, the Investment Manager shall reduce its management fee to the
extent of such excess and, if required, pursuant to any such laws or
regulations, will reimburse the Fund for annual operating expenses in excess of
any expense limitation that may be applicable; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions, distribution fees and extraordinary expenses (including but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Fund. Such reduction, if
any, shall be computed and accrued daily, shall be settled on a monthly basis,
and shall be based upon the expense limitation applicable to the Fund as at the
end of the last
2
<PAGE>
business day of the month. Should two or more such expense limitations be
applicable as at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Investment Manager's
fee shall be applicable.
For purposes of this provision, should any applicable expense limitation be
based upon the gross income of the Fund, such gross income shall include, but
not be limited to, interest on debt securities in the Fund's portfolio accrued
to and including the last day of the Fund's fiscal year, and dividends declared
on equity securities in the Fund's portfolio, the record dates for which fall on
or prior to the last day of such fiscal year, but shall not include gains from
the sale of securities.
8. The Investment Manager will use its best efforts in the supervision and
management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund or
any of its investors for any error of judgment or mistake of law or for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors.
9. Nothing contained in this Agreement shall prevent the Investment Manager
or any affiliated person of the Investment Manager from acting as investment
adviser or manager for any other person, firm or corporation and shall not in
any way bind or restrict the Investment Manager or any such affiliated person
from buying, selling or trading any securities or commodities for their own
accounts or for the account of others for whom they may be acting. Nothing in
this Agreement shall limit or restrict the right of any Trustee, officer or
employee of the Investment Manager to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
other business whether of a similar or dissimilar nature.
10. This Agreement shall remain in effect until April 30, 1994 and from year
to year thereafter provided such continuance is approved at least annually by
the vote of holders of a majority, as defined in the Investment Company Act of
1940, as amended (the "Act"), of the outstanding voting securities of the Fund
or by the Trustees of the Fund; provided that in either event such continuance
is also approved annually by the vote of a majority of the Trustees of the Fund
who are not parties to this Agreement or "interested persons" (as defined in
the Act) of any such party, which vote must be cast in person at a meeting
called for the purpose of voting on such approval; provided, however, that (a)
the Fund may, at any time and without the payment of any penalty, terminate
this Agreement upon thirty days' written notice to the Investment Manager,
either by majority vote of the Trustees of the Fund or by the vote of a
majority of the outstanding voting securities of the Fund; (b) this Agreement
shall immediately terminate in the event of its assignment (to the extent
required by the Act and the rules thereunder) unless such automatic
terminations shall be prevented by an exemptive order of the Securities and
Exchange Commission; and (c) the Investment Manager may terminate this Agreement
without payment of penalty on thirty days' written notice to the Fund. Any
notice under this Agreement shall be given in writing, addressed and delivered,
or mailed post-paid, to the other party at the principal office of such party.
11. This Agreement may be amended by the parties without the vote or consent
of the shareholders of the Fund to supply any omission, to cure, correct
or supplement any ambiguous, defective or inconsistent provision hereof, or if
they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund nor the Investment
Manager shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.
13. The Investment Manager and the Fund each agree that the name "Dean
Witter", which comprises a component of the Fund's name, is a property right of
Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will only
use the name "Dean Witter" as a component of its name and for no other purpose,
(ii) it will not purport to grant to any third party the right to use the name
"Dean Witter" for any purpose, (iii) the Investment Manager or its parent, Dean
Witter Reynolds Inc., or any corporate affiliate of the Investment Manager's
parent, may use or grant to others the right to use the name "Dean Witter", or
any
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combination or abbreviation thereof, as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of such right to
any other investment company, (iv) at the request of the Investment Manager or
its parent, the Fund will take such action as may be required to provide its
consent to the use of the name "Dean Witter", or any combination or abbreviation
thereof, by the Investment Manager or its parent or any corporate affiliate of
the Investment Manager's parent, or by any person to whom the Investment Manager
or its parent or any corporate affiliate of the Investment Manager's parent
shall have granted the right to such use, and (v) upon the termination of any
investment advisory agreement into which the Investment Manager and the Fund may
enter, or upon termination of affiliation of the Investment Manager with its
parent, the Fund shall, upon request by the Investment Manager or its parent,
cease to use the name "Dean Witter" as a component of its name, and shall not
use the name, or any combination or abbreviation thereof, as a part of its name
or for any other commercial purpose, and shall cause its officers, Trustees and
shareholders to take any and all actions which the Investment Manager or its
parent may request to effect the foregoing and to reconvey to the Investment
Manager or its parent any and all rights to such name.
14. The Declaration of Trust establishing Dean Witter Utilities Fund, dated
December 8, 1987, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Dean Witter Utilities Fund
refers to the Trustees under the Declaration collectively as Trustees, but not
as individuals or personally; and no Trustee, shareholder, officer, employee or
agent of Dean Witter Utilities Fund shall be held to any personal liability, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise, in connection with the affairs of said Dean
Witter Utilities Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
<TABLE>
<S> <C>
DEAN WITTER UTILITIES FUND
By
.........................................................
Attest:
........................................................
DEAN WITTER INTERCAPITAL INC.
By
.........................................................
Attest:
........................................................
</TABLE>
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DEAN WITTER UTILITIES FUND
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 30th day of June, 1993, between Dean Witter
Utilities Fund, an unincorporated business trust organized under the laws of the
Commonwealth of Massachusetts (the "Trust"), and Dean Witter Distributors Inc.,
a Delaware corporation (the "Distributor");
W I T N E S S E T H:
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a diversified open-end investment company and it
is in the interest of the Trust to offer its shares for sale continuously; and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Trust's transferable
shares of beneficial interest, of $.01 par value ("Shares"), in order to promote
the growth of the Trust and facilitate the distribution of its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR. (a) The Trust hereby appoints
the Distributor as the principal underwriter of the Trust to sell Shares to the
public on the terms set forth in this Agreement and the Trust's Prospectus and
the Distributor hereby accepts such appointment and agrees to act hereunder. The
Trust, during the term of this Agreement, shall sell Shares to the Distributor
upon the terms and conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from the Trust and to sell Shares as principal to investors and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in the Trust's prospectus
(the "Prospectus") and statement of additional information included in the
Trust's registration statement (the "Registration Statement") most recently
filed from time to time with the Securities and Exchange Commission (the "SEC")
and effective under the Securities Act of 1933, as amended (the "1933 Act"), and
1940 Act or as said Prospectus may be otherwise amended or supplemented and
filed with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of the Trust, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by the Trust: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Trust or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Trust; or
(ii) pursuant to reinvestment of dividends or capital gains distributions; or
(iii) pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM THE TRUST. (a) The Distributor shall
have the right to buy from the Trust the Shares needed, but not more than the
Shares needed (except for clerical errors in transmission), to fill
unconditional orders for Shares placed with the Distributor by investors and
securities dealers. The price which the Distributor shall pay for the Shares so
purchased from the Trust shall be the net asset value, determined as set forth
in the Prospectus.
