<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 1996
REGISTRATION NOS.: 33-21803
811-5554
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 8 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 10 /X/
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DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
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
the effective date of the registration statement
-------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
<TABLE>
<S> <C>
X immediately upon filing pursuant to paragraph (b)
on (date), pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule 485
</TABLE>
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (A)(1) OF RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT FILED THE RULE 24F-2 NOTICE FOR
ITS FISCAL YEAR ENDED DECEMBER 31, 1995 WITH THE SECURITIES AND EXCHANGE
COMMISSION ON FEBRUARY 12, 1996.
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<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<S> <C>
ITEM CAPTION
PART A PROSPECTUS
1. ......................................... Cover Page
2. ......................................... Prospectus Summary; Summary of Fund Expenses
3. ......................................... Financial Highlights; Report of Independent Accountants; Financial
Statements; Performance Information
4. ......................................... Investment Objective and Policies; Risk Considerations; 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. ......................................... Redemption of Fund Shares; 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; Purchase of Fund Shares; Custodian and
Transfer Agent; Independent Accountants
17. ......................................... Portfolio Transactions and Brokerage
18. ......................................... Shares of the Fund
19. ......................................... Purchase of Fund Shares; Redemption of Fund Shares; Financial
Statements; Determination of Net Asset Value; Shareholder Services
20. ......................................... Dividends, Distributions and Taxes
21. ......................................... Purchase of Fund Shares
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 23, 1996
Dean Witter California Tax-Free Daily Income Trust (the "Fund")
is a no-load, open-end, diversified management investment company whose
investment objective is to provide as high a level of daily income exempt from
federal and California income tax as is consistent with stability of principal
and liquidity. The Fund has a Rule 12b-1 Distribution Plan (see below). The Fund
seeks to achieve its objective by investing primarily in high quality California
tax-exempt securities with short-term maturities, including Municipal Bonds,
Municipal Notes and Municipal Commercial Paper. (See "Investment Objective and
Policies.")
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
In accordance with a Plan of Distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "Act") with Dean Witter
Distributors Inc. (the "Distributor"), the Fund is authorized to reimburse for
specific expenses incurred in promoting the distribution of the Fund's shares.
Reimbursement may in no event exceed an amount equal to payments at the annual
rate of 0.15% of the average daily net assets of the Fund.
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 23, 1996, which has been filed with
the Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at its address or at one of its telephone numbers listed on
this page. The Statement of Additional Information is incorporated herein by
reference.
<TABLE>
<S> <C>
Minimum initial investment ...... $5,000
Minimum additional investment.... $ 100
</TABLE>
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/3
Financial Highlights/4
The Fund and its Management/5
Investment Objective and Policies/5
Special Considerations Relating to California
Tax-Exempt Securities/8
Investment Restrictions/9
Purchase of Fund Shares/10
Shareholder Services/12
Redemption of Fund Shares/14
Dividends, Distributions and Taxes/16
Additional Information/19
Financial Statements--December 31, 1995/20
Report of Independent Accountants/29
For information about the Fund, including information on opening an account,
registration of shares, and other information relating to a specific account,
call:
- 800-869-NEWS (toll-free) or
- 212-392-2550
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, 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
California Tax-Free Daily Income Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550
<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an open-end,
Fund diversified management investment company investing principally in short-term securities which are exempt from
federal and California income tax.
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Shares Offered Shares of beneficial interest with $0.01 par value. (see p. 19).
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Purchase of Shares Investments may be made:
- By wire
- By mail
- Through Dean Witter Reynolds Inc. Account Executives and other Selected Broker-Dealers
Purchases are at net asset value, without a sales charge. Minimum initial investment: $5,000. Subsequent
investments: $100 or more through the Transfer Agent; $1,000 or more through the account executive or $100 to
$5,000 through EasyInvest-TM-.
Orders for purchase of shares are effective on day of receipt of payment in Federal funds if payment is received
by the Fund's transfer agent before 12:00 noon New York time (see p. 10).
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Investment To provide as high a level of daily income exempt from federal and California income tax as is consistent with
Objective stability of principal and liquidity (see p. 5).
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Investment A diversified portfolio of California tax-exempt fixed-income securities with short-term maturities (see p. 5).
Policy
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Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its wholly-owned
Manager subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory, management and
administrative capacities to ninety-five investment companies and other portfolios with assets of approximately
$79.5 billion at December 31, 1995 (see page 5).
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Management The monthly fee is at an annual rate of 1/2 of 1% of average daily net assets, scaled down on assets over $500
Fee million (see p. 5).
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Distributor Dean Witter Distributors Inc. (the "Distributor") sells shares of the Fund through Dean Witter Reynolds Inc.
("DWR") and other selected broker-dealers pursuant to selected dealer agreements. Other than the reimbursement
to the Distributor pursuant to to the Rule 12b-1 Distribution Plan, the Distributor receives no distribution
fees. (see p. 10).
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Plan of The Fund is authorized to reimburse specific expenses incurred in promoting the distribution of the Fund's
Distribution shares pursuant to a Plan of Distribution with the Distributor pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Reimbursement may in no event exceed an amount equal to payments at the annual rate of .15
of 1% of average daily net assets of the Fund (see p. 11).
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Dividends Declared and automatically reinvested daily in additional shares; cash payments of dividends available monthly
(see p. 17).
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Reports Individual periodic account statements; annual and semi-annual Fund financial statements.
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Redemption of Shares are redeemable at net asset value without any charge (see p. 15):
Shares - By check
- By telephone or wire instructions, with proceeds wired or mailed to a predesignated bank account
- By mail
- Via an automatic redemption procedure (see p. 16).
A shareholder's account is subject to possible involuntary redemption if its value falls below $1,000 (see p.
16).
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Risks The Fund invests principally in short-term fixed income securities issued or guaranteed by the state of
California and its local governments which are subject to minimal risk of loss of income and principal. However,
the investor is directed to the discussions concerning "variable rate obligations" and "when-issued and delayed
delivery securities" on page 8 of the Prospectus and on page 14 of the Statement of Additional Information and
the discussions concerning "repurchase agreements" and "puts" on pages 15-16 of the Statement of Additional
Information, concerning any risks associated with such portfolio securities and management techniques. Since the
Fund concentrates its investments in California tax-exempt securities, the Fund is affected by any political,
economic or regulatory developments affecting the ability of California issuers to pay interest or repay
principal (see pages 8-9 of the Prospectus and pages 19-22 of the Statement of Additional Information).
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</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE
IN THE 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, 1995.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
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Maximum Sales Charge Imposed on Purchases.............................................. None
Maximum Sales Charge Imposed on Reinvested Dividends................................... None
Deferred Sales Charge.................................................................. None
Redemption Fees........................................................................ None
Exchange Fees.......................................................................... None
</TABLE>
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------------
Management Fees....................................................................... 0.50%
12b-1 Fee*............................................................................ 0.10%
Other Expenses........................................................................ 0.15%
Total Fund Operating Expenses......................................................... 0.75%
<FN>']
- ------------
* THE 12B-1 FEE IS CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC., ("NASD") GUIDELINES (SEE "PURCHASE OF
FUND SHARES").
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<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............................................................... $ 8 $ 24 $ 41 $ 92
</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," "Purchase of Fund Shares--Plan of Distribution"
in this Prospectus.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, notes thereto and the unqualified report of
independent accountants which are contained in this Prospectus commencing on
page 20.
<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 22,
1988*
FOR THE YEAR ENDED DECEMBER 31, THROUGH
----------------------------------------------------------------------- DECEMBER 31,
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- -------- -------- ------------
Net investment income..... 0.030 0.021 0.018 0.023 0.037 0.049 0.056 0.024
Less dividends from net
investment income........ (0.030) (0.021) (0.018) (0.023) (0.037) (0.049) (0.056) (0.024)
-------- -------- -------- -------- -------- -------- -------- ------------
Net asset value, end of
period................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- -------- -------- ------------
-------- -------- -------- -------- -------- -------- -------- ------------
TOTAL INVESTMENT RETURN... 3.04% 2.17% 1.78% 2.37% 3.77% 5.04% 5.70% 2.45%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period,
in thousands............. $254,376 $217,079 $251,059 $288,044 $332,426 $361,144 $341,682 $191,762
Ratios to average net
assets:
Expenses................ 0.75%(4) 0.72% 0.71% 0.73% 0.70% 0.71% 0.68% 0.67%(2)(3)
Net investment income... 3.00% 2.13% 1.76% 2.35% 3.70% 4.89% 5.56% 5.47%(2)(3)
<FN>
- ---------------
* COMMENCEMENT OF OPERATIONS.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE ANNUALIZED EXPENSE AND NET INVESTMENT
INCOME RATIOS WOULD HAVE BEEN 0.81% AND 5.33%, RESPECTIVELY.
(4) THE ABOVE EXPENSE RATIO WOULD HAVE BEEN 0.74% WHICH REFLECTS 0.01%
EFFECT FOR CUSTODY CASH CREDITS.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
THE FUND AND ITS MANAGEMENT
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Dean Witter California Tax-Free Daily Income Trust (the "Fund") is an
open-end, diversified management investment company. The Fund was organized as a
trust of the type commonly
known as a "Massachusetts business trust" on April 25, 1988 under the name of
Dean Witter/Sears California Tax-Free Daily Income Trust.