(b) The Shares are to be resold by the Distributor at the net asset value
per share, as set forth in the Prospectus, to investors or to securities
dealers, including DWR, who have entered into selected dealer agreements with
the Distributor pursuant to Section 7 ("Selected Dealers").
(c) The Trust shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(d) hereof. The Trust shall also have the right
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to suspend the sale of the Shares if trading on the New York Stock Exchange
shall have been suspended, if a banking moratorium shall have been declared by
federal or New York authorities, or if there shall have been some other
extraordinary event which, in the judgment of the Trust, makes it impracticable
to sell the Shares.
(d) The Trust, or any agent of the Trust designated in writing by the
Trust, shall be promptly advised of all purchase orders for Shares received by
the Distributor. Any order may be rejected by the Trust; provided, however, that
the Trust will not arbitrarily or without reasonable cause refuse to accept
orders for the purchase of Shares. The Distributor will confirm orders upon
their receipt, and the Trust (or its agent) upon receipt of payment therefor and
instructions will deliver share certificates for such Shares or a statement
confirming the issuance of Shares. Payment shall be made to the Trust in
New York Clearing House funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Trust (or its agent).
With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Trust's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to the Trust's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES. (a) Any of the outstanding
Shares may be tendered for redemption at any time, and the Trust agrees to
redeem the Shares so tendered in accordance with the applicable provisions set
forth in the Prospectus. The price to be paid to redeem the Shares shall be
equal to the net asset value determined as set forth in the Prospectus less any
applicable contingent deferred sales charge. All payments by the Trust hereunder
shall be made in the manner set forth below.
The proceeds of any redemption of Shares shall be paid by the Trust as
follows: (i) any applicable contingent deferred sales charge shall be paid to
the Distributor or to the Selected Dealer, or, when applicable, pursuant to the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
("NASD"), retained by the Fund and (ii) the balance shall be paid to the
redeeming shareholders, in each case in accordance with applicable provisions of
the Prospectus, in New York Clearing House funds. The Distributor is authorized
to direct the Trust to pay directly to any Selected Dealer any contingent
deferred sales charges payable by the Trust to the Distributor in respect of
Shares sold by the Selected Dealer to the redeeming shareholders.
(b) The Distributor is authorized, as agent for the Trust, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in the
Prospectus. The Distributor shall promptly transmit to the transfer agent of the
Trust for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Trust's transfer
agent in connection with all such repurchases.
(c) The Distributor is authorized, as agent for the Trust, to repurchase
Shares held in a share holder's account with the Trust for which no share
certificate has been issued, upon the telephonic or telegraphic request of the
shareholder, or at the discretion of the Distributor. The Distributor shall
promptly transmit to the transfer agent of the Trust, for redemption, all such
orders for repurchase of shares. Payment for shares repurchased may be made by
the Trust to the Distributor for the account of the shareholder. The Distributor
shall be responsible for the accuracy of instructions transmitted to the Trust's
transfer agent in connection with all such repurchases.
With respect to Shares tendered for redemption or repuchase by any Selected
Dealer on behalf of its customers, the Distributor is authorized to instruct the
transfer agent of the Trust to accept orders for
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redemption or repurchase directly from the Selected Dealer on behalf of the
Distributor and to instruct the Trust to transmit payments for such redemptions
and repurchases directly to the Selected Dealer on behalf of the Distributor for
the account of the shareholder. The Distributor shall obtain from the Selected
Dealer and maintain a record of such orders. The Distributor is further
authorized to obtain from the Trust; and shall maintain, a record of payments
made directly to the Selected Dealer on behalf of the Distributor.
(d) Redemption of Shares or payment by the Trust may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by the Trust
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange Commission, by order,
so permits.
SECTION 5. DUTIES OF THE TRUST. (a) The Trust shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use in connection with the
distribution of the Shares, including one certified copy, upon request by the
Distributor, of all financial statements prepared by the Trust and examined by
independent accountants. The Trust shall, at the expense of the Distributor,
make available to the Distributor such number of copies of the Prospectus as the
Distributor shall reasonably request.
(b) The Trust shall take, from time to time, but subject to the necessary
approval of its share holders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) The Trust shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Shares for sale under the
securities laws of such states as the Distributor and the Trust may approve. Any
such qualification may be withheld, terminated or withdrawn by the Trust at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Trust. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Trust in connection with such
qualification.
(d) The Trust shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of annual and
interim reports by the Trust.
SECTION 6. DUTIES OF THE DISTRIBUTOR. (a) The Distributor shall sell
Shares of the Trust through DWR, and may sell Shares through other securities
dealers and its own Account Executives, if any, and shall devote reasonable time
and effort to promote sales of the Shares, but shall not be obligated to sell
any specific number of Shares. The services of the Distributor hereunder are not
exclusive and it is understood that the Distributor may act as principal
underwriter for other registered investment companies. It is also understood
that Selected Dealers, including DWR, may also sell shares for other registered
investment companies.
(b) The Distributor and any Selected Dealers shall not give any information
or make any representations, other than those contained in the Registration
Statement or related Prospectus and any sales literature specifically approved
by the Trust.
(c) The Distributor agrees that it will comply with the terms and
limitations of the Rules of Fair Practice of the NASD.
SECTION 7. SELECTED DEALERS AGREEMENTS. (a) The Distributor shall have
the right to enter into selected dealers agreements with Selected Dealers for
the sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Trust. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public offering
price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by the
Trust, for the confirmation of sales of Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
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<PAGE>
SECTION 8. PAYMENT OF EXPENSES. (a) The Distributor shall bear all
expenses incurred by it in connection with its duties and activities under this
Agreement including the payment to Selected Dealers of any sales commissions
service fees, and other expenses for sales of the Trust's shares (except such
expenses as are specifically undertaken herein by the Trust) incurred or paid by
Selected Dealers, including DWR. It is understood and agreed that, so long as
the Trust's Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act
continues in effect, any expenses incurred by the Distributor hereunder and by
DWR under the Distribution Agreement previously in effect between DWR and the
Trust may be paid from amounts the Distributor and DWR are entitled to receive
from the Trust under such Plan. It is further understood and agreed that
expenses for which the Distributor and DWR or any other Selected Dealer may be
paid under said Plan include opportunity costs, which may be calculated as a
carrying charge on the excess of distribution expenses, incurred by the
Distributor and/or the Selected Dealer over distribution revenues received by
each of them, respectively, under this Agreement and the Distribution Agreement
previously in effect with DWR.
(b) The Trust shall bear all costs and expenses of the Trust, including
payment of contingent deferred sales charges, fees and disbursements of legal
counsel including counsel to the Trustees of the Trust who are not interested
persons (as defined in the 1940 Act) of the Trust or the Distributor, and
independent accountants, in connection with the preparation and filing of any
required Registration Statements and Prospectuses and all amendments and
supplements thereto, and the expense of preparing, printing, mailing and
otherwise distributing prospectuses and statements of additional information,
annual or interim reports or proxy materials to shareholders.
(c) The Trust shall bear the cost and expenses of qualification of the
Shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Trust as a broker or dealer, in such states of the United States
or other jurisdictions as shall be selected by the Trust and the Distributor
pursuant to Section 5(c) hereof and the cost and expenses payable to each such
state for continuing qualification therein until the Trust decides to
discontinue such qualification pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION. (a) The Trust shall indemnify and hold
harmless the Distributor and each person, if any, who controls the Distributor
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any Shares, which may be based upon the
1933 Act, or on any other statute or at common law, on the ground that the
Registration Statement or related Prospectus and Statements of Additional
Information, as from time to time amended and supplemented, or the annual or
interim reports to shareholders of the Trust, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, unless such
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Trust in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the indemnity of the
Trust in favor of the Distributor and any such controlling persons to be deemed
to protect the Distributor or any such controlling persons thereof against any
liability to the Trust or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement; or (ii) is the Trust to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any such
controlling persons, as the case may be, shall have notified the Trust in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Trust of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense, of any suit brought to
enforce any such liability, but if the Trust elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to
4
<PAGE>
the Distributor or such controlling person or persons, defendant or defendants
in the suit. In the event the Trust elects to assume the defense of any such
suit and retain such counsel, the Distributor or such controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Trust does not
elect to assume the defense of any such suit, it will reimburse the Distributor
or such controlling person or persons, defendant or defendants in the suit, for
the reasonable fees and expenses of any counsel retained by them. The Trust
shall promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or trustees in connection with the
issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless the Trust and
each of its trustees and officers and each person, if any, who controls the
Trust against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Trust in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus and Statement of Additional Information, as from time to time
amended, or the annual or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless the Trust and the
Trust's transfer agent, individually and in its capacity as the Trust's transfer
agent, from and against any claims, damages and liabilities which arise as a
result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Trust
pursuant to subsection 4(c) hereof and pay the proceeds to, or as directed by,
the Distributor for the account of each shareholder whose Shares are so
redeemed; and (2) register Shares in the names of investors, confirm the
issuance thereof and receive payment therefor pursuant to subsection 3(d).
(iii) In case any action shall be brought against the Trust or any person
so indemnified by this subsection 9(b) in respect of which indemnity may be
sought against the Distributor, the Distributor shall have the rights and duties
given to the Trust, and the Trust and each person so indemnified shall have the
rights and duties given to the Distributor by the provisions of subsection (a)
of this Section 8.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifiying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Trust on the one hand and the Distributor on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Trust on the one hand and
the Distributor on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Trust on the one hand and
the Distributor on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Trust bear to the total compensation received by the Distributor, in each case
as set forth in the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Trust or the Distributor and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Trust and the Distributor agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such claim.
Notwithstanding the provisions of this subsection (c), the Distributor shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Shares distributed by it to the public were
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<PAGE>
offered to the public exceeds the amount of any damages which it has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective as of the date first above written and shall remain in
force until April 30, 1994, and thereafter, but only so long as such continuance
is specifically approved at least annually by (i) the Board of Trustees of the
Trust, or by the vote of a majority of the outstanding voting securities of the
Trust, cast in person or by proxy, and (ii) a majority of those Trustees who are
not parties to this Agreement or interested persons of any such party and who
have no direct or indirect financial interest in this Agreement or in the
operation of the Trust's Rule 12b-1 Plan or in any agreement related thereto,
cast in person at a meeting called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Trus tees of the Trust, by a majority of the Trustees of the
Trust who are not interested persons of the Trust and who have no direct or
indirect financial interest in this Agreement, or by vote of a majority of the
outstanding voting securities of the Trust, or by the Distributor, on sixty
days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended
by the parties only if such amendment is specifically approved by (i) the
Trustees of the Trust, or by the vote of a majority of outstanding voting
securities of the Trust, and (ii) a majority of those Trustees of the Trust who
are not parties to this Agreement or interested persons of any such party and
who have no direct or indirect financial interest in this Agreement or in any
Agreement related to the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act, cast in person at a meeting called for the purpose of voting
on such approval.
SECTION 12. GOVERNING LAW. This Agreement shall be construed in
accordance with the law of the State of New York and the applicable provisions
of the 1940 Act. To the extent the applicable law of the State of New York, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
SECTION 13. PERSONAL LIABILITY. The Declaration of the Trust establishing
Dean Witter Utilities Fund, dated December 8, 1988, a copy of which, together
with all amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Utilities Fund refers to the Trustees under the Declaration collectively
as Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of Dean Witter Utilities Fund shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Dean Witter Utilities Fund, but the Trust Estate only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
DEAN WITTER UTILITIES FUND
By: /s/
.....................
DEAN WITTER DISTRIBUTORS INC.
By: /s/
.....................
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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 Utilities Fund, a
Massachusetts business trust (the "Fund"), pursuant to which it acts as the
Distributor for the sale of the Fund's shares of beneficial interest, par value
$0.01 per share (the "Shares"). Under the Distribution Agreement, the
Distributor has the right to distribute Shares for resale.
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to the
public are registered under the Securities Act of 1933, as amended. You have
received a copy of the Distribution Agreement between us and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms used herein, including "Prospectus" and "Registration Statement" of
the Fund and "Selected Dealer" shall have the same meaning in this Agreement as
in the Distribution Agreement. As principal, we offer to sell shares to 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 any such claim. Notwithstanding the provisions of
this subsection (II), you shall not be required to contribute any amount in
excess of the amount by which the total price at which the Shares distributed by
it to the public were offered to the public exceeds the amount of any damages
which it has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act of
1933 Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Fund shares. We shall be under no liability to you except for lack
of good faith and for obligations expressly assumed by us herein. Nothing
contained in this paragraph is intended to operate as, and the provisions of
this paragraph shall not in any way whatsoever constitute, a waiver by you of
compliance with any provision of the Securities Act of 1933, as amended, or of
the rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we
believe the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. All communications to us should be sent to the address shown below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
3
<PAGE>
15. This Agreement shall become effective as of the date of your acceptance
hereof, provided that you return to us promptly a signed and dated copy.