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 a total of ninety-five investment companies, thirty
of which are listed on the New York Stock Exchange, with combined total assets
of approximately $76.9 billion as of December 31, 1995. The Investment Manager
also manages and advises portfolios of pension plans, other institutions and
individuals which aggregated approximately $2.6 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund. The Fund's
Board of Trustees reviews the various services provided by or under the
direction of the Investment Manager to ensure that the Fund's general investment
policies and programs are being properly carried out and that administrative
services are being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily at an annual rate of
0.50% of the daily net assets of the Fund up to $500 million, scaled down at
various asset levels to 0.25% on net assets exceeding $3 billion. For the fiscal
year ended December 31, 1995, the Fund accrued total compensation to the
Investment Manager amounting to 0.50% of the Fund's average daily net assets and
the Fund's total expenses amounted to 0.75% of the Fund's average daily net
assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to provide as high a level of daily
income exempt from federal and California income tax as is consistent with
stability of principal and liquidity. It is a fundamental policy of the Fund
that at least 80% of its total assets will be invested in securities the
interest on which is exempt from federal and California income tax. This policy
and the Fund's investment objective may not be changed without a vote of a
majority of the Fund's outstanding voting securities, as defined in the
Investment Company Act of 1940, as amended (the "Act"). There is no assurance
that the objective will be achieved.
The Fund seeks to achieve its investment objective by investing primarily in
high quality tax-exempt securities with short-term maturities (remaining
maturities of thirteen months or less). Such securities will include California
Municipal Bonds and California Municipal Notes ("California Municipal
Obligations") and California Municipal Commercial Paper which are rated in one
of the two highest rating categories for debt obligations by at least two
nationally recognized statistical rating organizations ("NRSROS"--primarily
Standard & Poor's Corporation ["S&P"] and Moody's Investors Service
["Moody's"]), or one NRSRO if the
obliga-
5
<PAGE>
tion is rated by only one NRSRO. Unrated obligations may be purchased if they
are determined to be of comparable quality by the Fund's Trustees.
The types of taxable securities in which the Fund may temporarily invest are
limited to the following short-term fixed-income securities (maturing in one
year or less from the time of purchase); (i) obligations of the United States
Government or its agencies, instrumentalities or authorities; (ii) commercial
paper rated P-1 by Moody's or A-1 by S&P; (iii) certificates of deposit of
domestic banks with assets of $1 billion or more; and (iv) repurchase agreements
with respect to any of the foregoing portfolio securities.
California Municipal Obligations are debt obligations of a state, its
cities, municipalities and municipal agencies which generally have maturities,
at the time of their issuance, of either one year or more (Bonds) or from six
months to three years (Notes). California Municipal Commercial Paper refers to
short-term obligations of municipalities which may be issued at a discount and
are sometimes referred to as Short-Term Discount Notes. Any Municipal Obligation
which depends directly or indirectly on the credit of the Federal Government,
its agencies or instrumentalities shall be considered to have a Moody's rating
of Aaa or S&P rating of AAA. An obligation shall be considered a California
Municipal Obligation only if, in the opinion of bond counsel, the interest
payable therefrom is exempt from both federal income tax and California personal
income tax.
The foregoing percentage and rating limitations apply at the time of
acquisition of a security based on the last previous determination of the Fund's
net asset value. Any subsequent change in any rating by a rating service or
change in percentages resulting from market fluctuations will not require
elimination of any security from the Fund's portfolio. However, in accordance
with procedures adopted by the Fund's Trustees pursuant to federal securities
regulations governing money market funds, if the Investment Manager becomes
aware that a portfolio security has received a new rating from an NRSRO that is
below the second highest rating, then, unless the security is disposed of within
five days, the Investment Manager will perform a creditworthiness analysis of
any such downgraded securities, which analysis will be reported to the Trustee
who will, in turn, determine whether the securities continue to present minimal
credit risks to the Fund.
The ratings assigned by NRSRO's represent their opinions as to the quality
of the securities which they undertake to rate (see the Appendix to the
Statement of Additional Information). It should be emphasized, however, that the
ratings are general and not absolute standards of quality.
The two principal classifications of California Municipal Obligations are
"general obligation" and "revenue" bonds, notes or commercial paper. General
obligation bonds, notes or commercial paper are secured by the issuer's pledge
of its faith, credit and taxing power for the payment of principal and interest.
Issuers of general obligation bonds, notes or commercial paper include a state,
its counties, cities, towns and other governmental units. Revenue bonds, notes
or commercial paper are payable from the revenues derived from a particular
facility or class of facilities or, in some cases, from specific revenue
sources. Revenue bonds, notes or commercial paper are issued for a wide variety
of purposes, including the financing of electric, gas, water and sewer systems
and other public utilities; industrial development and pollution control
facilities; single and multi-family housing units; public buildings and
facilities; air and marine ports, transportation facilities such as toll roads,
bridges and tunnels; and health and educational facilities such as hospitals and
dormitories. They rely primarily on user fees to pay debt service, although the
principal revenue source is often supplemented by additional security features
which are intended to enhance the creditworthiness of the issuer's obligations.
In some cases, particularly revenue bonds issued to finance housing and public
buildings, a direct or implied "moral obligation" of a governmental unit may be
6
<PAGE>
pledged to the payment of debt service. In other cases, a special tax or other
charge may augment user fees.
Included within the revenue bonds category are participations in lease
obligations or installment purchase contracts (hereinafter collectively called
"lease obligations") of municipalities. State and local governments issue lease
obligations to acquire equipment and facilities.
Lease obligations may have risks not normally associated with general
obligation or other revenue bonds. Leases and installment purchase or
conditional sale contracts (which may provide for title to the leased asset to
pass eventually to the issuer) have developed as a means for governmental
issuers to acquire property and equipment without the necessity of complying
with the constitutional and statutory requirements generally applicable for the
issuance of debt. Certain lease obligations contain "non-appropriation" clauses
that provide that the governmental issuer has no obligation to make future
payments under the lease or contract unless money is appropriated for such
purpose by the appropriate legislative body on an annual or other periodic
basis. Consequently, continued lease payments on those lease obligations
containing "non-appropriation" clauses are dependent on future legislative
actions. If such legislative actions do not occur, the holders of the lease
obligation may experience difficulty in exercising their rights, including
disposition of the property.
Lease obligations represent a relatively new type of financing that has not
yet developed the depth of marketability associated with more conventional
municipal obligations, and, as a result, certain of such lease obligations may
be considered illiquid securities. To determine whether or not the Fund will
consider such securities to be illiquid (the Fund may not invest more than ten
percent of its net assets in illiquid securities), the Trustees of the Fund have
established guidelines to be utilized by the Fund in determining the liquidity
of a lease obligation. The factors to be considered in making the determination
include: 1) the frequency of trades and quoted prices for the obligation; 2) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers; 3) the willingness of dealers to undertake to make a
market in the security; and 4) the nature of the marketplace trades, including,
the time needed to dispose of the security, the method of soliciting offers, and
the mechanics of the transfer.
The Fund does not generally intend to invest more than 25% of its total
assets in securities of any one governmental unit. The Fund may invest more than
25% of its total assets in industrial development and pollution control bonds
(two kinds of tax-exempt Municipal Bonds) whether or not the users of facilities
financed by such bonds are in the same industry. In cases where such users are
in the same industry, there may be additional risk to the Fund in the event of
an economic downturn in such industry, which may result generally in a lowered
need for such facilities and a lowered ability of such users to pay for the use
of such facilities.
The high quality, short-term fixed income securities in which the Fund
principally invests are guaranteed by state and local governments and are
subject to minimal risk of loss of income and principal.
PORTFOLIO MANAGEMENT
Although the Fund will generally acquire securities for investment with the
intent of holding them to maturity and will not seek profits through short-term
trading, the Fund may dispose of any security prior to its maturity to meet
redemption requests. Securities may also be sold when the Fund's Investment
Manager believes such disposition to be advisable on the basis of a revised
evaluation of the issuer or based upon relevant market considerations. There may
be occasions when, as a result of maturities of portfolio securities or sale of
Fund shares, or in order to meet anticipated redemption requests, the Fund may
hold cash which is not earning income.
The Fund anticipates that the average weighted maturity of the portfolio
will be 90 days or less. The relatively short-term nature of the Fund's
portfolio is
7
<PAGE>
expected to result in a lower yield than portfolios comprised of longer-term
tax-exempt securities.
VARIABLE RATE OBLIGATIONS. The interest rates payable on certain Municipal
Bonds and Municipal Notes are not fixed and may fluctuate based upon changes in
market rates. Municipal obligations of this type are called "variable rate" or
"floating rate" obligations. The interest rate payable on a variable rate
obligation is adjusted either at predesignated periodic intervals and on a
floating rate obligation whenever there is a change in the market rate of
interest on which the interest rate payable is based.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
tax-exempt securities on a when-issued or delayed delivery basis; i.e., delivery
and payment can take place a month or more after the date of the transaction.
These securities are subject to market fluctuation and no interest accrues to
the purchaser prior to settlement. At the time the Fund makes the commitment to
purchase such securities, it will record the transaction and thereafter reflect
the value, each day, of such securities in determining its net asset value.
BROKERAGE ALLOCATION. Brokerage commissions are not normally charged on
purchases and sales of short-term municipal obligations, but such transactions
may involve transaction costs in the form of spreads between bid and asked
prices. Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with DWR.
In addition, the Fund may incur brokerage commissions on transactions conducted
through DWR.
SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA TAX-EXEMPT SECURITIES
The Fund will be affected by any political, economic or regulatory
developments affecting the ability of California issuers to pay interest or
repay principal. Various developments regarding the California Constitution and
State statutes which limit the taxing and spending authority of California
governmental entities may impair the ability of California issuers to maintain
debt service on their obligations. The following information constitutes only a
brief summary and is not intended as a complete description. See the Statement
of Additional Information for a more detailed discussion.
California is the most populous state in the nation with a total population
at the 1990 census of 29,976,000. Growth has been incessant since World War II,
with population gains in each decade since 1950 of between 18% and 49%. During
the last decade, the population rose 20%. The State now comprises 12.3% of the
nation's population and 12.9% of its total personal income. Its economy is broad
and diversified with major concentrations in high technology research and
manufacturing, aerospace and defense-related manufacturing, trade, real estate,
and financial services. After experiencing strong growth throughout much of the
1980s, the State was adversely affected by both the national recession and the
cutbacks in aerospace and defense spending which had a severe impact on the
economy in Southern California. California is still experiencing some effects of
the recession. Unemployment has remained above the national average since 1990.
Substantial contraction in California's defense related industries, overbuilding
in commercial real estate and consolidation and decline in the State's financial
services industry will likely produce slower overall growth for several years.
Economists predict that the State's economy will experience modest growth in
1996.
These economic difficulties have exacerbated the structural budget imbalance
which has been evident since fiscal year 1985-1986. Since that time, budget
shortfalls have become increasingly more difficult to solve and the State has
recorded General Fund operating deficits in several fiscal years. Many of these
problems have been attributable to the fact that the great population influx has
produced increased demand for education and social services at a far greater
pace than the growth in the State's tax revenues. Despite substantial tax
increases, expenditure reductions and the shift of
8
<PAGE>
some expenditure responsibilities to local government, the budget condition
remains problematic.
On August 3, 1995, the Governor signed into law a new $57.5 billion budget
which, among other things, reduces welfare payments and increases education
spending from the previous fiscal year. The fiscal 1995-96 budget calls for
$44.1 billion in revenues and $43.4 billion in spending, an increase of over
3.5% and 4.0%, respectively, from the fiscal 1994-95 budget. Although the
State's budget projects an operating surplus of approximately $600 million, it
continues to rely on federal actions, both to fund programs relating to MediCal
and incarceration costs associated with illegal immigrants and to relieve the
State from federally mandated spending, which are not certain of occurring.
Accordingly, the surplus may not be realized unless the economy outperforms
expectations or spending falls below planned levels.
Because of the State of California's continuing budget problems, the State's
General Obligation bonds were downgraded in July 1994 from A1 to Aa by Moody's,
to A from A+ by S&P, and from AA to A by Fitch Investors Service, Inc. All three
rating agencies expressed uncertainty in the State's ability to balance its
budget by 1996.
The effect of these various constitutional and statutory amendments and
budget developments upon the ability of California issuers to pay interest and
principal on their obligations remains unclear and in any event may depend upon
whether a particular California tax-exempt security is a general or limited
obligation bond and on the type of security provided for the bond. It is
possible that other measures affecting the taxing or spending authority of
California or its political subdivisions may be approved or enacted in the
future.
For a more detailed discussion of the State of California economic factors,
see the Statement of Additional Information.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act.
For purposes of the following restrictions: (a) an "issuer" of a security is
the entity whose assets and revenues are committed to the payment of interest
and principal on that particular security, provided that the guarantee of a
security will be considered a separate security and provided further that a
guarantee of a security shall not be deemed to be a security issued by the
guarantor if the value of all securities issued or guaranteed by the guarantor
and owned by the Fund does not exceed 10% of the value of the total assets of
the Fund; (b) a "taxable security" is any security the interest on which is
subject to federal income tax; and (c) all percentage limitations apply
immediately after a purchase or initial investment, and any subsequent change in
any applicable percentage resulting from market fluctuations does not require
elimination of any security from the portfolio.
The Fund may not:
1. With respect to 75% of its total assets, purchase securities of any issuer
if, immediately thereafter, more than 5% of the value of its total assets are in
the securities of any one issuer (other than obligations issued, or guaranteed
by, the United States Government, its agencies or instrumentalities or by the
State of California or its political subdivisions).
2. With respect to 75% of its total assets, purchase more than 10% of all
outstanding taxable debt securities of any one issuer (other than debt
securities issued, or guaranteed as to principal and interest by, the United
States Government, its agencies or instrumentalities).
9
<PAGE>
3. Invest 25% or more of the value of its total assets in taxable securities
of issuers in any one industry (industrial development and pollution control
bonds are grouped into industries based upon the business in which the issuers
of such obligations are engaged). This restriction does not apply to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities or by the State of California or its political subdivisions,
or to domestic bank obligations.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis,
without a sales charge. 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
through DWR and certain selected 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 offering price of the shares will be at their net asset value next
determined (see "Determination of Net Asset Value" below) after receipt of a
purchase order and acceptance by the Fund's transfer agent, Dean Witter Trust
Company (the "Transfer Agent") in proper form and accompanied by payment in
Federal Funds (i.e., monies of member banks within the Federal Reserve System
held on deposit at a Federal Reserve Bank) available to the Fund for investment.
Shares commence earning income on the day following the date of purchase. Share
certificates will not be issued unless requested in writing by the shareholder.
To initiate purchase by mail or wire, a completed Investment Application
(contained in the Prospectus) must be sent to the Transfer Agent at P.O. Box
1040, Jersey City, N.J. 07303. Checks should be made payable to the Dean Witter
California Tax-Free Daily Income Trust and sent to Dean Witter Trust Company at
the above address. Purchases by wire must be preceded by a call to the Transfer
Agent advising it of the purchase (see Investment Application or the front cover
of this Prospectus for the telephone number) and must be wired to The Bank of
New York, for credit to account of Dean Witter Trust Company, Harborside
Financial Center, Plaza Two, Jersey City, New Jersey, Account Number 8900188413.
Wire purchase instructions must include the name of the Fund and the
shareholder's account number. Purchases made by check are normally effective
within two business days for checks drawn on Federal Reserve System member
banks, and longer for most other checks. Wire purchases received by the Transfer
Agent prior to 12 noon New York time are normally effective that day and wire
purchases received after 12 noon New York time are normally effective the next
business day. Initial investments must be at least $5,000, although the Fund, at
its discretion, may accept initial investments of smaller amounts, not less than
$1,000. Subsequent investments must be $100 or more and may be made through the
Transfer Agent. The Fund will waive the minimum initial investment for the
automatic reinvestment of distributions from certain unit investment trusts. The
Fund reserves the right to reject any purchase order.
Sales personnel are compensated for selling shares of the Fund at the time
of their sale by the Distributor and/or Selected Broker-Dealer. In addition,
some sales personnel of the Selected Broker-Dealer will receive various types of
non-cash compensation as special sales incentives, including trips, educational
and/or business seminars and merchandise.
Orders for the purchase of Fund shares placed by customers through DWR or
another Selected Broker-Dealer with payment in clearing house funds will be
transmitted to the Fund with payment in Federal Funds on the business day
following the day the order is placed by the customer with DWR or another
Selected Broker-Dealer. Investors desiring same day effectiveness should wire
Federal Funds directly to the Transfer Agent. An order procedure exists
pursu-
10
<PAGE>
ant to which customers can, upon request: (a) have the proceeds from the sale of
listed securities invested in shares of the Fund on the day following the day
the customer receives such proceeds in his or her DWR or other Selected
Broker-Dealer brokerage account; and (b) pay for the purchase of certain listed
securities by automatic liquidation of Fund shares owned by the customer. In
addition, there is an automatic purchase procedure whereby consenting DWR or
other Selected Broker-Dealer customers who are shareholders of the Fund will
have free cash credit balances in their DWR or other Selected Broker-Dealer
brokerage accounts as of the close of business (4:00 p.m., New York time) on the
last business day of each week (where such balances do not exceed $5,000)
automatically invested in shares of the Fund the next following business day.
Investors with free cash credit balances (i.e., immediately available funds) in
brokerage accounts at DWR or another Selected Broker-Dealer, will not have any
of such funds invested in the Fund until the business day after the customer
places an order with DWR or another Selected Broker-Dealer to purchase shares of
the Fund and will not receive the daily dividend which would have been received
had such funds been invested in the Fund on the day the order was placed with
DWR or another Selected Broker-Dealer. Accordingly, DWR or any other Selected
Broker-Dealer who follows the above procedure may have the use of such free
credit balances during such period.