DEAN WITTER DISTRIBUTORS INC.
By ...................................
(Authorized Signature)
Please return one signed copy
of this agreement to:
Dean Witter Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: Nations Securities
---------------------------
By:
----------------------------------
Address: 4201 Congress St., Suite 245
-----------------------------
Charlotte, NC 28209
- --------------------------------------
Date: 6/7/93
--------------------------------
4
<PAGE>
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
DEAN WITTER TRUST COMPANY
DWR
[open-end]
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
Article 1 Terms of Appointment; Duties of DWTC............... 2
Article 2 Fees and Expenses.................................. 6
Article 3 Representations and Warranties of DWTC............. 7
Article 4 Representations and Warranties of the
Fund............................................... 8
Article 5 Duty of Care and Indemnification.................... 9
Article 6 Documents and Covenants of the Fund and
DWTC............................................... 12
Article 7 Duration and Termination of Agreement.............. 16
Article 8 Assignment......................................... 16
Article 9 Affiliations....................................... 17
Article 10 Amendment.......................................... 18
Article 11 Applicable Law..................................... 18
Article 12 Miscellaneous...................................... 18
Article 13 Merger of Agreement................................ 20
Article 14 Personal Liability................................. 21
</TABLE>
-i-
<PAGE>
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 1st day of August,
1993 by and between each of the Dean Witter Funds listed on the signature
pages hereof, each of such Funds acting severally on its own behalf and not
jointly with any of such other Funds (each such Fund hereinafter referred to
as the "Fund"), each such Fund having its principal office and place of
business at Two World Trade Center, New York, New York, 10048, and DEAN WITTER
TRUST COMPANY, a trust company organized under the laws of New Jersey, having
its principal office and place of business at Harborside Financial Center,
Plaza Two, Jersey City, New Jersey 07311 ("DWTC").
WHEREAS, the Fund desires to appoint DWTC as its transfer agent,
dividend disbursing agent and shareholder servicing agent and DWTC desires to
accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
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<PAGE>
Article 1 TERMS OF APPOINTMENT; DUTIES OF DWTC
1.1 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints DWTC to act as, and DWTC
agrees to act as, the transfer agent for each series and class of shares of
the Fund, whether now or hereafter authorized or issued ("Shares"), dividend
disbursing agent and shareholder servicing agent in connection with any
accumulation, open-account or similar plans provided to the holders of such
Shares ("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund, including
without limitation any periodic investment plan or periodic withdrawal
program.
1.2 DWTC agrees that it will perform the following
services:
(a) In accordance with procedures established from time to
time by agreement between the Fund and DWTC, DWTC shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate documentation therefor to
the custodian of the assets of the Fund (the "Custodian");
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<PAGE>
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and issue certificates therefor or hold such Shares in book
form in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate documentation therefor to
the Custodian;
(iv) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption, pay over or cause
to be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder
on purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
-3-
<PAGE>
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding. DWTC
shall also provide to the Fund on a regular basis the total number of Shares
which are authorized, issued and outstanding and shall notify the Fund in case
any proposed issue of Shares by the Fund would result in an overissue. In
case any issue of Shares would result in an overissue, DWTC shall refuse to
issue such Shares and shall not countersign and issue any certificates
requested for such Shares. When recording the issuance of Shares, DWTC shall
have no obligation to take cognizance of any Blue Sky laws relating to the
issue of sale of such Shares, which functions shall be the sole responsibility
of the Fund.
(b) In addition to and not in lieu of the services set
forth in the above paragraph (a), DWTC shall: (i) perform all of the customary
services of a transfer agent, dividend disbursing agent and, as relevant,
shareholder servicing agent in connection with dividend reinvestment,
accumulation, open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to, maintaining all Shareholder accounts, preparing Shareholder
meeting lists,
-4-
<PAGE>
mailing proxies, receiving and tabulating proxies, mailing shareholder reports
and prospectuses to current Shareholders, withholding taxes on U.S. resident
and non-resident alien accounts, preparing and filing appropriate forms
required with respect to dividends and distributions by federal tax
authorities for all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and redemptions of
Shares and other confirmable transactions in Shareholder accounts, preparing
and mailing activity statements for Shareholders and providing Shareholder
account information; (ii) open any and all bank accounts which may be
necessary or appropriate in order to provide the foregoing services; and (iii)
provide a system which will enable the Fund to monitor the total number of
Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall (i) identify to DWTC in
writing those transactions and assets to be treated as exempt from Blue Sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of DWTC for the Fund's
registration status under the Blue Sky or securities laws of any State or
other jurisdiction is solely limited to the initial establishment of
transactions subject to Blue Sky compliance by the Fund and the reporting of
such transactions
-5-
<PAGE>
to the Fund as provided above and as agreed from time to time by the Fund and
DWTC.
(d) DWTC shall provide such additional services and
functions not specifically described herein as may be mutually agreed
between DWTC and the Fund. Procedures applicable to such services may be
established from time to time by agreement between the Fund and DWTC.
Article 2 FEES AND EXPENSES
2.1 For performance by DWTC pursuant to this Agreement,
each Fund agrees to pay DWTC an annual maintenance fee for each Shareholder
account and certain transactional fees, if applicable, as set out in the
respective fee schedule attached hereto as Schedule A. Such fees and
out-of-pocket expenses and advances identified under Section 2.2 below may be
changed from time to time subject to mutual written agreement between the Fund
and DWTC.
2.2 In addition to the fees paid under Section 2.1 above,
the Fund agrees to reimburse DWTC in connection with the services rendered by
DWTC hereunder. In addition, any other expenses incurred by DWTC at the
request or with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable
expenses within a reasonable period of time
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<PAGE>
following the mailing of the respective billing notice. Postage for mailing
of dividends, proxies, Fund reports and other mailings to all Shareholder
accounts shall be advanced to DWTC by the Fund upon request prior to the
mailing date of such materials.
Article 3 REPRESENTATIONS AND WARRANTIES OF DWTC
DWTC represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and
in good standing under the laws of New Jersey and it is duly qualified to
carry on its business in New Jersey.