PLAN OF DISTRIBUTION
In accordance with a Plan of Distribution between the Fund and the
Distributor, pursuant to Rule 12b-1 under the Act, certain services and
activities in connection with the distribution of the Fund's shares are
reimbursable expenses. The principal activities and services which may be
provided by the Distributor, DWR, its affiliates and other Selected
Broker-Dealers under the Plan include: (1) compensation to, and expenses of,
DWR's and other Selected Broker-Dealers' account executives and other employees,
including overhead and telephone expenses; (2) sales incentives and bonuses to
sales representatives and to marketing personnel in connection with promoting
sales of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparing and distributing sales literature; and
(5) providing advertising and promotional activities, including direct mail
solicitation and television, radio, newspaper, magazine and other media
advertisements. Reimbursements for these services will be made in monthly
payments by the Fund, which will in no event exceed an amount equal to a payment
at the annual rate of 0.15 of 1% of the Fund's average daily net assets. For the
fiscal year ended December 31, 1995, the fee paid was accrued at the annual rate
of 0.10 of 1% of the Fund's average daily net assets. Expenses incurred pursuant
to the Plan in any fiscal year will not be reimbursed by the Fund through
payments accrued in any subsequent fiscal year.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined at 4:00 p.m. New
York time on each day that the New York Stock Exchange is open (or, on days when
the New York Stock Exchange closes prior to 4:00 p.m., at such earlier time) by
taking the value of all assets of the Fund, subtracting its liabilities and
dividing by the number of shares outstanding. 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.
The Fund utilizes the amortized cost method in valuing its portfolio
securities, which method involves valuing a security at its cost adjusted by a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument. The
purpose of this method of calculation is to facilitate the maintenance of a
constant net asset value per share of $1.00. However, there can be no assurance
that the $1.00 net asset value will be maintained.
11
<PAGE>
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available for
shareholders who own or purchase shares of the Fund having a minimum value of at
least $5,000. The plan provides for monthly or quarterly (March, June,
September, December) checks in any dollar amount, not less than $25, or in any
whole percentage of the account balance, on an annualized basis. The shares will
be redeemed at their net asset value, determined at the shareholder's option, on
the tenth or twenty-fifth day (or next business day) of the relevant month or
quarter and normally a check for the proceeds will be mailed by the Transfer
Agent, or amounts credited to a shareholder's DWR or other Selected Broker-
Dealer brokerage account, within five days after the date of redemption. A
shareholder wishing to make this election should do so on the Investment
Application. The withdrawal plan may be terminated at any time by the Fund.
EASYINVEST-TM- Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
EXCHANGE PRIVILEGE. An "Exchange Privilege", that is, the privilege of
exchanging shares of certain Dean Witter Funds for shares of the Fund, exists
whereby shares of various Dean Witter Funds which are open-end investment
companies sold with either a front-end (at time of purchase) sales charge ("FESC
funds") or a contingent deferred (at time of redemption) sales charge ("CDSC
funds"), may be exchanged for shares of the Fund, Dean Witter Tax-Free Daily
Income Trust, Dean Witter U.S. Government Money Market Trust, Dean Witter Liquid
Asset Fund Inc. and Dean Witter New York Municipal Money Market Trust (which
five funds are hereinafter called "money market funds") and for shares of Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund, Dean Witter Balanced Income Fund, Dean Witter
Balanced Growth Fund, and Dean Witter Intermediate Term U.S. Treasury Trust
(which eleven Funds, including the Fund, are referred to herein as the "Exchange
Funds"). When exchanging into a money market fund from an FESC fund or a CDSC
fund, shares of the FESC fund or the CDSC fund are redeemed at their next
calculated net asset value and exchanged for shares of the money market fund at
their net asset value determined the following business day. An exchange from an
FESC fund or a CDSC fund to an 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. Subsequently, shares of the Exchange Funds
received in an exchange for shares of an FESC fund (regardless of the type of
fund originally purchased) may be redeemed and exchanged for shares of the other
Exchange Funds, FESC funds or CDSC funds (however, shares of CDSC funds,
including shares acquired in exchange for (i) shares of FESC funds or (ii)
shares of the Exchange Funds which were acquired in exchange for shares of FESC
funds, may not be exchanged for shares of FESC funds). Additionally, shares of
the Exchange Funds received in an exchange for shares of a CDSC fund (regardless
of the type of fund originally purchased) may be redeemed and exchanged for
shares of the other Exchange Funds or CDSC funds. Ultimately, any applicable
contingent deferred sales charge ("CDSC") will have to be paid upon redemption
of shares originally purchased from a CDSC fund. (If shares of the Exchange
Funds received in exchange for shares originally
pur-
12
<PAGE>
chased from a CDSC fund are exchanged for shares of another CDSC fund having a
different CDSC schedule than that of the CDSC fund from which the Exchange Funds
shares were acquired, the shares will be subject to the higher CDSC schedule.)
During the period of time the shares originally purchased from a CDSC fund
remain in the Exchange Funds (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 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. However, in the
case of shares exchanged into an Exchange Fund on or after April 23, 1990, upon
a redemption of shares which results in a CDSC being imposed, a credit (not to
exceed the amount of the CDSC) will be given in an amount equal to the Exchange
Fund 12b-1 distribution fees incurred on or after that date which are
attributable to those shares (see "Purchase of Fund Shares--Plan of
Distribution" in the respective Exchange Funds Prospectuses for a description of
Exchange Fund distribution fees). Exchanges involving FESC funds or CDSC funds
may be made after the shares of the FESC fund or CDSC 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.
Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of various
TCW/DW Funds, a group of funds distributed by the Distributor for which TCW
Funds Management, Inc. serves as Adviser, under the terms and conditions
described in the Prospectus and Statement of Additional Information of each
TCW/DW Fund.
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 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 Funds for which shares of the Fund may be 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 the Exchange Funds, TCW/ DW North American
Government Income Trust, TCW/DW Income and Growth Fund and TCW/DW Balanced Fund
pursuant to the Exchange Privilege, and provided further that the Exchange
Privilege may be terminated or materially revised without notice under certain
unusual circumstances described in the Statement of Additional Information.
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
exchanges of shares of the Fund pledged in their margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and
13
<PAGE>
shareholders should obtain one and read it carefully before investing. Exchanges
are subject to the minimum investment requirement and any other conditions
imposed by each fund. In the case of any shareholder holding a share certificate
or certificates, no exchanges may be made until all applicable share
certificates have been received by the Transfer Agent and deposited in the
shareholder's account. An exchange will be treated for federal income tax
purposes the same as a repurchase or redemption of shares on which the
shareholder has realized a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within ninety days after the shares are purchased. The
Exchange Privilege is only available in states where an exchange may legally be
made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the above Funds
pursuant to this Exchange Privilege by contacting their DWR or another Selected
Broker-Dealer account executive (no Exchange Privilege Authorization Form is
required). Other shareholders (and those who are shareholders of DWR or another
Selected Broker-Dealer but who wish to make exchanges directly by writing or
telephoning the Transfer Agent) must complete and forward to the Transfer Agent
an Exchange Privilege Authorization Form, copies of which may be obtained from
the Transfer Agent, to initiate an exchange. If the Authorization Form is used,
exchanges may be made in writing or by contacting the Transfer Agent at (800)
869-NEWS (toll-free). The Fund will employ reasonable procedures to confirm that
exchange instructions communicated over the telephone are genuine. Such
procedures may include requiring various forms of personal identification such
as name, mailing address, social security or other tax identification number and
DWR or other Selected Broker-Dealer account number (if any). Telephone
instructions may also be recorded. If such procedures are not employed, the Fund
may be liable for any losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the experience of 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.
REDEMPTION OF FUND SHARES
- --------------------------------------------------------------------------------
A shareholder may withdraw all or any of his or her investments at any time,
without penalty or charge, by redeeming shares through the Transfer Agent at the
net asset value per share next determined (see "Purchase of Fund
Shares--Determination of Net Asset Value") after the receipt of a redemption
request meeting the applicable requirements as follows (all of which are subject
to the General Redemption Requirements set forth below).
1. BY CHECK
The Transfer Agent will supply blank checks to any shareholder who has
requested them on an Investment Application. The shareholder may make checks
payable to the order of anyone in any
14
<PAGE>
amount not less than $500 (checks written in amounts under $500 will not be
honored by the Transfer Agent). Shareholders must sign checks exactly as their
shares are registered. If the account is a joint account, the check may contain
one signature unless the joint owners have specified on an Investment
Application that all owners are required to sign checks. Only shareholders
having accounts in which no share certificates have been issued will be
permitted to redeem shares by check.
Shares will be redeemed at their net asset value next determined (see
"Purchase of Fund Shares-- Determination of Net Asset Value") after receipt by
the Transfer Agent of a check which does not exceed the value of the account.
Payment of the proceeds of a check will normally be made on the next business
day after receipt by the Transfer Agent of the check in proper form. Shares
purchased by check (including a certified or bank cashier's check) are not
normally available to cover redemption checks until fifteen days after receipt
of the check used for investment by the Transfer Agent. The Transfer Agent will
not honor a check in an amount exceeding the value of the account at the time
the check is presented for payment.
2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH PAYMENT TO PREDESIGNATED BANK ACCOUNT
A shareholder may redeem shares by telephoning or sending wire instructions
to the Transfer Agent. Payment will be made by the Transfer Agent to the
shareholder's bank account at any commercial bank designated by the shareholder
in an Investment Application, by wire if the amount is $1,000 or more and the
shareholder so requests, and otherwise by mail. Normally, the Transfer Agent
will transmit payment the next business day following receipt of a request for
redemption in proper form. Only shareholders having accounts in which no share
certificates have been issued will be permitted to redeem shares by telephone or
wire instructions.
DWR and other participating Selected Broker-Dealers have informed the
Distributor and the Fund that, on behalf of and as agent for their customers who
are shareholders of the Fund, they will transmit to the Fund requests for
redemption of shares owned by their customers. In such cases, the Transfer Agent
will wire proceeds of redemptions to DWR's or another Selected Broker-Dealer's
bank account for credit to the shareholders' accounts the following business
day. DWR and other participating Selected Broker-Dealers have also informed the
Distributor and the Fund that they do not charge for this service.
Redemption instructions must include the shareholder's name and account
number and be wired or called to the Transfer Agent:
-- 800-869-NEWS (Toll-Free)
-- Telex No. 125076
3. BY MAIL
A shareholder may redeem shares by sending a letter to Dean Witter Trust
Company, P.O. Box 983, Jersey City, NJ 07303, requesting redemption and
surrendering share certificates if any have been issued.
Redemption proceeds will be mailed to the shareholder at his or her
registered address or mailed or wired to his or her predesignated bank account,
as he or she may request. Proceeds of redemption may also be sent to some other
person, as requested by the shareholder.
GENERAL REDEMPTION REQUIREMENTS
Written requests for redemption must be signed by the registered
shareholder(s). If the proceeds are to be paid to anyone other than the
registered shareholders or sent to any address other than the shareholder's
registered address or predesignated bank account, 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), except in the case of redemption by
check. Additional documentation may be required where shares are held by a
corporation, partnership,
trus-
15
<PAGE>
tee or executor. With regard to shares of the Fund acquired pursuant to the
Exchange Privilege, any applicable contingent deferred sales charge will be
imposed upon the redemption of such shares (see "Purchase of Fund
Shares--Exchange Privilege").
If shares to be redeemed are represented by a share certificate, the request
for redemption must be accompanied by the share certificate and a share
assignment form signed by the registered shareholder(s) exactly as the account
is registered. Shareholders are advised, for their own protection, to send the
share certificate and assignment form in separate envelopes (if they are being
mailed and not hand delivered) to the Transfer Agent. Signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent (see
above). Additional documentation may be required where shares are held by a
corporation, partnership, trustee or executor.
All requests for redemption, all share certificates and all share
assignments should be sent to Dean Witter Trust Company, P.O. Box 983, Jersey
City, NJ 07303.
Generally, the Fund will attempt to make payment for all redemptions within
one business day, but in no event later than seven days after receipt of such
redemption request in proper form. However, if the shares being redeemed were
purchased by check (including a certified or bank cashier's check), payment 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). In addition, the Fund may postpone
redemptions at certain times when normal trading is not taking place on the New
York Stock Exchange.
The Fund reserves the right, on sixty days notice, to redeem at 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 $1,000, or such lesser amount as may be fixed by the Board of
Trustees.
AUTOMATIC REDEMPTION PROCEDURE
The Distributor has instituted an automatic redemption procedure which it
may utilize to satisfy amounts due by a shareholder maintaining a brokerage
account with DWR or another Selected Broker-Dealer, as a result of purchases of
securities or other transactions in the shareholder's brokerage account. Under
this procedure, if the shareholder elects to participate by so notifying DWR or
other Selected Broker-Dealer, the shareholder's DWR or other Selected
Broker-Dealer brokerage account will be scanned each business day prior to the
close of business (4:00 p.m., New York time). After application of any cash
balances in the account, a sufficient number of Fund shares may be redeemed at
the close of business to satisfy any amounts for which the shareholder is
obligated to make payment to DWR or another Selected Broker-Dealer. Redemptions
will be effected on the business day preceding the date the shareholder is
obligated to make such payment, and DWR or another Selected Broker-Dealer will
receive the redemption proceeds on the day following the redemption date.
Shareholders will receive all dividends declared and reinvested through the date
of redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends, payable on each
day the New York Stock Exchange is open for business, of all of its daily net
investment income to shareholders of record as of the close of business the
preceding business day. Dividends from net short-term capital gains, if any,
will be paid periodically. The amount of dividend may fluctuate from day to day
and may be omitted on some days if net realized losses on portfolio securities
exceed the Fund's net investment
16
<PAGE>
income. Dividends are declared and automatically reinvested daily in additional
full and fractional shares of the Fund at the net asset value per share at the
close of business on that day. Any dividends declared in the last quarter of any
calendar year which are paid in the following calendar year prior to February 1
will be deemed received by the shareholder in the prior calendar year.
Shareholders may instruct the Transfer Agent (in writing) to have their
dividends paid out monthly in cash. For such shareholders, the shares reinvested
and credited to their account during the month will be redeemed as of the close
of business on the monthly payment date (which will be no later than the last
business day of the month) and the proceeds will be paid to them by check.
Processing of dividend checks begins immediately following the monthly payment
date. Shareholders who have requested to receive dividends in cash will normally
receive their monthly dividend check during the first ten days of the following
month.
Share certificates for dividends or distributions will not be issued unless
a shareholder requests in writing that a certificate be issued for a specific
number of shares.
TAXES. Because the Fund intends to distribute substantially all of its net
investment income and net capital gains, if any, to shareholders, and intends to
otherwise comply with all the provisions of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), to qualify as a regulated investment
company, it is not expected that the Fund will be required to pay any federal
income tax.
The Fund intends to qualify to pay "exempt-interest dividends" to its
shareholders by maintaining, as of the close of each quarter of its taxable
year, at least 50% of the value of its total assets in tax-exempt securities. If
the Fund satisfies such requirement, dividends from net investment income to
shareholders, whether taken in cash or reinvested in additional Fund shares,
will be excludable from gross income for federal income tax purposes to the
extent net interest income is represented by interest on tax-exempt securities.
Exempt-interest dividends are included, however, in determining what portion, if
any, of a person's Social Security benefits are subject to federal income tax.
The Code subjects interest received on certain otherwise tax-exempt
securities to an alternative minimum tax. This alternative minimum tax applies
to interest received on "private activity bonds" (in general, bonds that benefit
non-governmental entities) issued after August 7, 1986 which, although
tax-exempt, are used for purposes other than those generally performed by
governmental units (e.g., bonds used for commercial or housing purposes). Income
received on such bonds is classified as a "tax preference item", under the
alternative minimum tax, for both individual and corporate investors. A portion
of the Fund's investments may be made in such "private activity bonds," with the
result that a portion of the exempt-interest dividends paid by the Fund may be
an item of tax preference to shareholders subject to the alternative minimum
tax. In addition, certain corporations which are subject to the alternative
minimum tax may have to include a portion of exempt-interest dividends in
calculating their alternative minimum taxable income in situations where the
"adjusted current earnings" of the corporation exceeds its alternative minimum
taxable income.
Under California law, a fund which qualifies as a regulated investment
company must have at least 50% of the value of its total assets invested in
California state and local issues or in obligations of the United States which
pay interest excludable from income (or in a combination thereof), at the end of
each quarter of its taxable year in order to be eligible to pay dividends which
will be exempt from California personal income tax. Shareholders who are
California residents will not incur any federal or California income tax on the
amount of exempt-interest dividends received by them from the Fund and derived
from California state and local issues or certain United States issues whether
taken in cash or reinvested in additional shares (to the extent that
17
<PAGE>
such dividends are derived from California securities).
After the end of its calendar year, the shareholders will be sent a
statement indicating the percentage of the dividend distributions for such
taxable year which constitutes exempt-interest dividends and the percentage, if
any, that is taxable, and the percentage, if any, of the exempt-interest
dividends which constitutes an item of tax preference. Unlike federal law, no
portion of the exempt-interest dividends will constitute an item of tax
preference for California personal income tax purposes. Moreover, unlike federal
law, an individual's Social Security benefits are not subject to California
personal income tax, so that the receipt of California exempt-interest dividends
will have no effect on an individual's California personal income tax.
Shareholders will normally be subject to federal and California personal
income tax on dividends paid from interest income derived from taxable
securities and on distributions of net capital gains. For federal income tax and
California personal income tax purposes, distributions of 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 cash. In
addition, for California personal income tax purposes, the shareholders of the
Fund will not be subject to tax, or receive a credit for tax paid by the Fund,
on undistributed capital gains, if any. To avoid being subject to a 31% backup
withholding tax on taxable dividends and capital gains distributions and the
proceeds of redemptions and repurchases, shareholders' taxpayer identification
numbers must be furnished and certified as to accuracy.
Interest on indebtedness incurred by shareholders or related parties to
purchase or carry shares of an investment company paying exempt-interest
dividends, such as the Fund, will not be deductible by the investor for federal
or California personal income tax purposes.
The foregoing relates to federal income taxation and to California personal
income taxation as in effect as of the date of this Prospectus. Distributions
from investment income and capital gains, including exempt-interest dividends,
may be subject to California franchise taxes if received by a corporation doing
business in California, to state taxes in states other than California and to
local taxes.
Shareholders should consult their tax advisers as to the applicability of
the above to their own tax situation.
CURRENT AND EFFECTIVE YIELD
From time to time the Fund advertises its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to the income
generated by an investment in the Fund over a given seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that seven-day
period is assumed to be generated each seven-day period within a 365-day period
and is shown as a percentage of the investment. The "effective yield" for a
seven-day period is calculated similarly but, when annualized, the income earned
by an investment in the Fund is assumed to be reinvested each week within a
365-day period. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. The Fund may
also quote tax-equivalent yield which is calculated by determining the pre-tax
yield which, after being taxed at a stated rate, would be equivalent to the
yield determined as described above. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund.