3.2 It is and will remain registered with the U.S.
Securities and Exchange Commission ("SEC") as a Transfer Agent pursuant to the
requirements of Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its
charter and By-Laws to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.5 It has and will continue to have access to the
necessary facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
-7-
<PAGE>
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to DWTC that:
4.1 It is a corporation duly organized and existing and in
good standing under the laws of Delaware or Maryland or a trust duly organized
and existing and in good standing under the laws of Massachusetts, as the case
may be.
4.2 It is empowered under applicable laws and by its
Articles of Incorporation or Declaration of Trust, as the case may be, and
under its By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to
enter into and perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC
under the Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of
1933 (the "1933 Act") is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue to
be made, with respect to all Shares of the Fund being offered for sale.
-8-
<PAGE>
Article 5 DUTY OF CARE AND INDEMNIFICATION
5.1 DWTC shall not be responsible for, and the Fund shall
indemnify and hold DWTC harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability
arising out of or attributable to:
(a) All actions of DWTC or its agents or subcontractors required
to be taken pursuant to this Agreement, provided that such actions are taken
in good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Fund's lack of good faith,
negligence or willful misconduct or which arise out of breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by DWTC or its agents or
subcontractors of information, records and documents which (i) are received by
DWTC or its agents or subcontractors and furnished to it by or on behalf of
the Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTC or its agents or
subcontractors of, any instructions or requests
-9-
<PAGE>
of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities or Blue Sky
laws of any State or other jurisdiction that such Shares be registered in such
State or other jurisdiction or in violation of any stop order or other
determination or ruling by any federal agency or any State or other
jurisdiction with respect to the offer or sale of such Shares in such State or
other jurisdiction.
5.2 DWTC shall indemnify and hold the Fund harmless from or
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by DWTC as a result of the lack of good faith, negligence
or willful misconduct of DWTC, its officers, employees or agents.
5.3 At any time, DWTC may apply to any officer of the Fund
for instructions, and may consult with legal counsel to the Fund, with respect
to any matter arising in connection with the services to be performed by DWTC
under this Agreement, and DWTC and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund for any action taken or omitted by
it in reliance upon such instructions or upon the opinion of such counsel.
DWTC, its
-10-
<PAGE>
agents and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of the Fund, reasonably
believed to be genuine and to have been signed by the proper person or
persons, or upon any instruction, information, data, records or documents
provided to DWTC or its agents or subcontractors by machine readable input,
telex, CRT data entry or other similar means authorized by the Fund, and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. DWTC, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signature of the officers of the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.4 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.
-11-
<PAGE>
5.5 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any act or failure to act hereunder.
5.6 In order that the indemnification provisions contained
in this Article 5 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion, and
shall keep the other party advised with respect to all developments concerning
such claim. The party who may be required to indemnify shall have the option
to participate with the party seeking indemnification in the defense of such
claim. The party seeking indemnification shall in no case confess any claim
or make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
Article 6 DOCUMENTS AND COVENANTS OF THE FUND AND DWTC
6.1 The Fund shall promptly furnish to DWTC the following:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of DWTC and the execution and delivery
of this Agreement;
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<PAGE>
(ii) A certified copy of the Articles of Incorporation and
By-Laws of the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of
Directors designating persons authorized to give instructions on behalf of the
Fund and signature cards bearing the signature of any officer of the Fund or
any other person authorized to sign written instructions on behalf of the
Fund;
(iv) A specimen of the certificate for Shares of the Fund in the
form approved by the Board of Directors, with a certificate of the Secretary
of the Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees
of the Fund authorizing the appointment of DWTC and the execution and delivery
of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
-13-
<PAGE>
(iv) A specimen of the certificate for Shares of the Fund in the
form approved by the Board of Trustees, with a certificate of the Secretary of
the Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered
or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTC deems
to be appropriate or necessary for the proper performance of its duties.
6.2 DWTC hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for safekeeping of
Share certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
6.3 DWTC shall prepare and keep records relating to the
services to be performed hereunder, in the form and manner as it may deem
advisable and as required by applicable laws and regulations. To the extent
required by
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<PAGE>
Section 31 of the 1940 Act, and the rules and regulations thereunder, DWTC
agrees that all such records prepared or maintained by DWTC relating to the
services performed by DWTC hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section 31 of
the 1940 Act, and the rules and regulations thereunder, and will be
surrendered promptly to the Fund on and in accordance with its request.
6.4 DWTC and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential and shall not be voluntarily disclosed to
any other person except as may be required by law or with the prior consent of
DWTC and the Fund.
6.5 In case of any request or demands for the inspection of
the Shareholder records of the Fund, DWTC will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. DWTC reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be
held liable for the failure to exhibit the Shareholder records to such person.
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<PAGE>
Article 7 DURATION AND TERMINATION OF AGREEMENT
7.1 This Agreement shall remain in full force and effect
until July 31, 1996 and from year-to-year thereafter unless terminated by
either party as provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60
days written notice, and by DWTC on 90 days written notice, to the other party
without payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and other
materials will be borne by the Fund. Additionally, DWTC reserves the right to
charge for any other reasonable fees and expenses associated with such
termination.
Article 8 ASSIGNMENT
8.1 Except as provided in Section 8.3 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.2 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and
assigns.
-16-
<PAGE>
8.3 DWTC may, in its sole discretion and without further
consent by the Fund, subcontract, in whole or in part, for the performance of
its obligations and duties hereunder with any person or entity including but
not limited to companies which are affiliated with DWTC; PROVIDED,
HOWEVER, that such person or entity has and maintains the qualifications, if
any, required to perform such obligations and duties, and that DWTC shall be
as fully responsible to the Fund for the acts and omissions of any agent or
subcontractor as it is for its own acts or omissions under this Agreement.
Article 9 AFFILIATIONS
9.1 DWTC may now or hereafter, without the consent of or
notice to the Fund, function as transfer agent and/or shareholder servicing
agent for any other investment company registered with the SEC under the 1940
Act and for any other issuer, including without limitation any investment
company whose adviser, administrator, sponsor or principal underwriter is or
may become affiliated with Dean Witter, Discover & Co. or any of its direct or
indirect subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or
Trustees (as the case may be), officers, employees, agents and shareholders of
the Fund, and the directors, officers, employees, agents and shareholders of
the
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Fund's investment adviser and/or distributor, are or may be interested in DWTC
as directors, officers, employees, agents and shareholders or otherwise, and
that the directors, officers, employees, agents and shareholders of DWTC may
be interested in the Fund as Directors or Trustees (as the case may be),
officers, employees, agents and shareholders or otherwise, or in the
investment adviser and/or distributor as directors, officers, employees,
agents, shareholders or otherwise.