18
<PAGE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by the
Shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that notice
of such disclaimer be given in each instrument entered into or executed by the
Fund and provides for indemnification and reimbursement of expenses out of the
Fund's property for any shareholder held personally liable for the obligations
of the Fund. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Fund itself
would be unable to meet its obligations. Given the above limitations on
shareholder personal liability and the nature of the Fund's assets and
operations, the possibility of the Fund being unable to meet its obligations is
remote and, in the opinion of Massachusetts counsel to the Fund, the risk to
Fund shareholders of personal liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure that
the interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering and prohibits engaging in futures and options transactions and
profiting on short-term trading (that is, a purchase within 60 days of a sale or
a sale within 60 days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account within
30 days before or after any transaction in any Dean Witter Fund managed by them.
Any violations of the Code of Ethics are subject to sanctions, including
reprimand, demotion or suspension or termination of employment. The Code of
Ethics comports with regulatory requirements and the recommendations in the
recent report by the Investment Company Institute Advisory Group on Personal
Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund or the Distributor or to the Transfer Agent at the telephone numbers
or addresses, as are set forth on the front cover of this Prospectus.
19
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $254,409,570)............................. $254,409,570
Cash........................................................ 80,921
Interest receivable......................................... 1,364,636
Prepaid expenses............................................ 12,559
------------
TOTAL ASSETS........................................... 255,867,686
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased............... 1,252,169
Investment management fee............................... 100,634
Plan of distribution fee................................ 20,127
Accrued expenses............................................ 118,405
------------
TOTAL LIABILITIES...................................... 1,491,335
------------
NET ASSETS:
Paid-in-capital............................................. 254,377,102
Accumulated undistributed net investment income............. 182
Accumulated net realized loss............................... (933)
------------
NET ASSETS............................................. $254,376,351
------------
------------
NET ASSET VALUE PER SHARE,
254,377,102 SHARES OUTSTANDING (UNLIMITED SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$1.00
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $8,624,290
----------
EXPENSES
Investment management fee................................... 1,153,594
Plan of distribution fee.................................... 227,070
Transfer agent fees and expenses............................ 182,883
Professional fees........................................... 48,033
Shareholder reports and notices............................. 37,375
Trustees' fees and expenses................................. 26,682
Registration fees........................................... 21,338
Custodian fees.............................................. 14,051
Other....................................................... 8,348
----------
TOTAL EXPENSES BEFORE EXPENSE OFFSET................... 1,719,374
LESS: EXPENSE OFFSET................................... (13,854)
----------
TOTAL EXPENSES AFTER EXPENSE OFFSET.................... 1,705,520
----------
NET INVESTMENT INCOME AND NET INCREASE................. $6,918,770
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 6,918,770 $ 5,489,268
Net realized loss........................................... -- (933)
----------------- -----------------
NET INCREASE........................................... 6,918,770 5,488,335
Dividends from net investment income........................ (6,918,924) (5,488,932)
Net increase (decrease) from transactions in shares of
beneficial interest....................................... 37,297,439 (33,978,891)
----------------- -----------------
TOTAL INCREASE (DECREASE).............................. 37,297,285 (33,979,488)
NET ASSETS:
Beginning of period......................................... 217,079,066 251,058,554
----------------- -----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $182
AND $336, RESPECTIVELY)................................. $254,376,351 $217,079,066
----------------- -----------------
----------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter California Tax-Free Daily Income Trust (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The Fund's investment
objective is to provide a high level of daily income which is exempt from
federal and California income tax, consistent with stability of principal and
liquidity. The Fund was organized as a Massachusetts business trust on April 25,
1988 and commenced operations on July 22, 1988.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued at amortized
cost, which approximates market value.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
The Fund amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to shareholders as of the close of each business day.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays a management fee, accrued daily
and payable monthly, by applying the following annual rates to the net assets of
the Fund determined as of the close of each business day: 0.50% to the portion
of the average daily net assets not exceeding $500 million; 0.425% to the
portion of the average daily net assets exceeding $500 million but not exceeding
$750 million; 0.375% to the portion of the average daily net assets exceeding
$750 million but not exceeding $1 billion; 0.35% to the portion of the average
daily net assets exceeding $1 billion but not
23
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, CONTINUED
exceeding $1.5 billion; 0.325% to the portion of the average daily net assets
exceeding $1.5 billion but not exceeding $2 billion; 0.30% to the portion of the
average daily net assets exceeding $2 billion but not exceeding $2.5 billion;
0.275% to the portion of the average daily net assets exceeding $2.5 billion but
not exceeding $3 billion; and 0.25% to the portion of the average daily net
assets exceeding $3 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, is the distributor of the Fund's shares and, in accordance
with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act,
finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses that
the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor and other
broker-dealers under the Plan: (1) compensation to, and expenses of, the
Distributor and other broker-dealers; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales of
the Fund's shares; (3) expenses incurred in connection with promoting sales of
the Fund's shares; (4) preparing and distributing sales literature; and (5)
providing advertising and promotional activities, including direct mail
solicitation and television, radio, newspaper, magazine and other media
advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the Fund's
shares. The amount of each monthly reimbursement payment may in no event exceed
an amount equal to a payment at the annual rate of 0.15% of the Fund's average
daily net assets during the month. Expenses incurred by the Distributor pursuant
to the Plan in any fiscal year will not be reimbursed by the Fund through
payments accrued in any subsequent fiscal year. For the year ended December 31,
1995, the distribution fee was accrued at the annual rate of 0.10%.
24
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, CONTINUED
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the year ended December 31, 1995 aggregated $475,285,100 and $433,192,000,
respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $15,600.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended December 31, 1995
included in Trustees' fees and expenses in the Statement of Operations amounted
to $8,282. At December 31, 1995, the Fund had an accrued pension liability of
$48,599 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest, at $1.00 per share, were as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
Shares sold....................................... 483,320,990 532,591,210
Shares issued in reinvestment of dividends........ 6,918,252 5,489,548
-------------- --------------
490,239,242 538,080,758
Shares repurchased................................ (452,941,803) (572,059,649)
-------------- --------------
Net increase (decrease) in shares outstanding..... 37,297,439 (33,978,891)
-------------- --------------
-------------- --------------
</TABLE>
6. SELECTED PER SHARE DATA AND RATIOS
See the "Financial Highlights" table on page 4 of this Prospectus.
25
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- --------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA TAX-EXEMPT SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (67.2%)
$ 5,900 California Department of Water Resources, Central
Valley Ser N-V2...................................... 4.90 % 01/08/96 $ 5,900,000
California Educational Facilities Authority,
6,300 California Institute of Technology Ser 1994.......... 4.60 01/08/96 6,300,000
5,775 Stanford University Ser L-2.......................... 4.75 01/08/96 5,775,000
California Health Facilities Financing Authority,
4,200 Catholic HealthCare West 1988 Ser A (MBIA)........... 4.85 01/08/96 4,200,000
6,000 Childrens Hospital of Orange County Ser 1991
(MBIA)............................................... 4.75 01/08/96 6,000,000
6,715 Health Dimensions Inc Ser 1987 A..................... 3.50 02/01/96 6,715,000
2,000 Kaiser Permanente Ser 1993 B......................... 4.90 01/08/96 2,000,000
5,000 Memorial Health Services Ser 1994.................... 4.90 01/08/96 5,000,000
10,000 St Francis Medical Center 1995 Ser E (MBIA).......... 4.85 01/08/96 10,000,000
7,100 St Joseph Health System Ser 1991 B................... 5.90 01/02/96 7,100,000
5,800 Scripps Memorial Hospital Ser 1991 B (MBIA).......... 4.75 01/08/96 5,800,000
California Pollution Control Financing Authority,
1,615 Chevron USA Ser 1983................................. 4.00 11/15/96 1,619,122
3,000 Chevron USA Ser 1984 B............................... 4.25 06/15/96 3,000,000
3,400 Noranda-Grey Eagle Mines Inc Ser 1985 C.............. 5.00 01/08/96 3,400,000
3,200 Shell Oil Co 1991 Ser A & B.......................... 5.90 01/02/96 3,200,000
5,600 Southern California Edison Co 1986 Ser A............. 5.40 01/02/96 5,600,000
10,000 California Public Capital Improvements Financing
Authority, Pooled Ser 1988 C......................... 3.70 03/15/96 10,000,000
California Statewide Communities Development Authority,
5,200 House Ear Institute 1993 Ser A COPs.................. 6.00 01/02/96 5,200,000
6,000 Kaiser Permanente Ser 1995 COPs...................... 4.90 01/08/96 6,000,000
4,000 St Joseph Health System COPs......................... 5.90 01/02/96 4,000,000
5,000 Contra Costa Transportation Authority, Sales Tax 1993
Ser A (FGIC)......................................... 4.90 01/08/96 5,000,000
11,000 Foothill/Eastern Transportation Corridor Agency, Toll
Road Ser 1995 C...................................... 4.80 01/08/96 11,000,000
5,000 Long Beach, Memorial Health Services Ser 1991.......... 4.90 01/08/96 5,000,000
5,900 Los Angeles, Multi-family 1985 Ser K................... 4.40 01/08/96 5,900,000
5,000 Los Angeles County Metropolitan Transportation
Authority, Prop C Sales Tax Refg Ser 1993 A (MBIA)... 5.00 01/08/96 5,000,000
11,000 Newport Beach, Hoag Memorial Hospital/Presbyterian 1992
Ser A................................................ 5.90 01/02/96 11,000,000
5,500 Oakland, Skyline Hill Assn Multi-family Issue A of
1985................................................. 4.80 01/08/96 5,500,000
5,000 San Diego, Lusk Mira Mesa Apts Issue E 1985............ 5.00 01/08/96 5,000,000
9,000 Southern California Public Power Authority,
Transmission
1991 Refg Ser (AMBAC)................................ 4.75 01/08/96 9,000,000
1,700 Puerto Rico Highway & Transportation, Ser X............ 4.50 01/08/96 1,700,000
---------------
TOTAL CALIFORNIA TAX-EXEMPT SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS
(AMORTIZED COST $170,909,122).....................................................
170,909,122
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE
THOUSANDS RATE DATE OF PURCHASE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
CALIFORNIA TAX-EXEMPT COMMERCIAL PAPER (28.1%)
California Pollution Control Financing Authority,
$ 4,800 Pacific Gas & Electric Co 1988 Ser E................. 3.55% 02/21/96 3.55 % $ 4,800,000
3,000 Southern California Edison Co Ser A 1985............. 3.70 02/12/96 3.70 3,000,000
7,000 Delmar Race Track Authority, Ser 1993 BANs............. 3.50 02/26/96 3.50 7,000,000
5,000 East Bay Municipal Utility District, Water System...... 3.40 03/26/96 3.40 5,000,000
Metropolitan Water District of Southern California,
4,800 ..................................................... 3.40 02/28/96 3.40 4,800,000
1,300 ..................................................... 3.55 02/28/96 3.55 1,300,000
5,000 ..................................................... 3.60 03/14/96 3.60 5,000,000
Sacramento Municipal Utility District, Ser I,
5,000 ..................................................... 3.65 01/31/96 3.65 5,000,000
5,000 ..................................................... 3.55 03/21/96 3.55 5,000,000
San Diego, San Diego Gas & Electric Co Ser 1995 A,
4,050 ..................................................... 3.65 02/09/96 3.65 4,050,000
4,000 ..................................................... 3.65 02/16/96 3.65 4,000,000
5,000 San Diego County Water Authority, Ser #1............... 3.65 02/22/96 3.65 5,000,000
West & Central Basin Financing Authority, West Basin
Municipal Water District TRANs,
4,000 ..................................................... 3.70 02/14/96 3.70 4,000,000
3,000 ..................................................... 3.60 02/20/96 3.60 3,000,000
Puerto Rico Government Development Bank,
3,500 ..................................................... 3.60 02/08/96 3.60 3,500,000
7,000 ..................................................... 3.70 02/13/96 3.70 7,000,000
---------------
TOTAL CALIFORNIA TAX-EXEMPT COMMERCIAL PAPER
(AMORTIZED COST $71,450,000)...................................................................
71,450,000
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE
THOUSANDS RATE DATE OF PURCHASE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL NOTES & BONDS (4.7%)
$ 6,000 California School Cash Reserve Program Authority, 1995
Pool Ser A, dtd 07/05/95............................. 4.75% 07/03/96 3.75 % $ 6,029,372
6,000 Santa Barbara County, 1995-1996 Ser A TRANs, dtd
07/06/95............................................. 4.50 07/05/96 3.79 6,021,076
---------------
TOTAL CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL NOTES & BONDS
(AMORTIZED COST $12,050,448)...................................................................
12,050,448
---------------
TOTAL INVESTMENTS
(AMORTIZED COST $254,409,570) (A)...................... 100.0% 254,409,570
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS......... -- (33,219)
----- ------------
NET ASSETS............................................. 100.0% $254,376,351
----- ------------
----- ------------
<FN>
- ---------------------
BANs Bond Anticipation Notes.
COPs Certificates of Participation.
TRANs Tax and Revenue Anticipation Notes.
+ Rate shown is rate in effect at December 31, 1995.
* Date on which the principal amount can be recovered through demand.
(a) Cost is the same for federal income tax purposes.
BOND INSURANCE:
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights (appearing in the "Financial
Highlights" table on page 4 of this Prospectus) present fairly, in all material
respects, the financial position of Dean Witter California Tax-Free Daily Income
Trust (the "Fund") at December 31, 1995, 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 seven years in
the period then ended and for the period July 22, 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 at December 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 7, 1996
- --------------------------------------------------------------------------------
1995 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended December 31, 1995, the Fund paid to the
shareholders $0.03 per share from net investment income. All of
the Fund's dividends from net investment income were exempt
interest dividends, excludable from gross income for Federal
income tax purposes.
29
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
<TABLE>
<S> <C>
MONEY MARKET FUNDS DEAN WITTER RETIREMENT SERIES
Dean Witter Liquid Asset Fund Inc. Liquid Asset Series
Dean Witter U.S. Government Money Market Trust U.S. Government Money Market Series
Dean Witter Tax-Free Daily Income Trust U.S. Government Securities Series
Dean Witter California Tax-Free Daily Income Trust Intermediate Income Securities Series
Dean Witter New York Municipal Money Market Trust American Value Series
EQUITY FUNDS Capital Growth Series
Dean Witter American Value Fund Dividend Growth Series
Dean Witter Natural Resource Development Securities Inc. Stategist Series
Dean Witter Dividend Growth Securities Inc. Utilities Series
Dean Witter Developing Growth Securities Trust Value-Added Market Series
Dean Witter World Wide Investment Trust Global Equity Series
Dean Witter Value-Added Market Series ASSET ALLOCATION FUNDS
Dean Witter Utilities Fund Dean Witter Strategist Fund
Dean Witter Capital Growth Securities Dean Witter Global Asset Allocation Fund
Dean Witter European Growth Fund Inc. ACTIVE ASSETS ACCOUNT PROGRAM
Dean Witter Precious Metals and Minerals Trust Active Assets Money Trust
Dean Witter Pacific Growth Fund Inc. Active Assets Tax-Free Trust
Dean Witter Health Sciences Trust Active Assets California Tax-Free Trust
Dean Witter Global Dividend Growth Securities Active Assets Government Securities Trust
Dean Witter Global Utilities Fund
Dean Witter International SmallCap Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter Federal Securities Trust
Dean Witter Convertible Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter New York Tax-Free Income Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
Dean Witter High Income Securities
Dean Witter National Municipal Trust
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
Dean Witter Intermediate Term U.S. Treasury Trust
</TABLE>
<PAGE>
Dean Witter California
Tax-Free Daily Income Trust Dean Witter
Two World Trade Center California Tax-Free
New York, New York 10048
TRUSTEES Daily Income Trust
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Katherine H. Stromberg
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
PROSPECTUS -- FEBRUARY 23, 1996
<PAGE>
<TABLE>
<S> <C>
440-
for office use only
APPLICATION
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
Send to: Dean Witter Trust Company (the "Transfer Agent"), P.O. Box 1040, Jersey City, NJ 07303
- ----------------------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS For assistance in completing this application, telephone Dean Witter Trust Company at (800) 526-3143 (Toll-Free).
- ----------------------------------------------------------------------------------------------------------------------------------
TO REGISTER
SHARES 1.
(please print) ------------------------------------------------------------------------------
First Name Last Name
- -As joint tenants,
use line 1 & 2 2.
------------------------------------------------------------------------------
First Name Last Name
(Joint tenants with rights of survivorship unless otherwise specified)
------------------------------
- -As custodian Social Security Number
for a minor, 3.
use lines 1 & 3 ------------------------------------------------------------------------------
Minors Name
------------------------------
Minor's Social Security Number
Under the ___________________________ Uniform Gifts to Minors Act
State of Residence of Minor
- -In the name of a
corporation, 4.
trust, ------------------------------------------------------------------------------
partnership
or other Name of Corporation, Trust (including trustee name(s)) or Other Organization
institutional
investors, use ------------------------------------------------------------------------------
line 4
If Trust, Date of Trust Instrument: ______________ -------------------------
Tax Identification Number
- ----------------------------------------------------------------------------------------------------------------------------------
ADDRESS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
City State Zip Code
- ----------------------------------------------------------------------------------------------------------------------------------
TO PURCHASE
SHARES:
Minimum Initial / / CHECK (enclosed) $ ____________ (Make Payable to Dean Witter California Tax-Free Daily Income Trust)
Investment:
$5,000 / / WIRE* On __________________ MF* __________________________________
(Date) (Control number, this transaction)
--------------------------------------------------------------------------------
Name of Bank Branch
--------------------------------------------------------------------------------
Address
--------------------------------------------------------------------------------
Telephone Number
* For an initial investment made by wiring funds, obtain a control number by
calling: (800) 526-3143 (Toll Free).
Your bank should wire to:
Bank of New York for credit to account of Dean Witter Trust Company
Account Number: 8900188413
Re: Dean Witter California Tax-Free Daily Income Trust
Account Of:________________________________________________________
(Investor's Account as Registered at the Transfer Agent)
Control or Account Number:_________________________________________
(Assigned by Telephone)
- ----------------------------------------------------------------------------------------------------------------------------------
OPTIONAL SERVICES
- ----------------------------------------------------------------------------------------------------------------------------------
NOTE: If you are a current shareholder of Dean Witter California Tax-Free Daily Income Trust, please
indicate your fund account number here.