Article 10 AMENDMENT
10.1 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Board of Directors or the Board of Trustees (as the case may be) of the
Fund.
Article 11 APPLICABLE LAW
11.1 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
York.
Article 12 MISCELLANEOUS
12.1 In the event that one or more additional investment
companies managed or administered by Dean Witter InterCapital Inc. or any of
its affiliates ("Additional Funds") desires to retain DWTC to act as transfer
agent, dividend disbursing agent and/or shareholder servicing agent,
-18-
<PAGE>
and DWTC desires to render such services, such services shall be provided
pursuant to a letter agreement, substantially in the form of Exhibit A hereto,
between DWTC and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any
Share certificate, no new certificate shall be issued in lieu thereof, unless
there shall first be furnished to DWTC an affidavit of loss or non-receipt by
the holder of Shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond satisfactory to DWTC and the Fund
issued by a surety company satisfactory to DWTC, except that DWTC may accept
an affidavit of loss and indemnity agreement executed by the registered holder
(or legal representative) without surety in such form as DWTC deems
appropriate indemnifying DWTC and the Fund for the issuance of a replacement
certificate, in cases where the alleged loss is in the amount of $1000 or
less.
12.3 In the event that any check or other order for payment of
money on the account of any Shareholder or new investor is returned unpaid for
any reason, DWTC will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of
such non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTC
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<PAGE>
may, in its sole discretion, deem appropriate or as the Fund and, if
applicable, the Distributor may instruct DWTC.
12.4 Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or to DWTC shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate
in writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTC:
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 MERGER OF AGREEMENT
13.1 This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
-20-
<PAGE>
Article 14 PERSONAL LIABILITY
14.1 In the case of a Fund organized as a Massachusetts
business trust, a copy of the Declaration of Trust of the Fund is on file with
the Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Board of Trustees of the
Fund as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Fund;
provided, however, that the Declaration of Trust of the Fund provides that the
assets of a particular Series of the Fund shall under no circumstances be
charged with liabilities attributable to any other Series of the Fund and that
all persons extending credit to, or contracting with or having any claim
against, a particular Series of the Fund shall look only to the assets of that
particular Series for payment of such credit, contract or claim.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated Agreement to be executed in their names and on their behalf by
and through their duly authorized officers, as of the day and year first above
written.
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Equity Income Trust
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
-22-
<PAGE>
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Select Municipal Reinvestment Fund
(44) Dean Witter Variable Investment Series
By:/S/ Sheldon Curtis
-----------------------------------------------
Sheldon Curtis
Vice President and General Counsel
ATTEST:
/S/ Barry Fink
- ----------------------
Barry Fink
Assistant Secretary
DEAN WITTER TRUST COMPANY
By:/S/ Charles A. Fiumefreddo
------------------------------------
Charles A. Fiumefreddo
Chairman
ATTEST:
/S/ David A. Hughey
- --------------------
David A. Hughey
Executive Vice President
-23-
<PAGE>
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (THE FUND NAME) a (Massachusetts business
trust/Maryland corporation) (the "Fund"), desires to employ and appoint Dean
Witter Trust Company ("DWTC") to act as transfer agent for each series and
class of shares of the Fund, whether now or hereafter authorized or issued
("Shares"), dividend disbursing agent and shareholder servicing agent,
registrar and agent in connection with any accumulation, open-account or
similar plan provided to the holders of Shares, including without limitation
any periodic investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by
the Fund to DWTC of fees as set out in the fee schedule attached hereto as
Schedule A, DWTC shall provide such services to the Fund pursuant to the terms
and conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
-24-
<PAGE>
Please indicate DWTC's acceptance of employment and appointment by
the Fund in the capacities set forth above by so indicating in the space
provided below.
Very truly yours,
(NAME OF THE FUND)
By:__________________________________
Sheldon Curtis
Vice President and General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST COMPANY
By:_______________________
Its:______________________
Date:_____________________
-25-
<PAGE>
SCHEDULE A
Fund: Dean Witter Utilities Fund
Fees: (1) Annual maintenance fee of $11.00 per shareholder
account, payable monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above,
for providing Forms 1099 for accounts closed during the
year, payable following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2
of the Agreement.
(4) Fees for additional services not set forth in this
Agreement shall be as negotiated between the parties.
- 26 -
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 31st day of December, 1993 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a New Jersey corporation
(herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement") with
certain investment companies as set forth on Schedule A (each such investment
company being herein referred to as a "Fund" and, collectively, as the "Funds")
pursuant to which InterCapital is to perform, or supervise the performance of,
among other services, administrative services for the Funds (and, in the case of
Funds with multiple portfolios, the Series or Portfolios of the Funds (such
Series and Portfolio being herein individually referred to as "a Series" and,
collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice); (ii)
provide the Fund with full administrative services, including the maintenance of
certain books and records, such as journals, ledger accounts and other records
required under the Investment Company Act of 1940, as amended (the"Act"), the
notification to the Fund and InterCapital of available funds for investment, the
reconciliation of account information and balances among the Fund's custodian,
transfer agent and dividend disbursing agent and InterCapital, and the
calculation of the net asset value of the Fund's shares; (iii) provide the Fund
with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary to provide effective
operation of the Fund; (iv) oversee the performance of administrative and
professional services rendered to the Fund by others, including its custodian,
transfer agent and dividend disbursing agent, as well as accounting, auditing
and other services; (v) provide the Fund with adequate general office space and
facilities; (vi) assist in the preparation and the printing of the periodic
updating of the Fund's registration statement and prospectus (and, in the case
of an open-end Fund, the statement of additional information), tax returns,
proxy statements, and reports to its shareholders and the Securities and
Exchange Commission; and (vii) monitor the compliance of the Fund's investment
policies and restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to perform
administrative services hereunder, it shall notify DWS in writing. If DWS is
willing to render such services, it shall notify InterCapital in writing,
whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to time
determine to be necessary or useful to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, the staff and
personnel of DWS shall be deemed to include officers of DWS and persons employed
or otherwise retained by DWS (including officers and employees of InterCapital,
with the consent of InterCapital) to furnish services, statistical and other
factual data, information with respect to technical and scientific developments,
and such other information, advice and assistance as DWS may desire. DWS shall
maintain each Fund's records and books of account (other than those maintained
by the Fund's transfer agent, registrar, custodian and other agencies). All such
books and records so maintained shall be the property of the Fund and, upon
request therefor, DWS shall surrender to InterCapital or to the Fund such of the
books and records so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other information
relating to the business and affairs of the Fund as DWS may
1
<PAGE>
reasonably require in order to discharge its duties and obligations to the Fund
under this Agreement or to comply with any applicable law and regulation or
request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of
a closed-end Fund) by applying the annual rate or rates set forth on Schedule B
to the net assets of each Fund. Except as hereinafter set forth, (i) in the
case of an open-end Fund, compensation under this Agreement shall be calculated
by applying 1/365th of the annual rate or rates to the Fund's or the Series'
daily net assets determined as of the close of business on that day or the last
previous business day and (ii) in the case of a closed-end Fund, compensation
under this Agreement shall be calculated by applying the annual rate or rates
to the Fund's average weekly net assets determined as of the close of the last
business day of each week. If this Agreement becomes effective subsequent to
the first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
on Schedule B. Subject to the provisions of paragraph 5 hereof, payment of DWS'
compensation for the preceding month shall be made as promptly as possible
after completion of the computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund and/or any Series thereof imposed by
state securities laws or regulations thereunder, as such limitations may be
raised or lowered from time to time, or, in the case of InterCapital Income
Securities Inc. or Dean Witter Variable Investment Series or any Series thereof,
the expense limitation specified in the Fund's Investment Management Agreement,
the fee payable hereunder shall be reduced on a pro rata basis in the same
proportion as the fee payable by the Fund under the Investment Management
Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by DWS,
and such clerical help and bookkeeping services as DWS shall reasonably require
in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations hereunder,
DWS shall not be liable to the Fund or any of its investors for any error of
judgment or mistake of law or for any act or omission by DWS or for any losses
sustained by the Fund or its investors. It is understood that, subject to the
terms and conditions of the Investment Management Agreement between each Fund
and InterCapital, InterCapital shall retain ultimate responsibility for all
services to be performed hereunder by DWS. DWS shall indemnify InterCapital and
hold it harmless from any liability that InterCapital may incur arising out of
any act or failure to act by DWS in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person controlling,
controlled by or under common control with DWS, and that DWS and any person
controlling, controlled by or under common control with DWS may have an interest
in the Fund. It is also understood that DWS and any affiliated persons thereof
or any persons controlling, controlled by or under common control with DWS have
and may have advisory, management, administration service or other contracts
with other organizations and persons, and may have other interests and
businesses, and further may purchase, sell or trade any securities or
commodities for their own accounts or for the account of others for whom they
may be acting.
9. This Agreement shall continue until April 30, 1994, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the
2
<PAGE>
event that the Investment Management Agreement between any Fund and InterCapital
is terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any manner
by mutual written agreement executed by each of the parties hereto.
11. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By: ____________________________
Attest:
__________________________
DEAN WITTER SERVICES COMPANY INC.
By: _____________________________
Attest:
__________________________
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
at December 31, 1993
Open-End Funds
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter California Tax-Free Daily Income Trust
7. Dean Witter California Tax-Free Income Fund
8. Dean Witter Capital Growth Securities
9. Dean Witter Convertible Securities Trust
10. Dean Witter Developing Growth Securities Trust
11. Dean Witter Diversified Income Trust
12. Dean Witter Dividend Growth Securities Inc.
13. Dean Witter Equity Income Trust
14. Dean Witter European Growth Fund Inc.
15. Dean Witter Federal Securities Trust
16. Dean Witter Global Dividend Growth Securities
17. Dean Witter Global Short-Term Income Fund Inc.
18. Dean Witter Health Sciences Trust
19. Dean Witter High Yield Securities Inc.
20. Dean Witter Intermediate Income Securities
21. Dean Witter Limited Term Municipal Trust
22. Dean Witter Liquid Asset Fund Inc.
23. Dean Witter Managed Assets Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter Natural Resource Development Securities Inc.
26. Dean Witter New York Municipal Money Market Trust
27. Dean Witter New York Tax-Free Income Fund
28. Dean Witter Pacific Growth Fund Inc.
29. Dean Witter Precious Metals and Minerals Trust
30. Dean Witter Premier Income Trust
31. Dean Witter Retirement Series
32. Dean Witter Select Municipal Reinvestment Fund
33. Dean Witter Short-Term U.S. Treasury Trust
34. Dean Witter Strategist Fund
35. Dean Witter Tax-Exempt Securities Trust
36. Dean Witter Tax-Free Daily Income Trust
37. Dean Witter U.S. Government Money Market Trust
38. Dean Witter U.S. Government Securities Trust
39. Dean Witter Utilities Fund
40. Dean Witter Value-Added Market Series
41. Dean Witter Variable Investment Series
42. Dean Witter World Wide Income Trust
43. Dean Witter World Wide Investment Trust
Closed-End Funds
44. High Income Advantage Trust
45. High Income Advantage Trust II
46. High Income Advantage Trust III
47. InterCapital Income Securities Inc.
48. Dean Witter Government Income Trust
49. InterCapital Insured Municipal Bond Trust
50. InterCapital Insured Municipal Trust
51. InterCapital Insured Municipal Income Trust
52. InterCapital California Insured Municipal Income Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. InterCapital Quality Municipal Securities
56. InterCapital California Quality Municipal Securities
57. InterCapital New York Quality Municipal Securities
4
<PAGE>
DEAN WITTER SERVICES COMPANY
SCHEDULE OF ADMINISTRATIVE FEES - JANUARY 1, 1994
MONTHLY COMPENSATION CALCULATED DAILY BY APPLYING THE FOLLOWING ANNUAL RATES TO
THE FUND'S NET ASSETS.
Dean Witter 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; and 0.045% of the portion of the daily
net assets exceeding $3.5 billion.
5
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 7 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 11, 1994 relating to the financial statements and financial highlights
of Dean Witter Utilities Fund, which appears in such Statement of Additional
Information, and to the incorporation by reference of such report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Financial Highlights" in the
Prospectus and to the references to us under the headings "Independent
Accountants" and "Experts" in the Statement of Additional Information.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York
February 22, 1994
<PAGE>
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER UTILITIES FUND
WHEREAS, Dean Witter Utilities Fund (the "Fund") is engaged in business as
an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, on March 2, 1988, the Fund adopted a Plan of Distribution pursuant
to Rule 12b-1 under the Act, and the Trustees then determined that there was a
reasonable likelihood that adoption of the Plan of Distribution would benefit
the Fund and its shareholders; and
WHEREAS, the Trustees believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to continue
to benefit the Fund and its shareholders; and
WHEREAS, on March 2, 1988, the Fund and Dean Witter Reynolds Inc. ("DWR")
entered into a Distribution Agreement pursuant to which the Fund employed DWR as
distributor of the Fund's shares; and
WHEREAS, on January 4, 1993, the Fund and DWR substituted Dean Witter
Distributors Inc. (the "Distributor") in the place of DWR as distributor of the
Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will continue to
promote the sale of Fund shares and provide personal services to Fund
shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor have entered into a separate
Distribution Agreement dated as of January 4, 1993, pursuant to which the Fund
has employed the Distributor in such capacity during the continuous offering of
shares of the Fund.
NOW, THEREFORE, the Fund hereby amends the Plan of Distribution previously
adopted and amended and restated, and the Distributor hereby agrees to the terms
of said Plan of Distribution (the "Plan"), as amended herein, in accordance with
Rule 12b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of securities
of which the Fund is the issuer, compensation for distribution of its
shares at the rate of the lesser of (i) 1.0% per annum of the average daily
aggregate sales of the shares of the Fund since its inception (not including
reinvestment of dividends and capital gains distributions from the Fund) less
the average daily aggregate net asset value of the shares of the Fund redeemed
since the Fund's inception upon which a contingent deferred sales charge has
been imposed or upon which such charge has been waived, or (ii) 1.0% per annum
of the Fund's average daily net assets. Such compensation shall be calculated
and accrued daily and paid monthly or at such other intervals as the Trustees
shall determine. The Distributor may direct that all or any part of the amounts
receivable by it under this Plan be paid directly to DWR, its affiliates or
other broker-dealers who provide distribution and shareholder services. All
payments made hereunder pursuant to the Plan shall be in accordance with the
terms and limitations of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc.
2. The amount set forth in paragraph 1 of this Plan shall be paid for
services of the Distributor, DWR, its affiliates and other
broker-dealers it may select in connection with the distribution of the Fund's
shares, including personal services to shareholders with respect to their
holdings of Fund shares, and may be spent by the Distributor, DWR, its
affiliates and such broker-dealers on any activities or expenses related to the
distribution of the Fund's shares or services to shareholders, including, but
not limited to: compensation to, and expenses of, account executives or other
employees of the Distributor, DWR, its affiliates or other broker-dealers;
overhead and other branch office distribution-related expenses and telephone
expenses of persons who engage in or support distribution of shares or who
provide personal services to shareholders; printing of prospectuses and reports
for other than existing shareholders; preparation, printing and distribution of
sales literature and advertising materials and opportunity costs in incurring
the foregoing expenses (which may be calculated as a carrying charge on the
excess of the distribution expenses incurred by the Distributor, DWR, its
affiliates or other broker-dealers over distribution revenues received by them).
The overhead and other branch office distribution-related expenses referred to
in this paragraph 2 may include: (a) the expenses of operating the branch
offices of the Distributor or other broker-dealers, including DWR, in connection
with the sale of Fund shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs of
client sales seminars; (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares; and (d) other expenses relating to branch
promotion of Fund sales.
3. This Plan, as amended and restated, shall not take effect until it has
been approved, together with any related agreements, by votes of a
majority of the Board of Trustees of the Fund and of the Trustees who are not
1
<PAGE>
"interested persons" of the Fund (as defined in the Act) and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
4. This Plan shall continue in effect until April 30, 1993, and from year
to year thereafter, provided such continuance is specifically approved
at least annually in the manner provided for approval of this Plan in paragraph
3 hereof.
5. The Distributor shall provide to the Trustees of the Fund and the
Trustees shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were made. In
this regard, the Trustees shall request the Distributor to specify such items of
expenses as the Trustees deem appropriate. The Trustees shall consider such
items as they deem relevant in making the determinations required by paragraph 4
hereof.
6. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. In the event of any such termination or in the event of
nonrenewal, the Fund shall have no obligation to pay expenses which have been
incurred by the Distributor, DWR, its affiliates or other broker-dealers in
excess of payments made by the Fund pursuant to this Plan. However, this shall
not preclude consideration by the Trustees of the manner in which such excess
expenses shall be treated.
7. This Plan may not be amended to increase materially the amount the Fund
may spend for distribution provided in paragraph 1 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the Act)
of the outstanding voting securities of the Fund, and no material amendment to
the Plan shall be made unless approved in the manner provided for approval in
paragraph 3 hereof.
8. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall
be committed to the discretion of the Trustees who are not interested persons.
9. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 5 hereof, for a period of not
less than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible place.
10.The Declaration of Trust establishing Dean Witter Utilities Fund, dated
January 4, 1993, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Dean Witter Utilities Fund
refers to the Trustees under the Declaration collectively as Trustees but not as
individuals or personally; and no Trustee, shareholder, officer, employee or
agent of Dean Witter Utilities Fund shall be held to any personal liability, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise, in connection with the affairs of said Dean
Witter Utilities Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
amended and restated Plan of Distribution, as amended, as of the day and year
set forth below in New York, New York.
<TABLE>
<S> <C>
Date: March 2, 1988 DEAN WITTER UTILITIES FUND
As amended on January 4, 1993
and April 28, 1993
By
.....................................................
Attest:
....................................................
DEAN WITTER DISTRIBUTORS INC.
By
.....................................................
Attest:
....................................................
DEAN WITTER REYNOLDS INC.
By
.....................................................
Attest:
....................................................
</TABLE>
2
<PAGE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DEAN WITTER UTILITIES FUND
30 day as of 12/31/93
6
YIELD = 2{ [ ((a-b)/c d) + 1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = The maximum offering price per share on the last
day of the period
6
YIELD = 2{ [(( 18,477,832.07 - 4,868,170.59)/267,426,414.969 X 14.34)+1]-1}
= 4.296644%
<PAGE>
FINAL DATE: 31-Dec-93
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
UTILITIES FUND
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-93 YEARS - n COMPOUND RETURN - T
- ------------- ----------- ----------- -------------------
<S> <C> <C> <C>
31-Dec-92 $1,077.90 1 7.79%
31-Dec-88 $1,790.90 5.00 12.36%
30-Apr-88 $1,944.10 5.67 12.44%
<FN>
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
</TABLE>
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Dec-93 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ----------- ----------- ----------------- ------ ----------------
<S> <C> <C> <C> <C>
31-Dec-92 $1,127.90 12.79% 1 12.79%
31-Dec-88 $1,810.90 81.09% 5.00 12.61%
30-Apr-88 $1,954.10 95.41% 5.67 12.54%
<FN>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
</TABLE>
FORMULA: G= (TR+1)*P
G= GROWTH OF $10,000 INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT $100,000 INVESTMENT - G
- ----------- ----------- ------------------------------------------- -----------------------
<S> <C> <C> <C> <C>
30-Apr-88 95.41 $19,541 $97,705 $195,410
</TABLE>