[4] [4] [0] - ______________________
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS All dividends will be reinvested daily in additional shares, unless the following option is selected:
/ / Pay income dividends by check at the end of each month.
- ----------------------------------------------------------------------------------------------------------------------------------
WRITE YOUR / / Send an initial supply of checks.
OWN FOR JOINT ACCOUNTS:
CHECK / / CHECK THIS BOX IF ALL OWNERS ARE REQUIRED TO SIGN CHECKS.
- ----------------------------------------------------------------------------------------------------------------------------------
SYSTEMATIC / / Systematic Withdrawal Plan ($25 minimum) Percentage of balance (annualized basis)
WITHDRAWAL $__________ / / Monthly or / / Quarterly _____% / / Monthly or / / Quarterly
PLAN / / 10th or / / 25th of Month/Quarter / / 10th or / / 25th of Month/Quarter
Minimum / / Pay shareholder(s) at address of record.
Account Value: / / Pay to the following: (If this payment option is selected a signature guarantee is required)
$5,000
--------------------------------------------------------------------------------
Name
--------------------------------------------------------------------------------
Address
--------------------------------------------------------------------------------
City State Zip Code
</TABLE>
<PAGE>
<TABLE>
<S> <C>
PAYMENT TO / / Dean Witter Trust Company is hereby authorized to honor telephonic or other
PREDESIGNATED instructions, without signature guarantee, from any person for the redemption of any
BANK ACCOUNT or all shares of Dean Witter California Tax-Free Daily Income Trust held in my (our)
account provided that proceeds are transmitted only to the following bank account.
(Absent its own negligence, neither Dean Witter California Tax-Free Daily Income
Trust nor Dean Witter Trust Company (the "Transfer Agent") shall be liable for any
redemption caused by unauthorized instruction(s)):
Bank Account must be in
same name as shares are --------------------------------------------------------- ----------------------------
registered NAME & BANK ACCOUNT NUMBER BANK'S ROUTING TRANSMIT CODE
(ASK YOUR BANK)
Minimum Amount:
$1,000 --------------------------------------------------------------------------------------
NAME OF BANK
--------------------------------------------------------------------------------------
ADDRESS OF BANK
( )
--------------------------------------------------------------------------------------
TELEPHONE NUMBER OF BANK
- ----------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AUTHORIZATION
- ----------------------------------------------------------------------------------------------------------------------------------
FOR ALL ACCOUNTS NOTE: RETAIN A COPY OF THIS DOCUMENT FOR YOUR RECORDS. ANY MODIFICATION OF THE INFORMATION
BELOW WILL REQUIRE AN AMENDMENT TO THIS FORM. THIS DOCUMENT IS IN FULL FORCE AND EFFECT
UNTIL ANOTHER DULY EXECUTED FORM IS RECEIVED BY THE TRANSFER AGENT.
The "Transfer Agent" is hereby authorized to act as agent for the registered owner of
shares of Dean Witter California Tax-Free Daily Income Trust (the "Fund") in effecting
redemptions of shares and is authorized to recognize the signature(s) below in payment of
funds resulting from such redemptions on behalf of the registered owners of such shares.
The Transfer Agent shall be liable only for its own negligence and not for 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.
I (we) certify to my (our) legal capacity, or the capacity of the investor named above, to
invest in and redeem shares of, and I (we) acknowledge receipt of a current prospectus of,
Dean Witter California Tax-Free Daily Income Trust and (we) further certify my (our)
authority to sign and act for and on behalf of the investor.
Under penalties of perjury, I certify (1) that the number shown on this form is my correct
taxpayer identification number and (2) that I am not subject to backup withholding either
because I have not been notified that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or the Internal Revenue Service has notified
me that I am no longer subject to backup withholding. (Note: You must cross out item (2)
above if you have been notified by IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your tax return.)
For Individual, Joint and Custodial Accounts for Minors, Check Applicable Box:
/ / I am a United States Citizen. / / I am not a United States Citizen.
SIGNATURE(S) (IF JOINT TENANTS, ALL MUST SIGN)
Name(s) must be
signed exactly the
same as shown on
lines 1 to 4 on the
reverse side of this
application
SIGNED THIS __________________________________________ DAY OF ____________________________, 19___.
FOR CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER ORGANIZATIONS
The following named persons are currently officers/trustees/general partners/other authorized
signatories of the Registered Owner, and any * of them ("Authorized Person(s)") is/are currently
authorized under the applicable governing document to act with full power to sell, assign or
transfer securities of the the Fund for the Registered Owner and to execute and deliver any
instrument necessary to effectuate the authority hereby conferred:
NAME/TITLE SIGNATURE
In addition, complete
Section A or B below.
SIGNED THIS __________________________________________ DAY OF ____________________________, 19___.
The Transfer Agent may, without inquiry, act only upon the instruction of
ANY PERSON(S) purporting to be (an) Authorized Person(s) as named in the
Certification Form last received by the Transfer Agent. The Transfer
Agent and the Fund shall not be liable for any claims, expenses
(including legal fees) or losses resulting from the Transfer Agent having
acted upon any instruction reasonably believed genuine.
----------------------------------------------------------------------------------------
*INSERT A NUMBER. UNLESS OTHERWISE INDICATED, THE TRANSFER AGENT MAY
HONOR INSTRUCTIONS OF ANY ONE OF THE PERSONS NAMED ABOVE.
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION (A) NOTE: EITHER A SIGNATURE GUARANTEE OR CORPORATE SEAL IS REQUIRED.
CORPORATIONS AND
INCORPORATED
ASSOCIATIONS ONLY.
I, _______________________________ , Secretary of the Registered Owner, do hereby certify that at
a meeting on __________________________________________________________________ at which a quorum
SIGN ABOVE AND COM- was present throughout, the Board of Directors of the corporation/the officers of the association
PLETE THIS duly adopted a resolution, which is in full force and effect and in accordance with the Registered
SECTION Owner's charter and by-laws, which resolution did the following: (1) empowered the above-named
Authorized Person(s) to effect securities transactions for the Registered Owner on the terms
described above; (2) authorized the Secretary to certify, from time to time, the names and titles
of the officers of the Registered Owner and to notify the Transfer Agent when changes in office
occur; and (3) authorized the Secretary to certify that such a resolution has been duly adopted
and will remain in full force and effect until the Transfer Agent receives a duly executed
amendment to the Certification Form.
SIGNATURE
GUARANTEE** Witness my hand on behalf of the corporation/association this day _________ of___________ , 19___.
(or Corporate Seal)
-----------------------------------------
Secretary**
The undersigned officer (other than the Secretary) hereby certifies that the foregoing instrument
has been signed by the Secretary of the
corporation/association.
SIGNATURE
GUARANTEE** ______________________________________________________________________
(or Corporate Seal) Certifying Officer of the Corporation or Incorporated Association**
- ----------------------------------------------------------------------------------------------------------------------------------
SECTION (B) ALL NOTE: A SIGNATURE GUARANTEE IS REQUIRED.
OTHER
INSTITUTIONAL _________________________________________________________________________________
INVESTORS Certifying
SIGNATURE Trustee(s)/General Partner(s)/Other(s)**
GUARANTEE** _________________________________________________________________________________
SIGN ABOVE AND COM- Certifying
PLETE THIS SECTION Trustee(s)/General Partner(s)/Other(s)**
----------------------------------------------------------------------------------------
**SIGNATURE(S) MUST BE GUARANTEED BY AN ELIBIGLE GUARANTOR
- ----------------------------------------------------------------------------------------------------------------------------------
DEALER Above signature(s) guaranteed. Prospectus has been delivered by undersigned to above-named
(if any) applicant(s).
Completion by dealer only
------------------------------------ -------------------------------------------------
Firm Name Office Number-Account Number at Dealer-A/E Number
------------------------------------ -------------------------------------------------
Address Account Executive's Last Name
------------------------------------ -------------------------------------------------
City, State, Zip Code Branch Office
- -Registered Trademark- 1995 Dean Witter Distributors Inc.
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DEAN WITTER
FEBRUARY 23, 1996 CALIFORNIA TAX-FREE
DAILY INCOME TRUST
- --------------------------------------------------------------------------------
Dean Witter California Tax-Free Daily Income Trust (the "Fund") is an
open-end, diversified management investment company whose investment objective
is to provide as high a level of daily income exempt from federal and California
income tax as is consistent with stability of principal and liquidity. The Fund
seeks to achieve its objective by investing primarily in high quality tax-exempt
securities with short-term maturities, including Municipal Bonds, Municipal
Notes and Municipal Commercial Paper. (See "Investment Practices and Policies".)
The Fund is authorized to reimburse specific expenses incurred in promoting
the distribution of the Fund's shares pursuant to a Plan of Distribution with
Dean Witter Distributors Inc. pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Reimbursement may in no event exceed an amount equal to
payments at the annual rate of 0.15% of the average daily net assets of the
Fund.
A Prospectus for the Fund, dated February 23, 1996, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge by request of the Fund at its 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 or from any other
Selected Broker-Dealer. This Statement of Additional Information 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 California Tax-Free Daily Income Trust
Two World Trade Center
New York, New York 10048
(800) 869-NEWS (toll-free)
(212) 392-2550
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............................................................ 3
Trustees and Officers.................................................................. 6
Investment Practices and Policies...................................................... 12
Investment Restrictions................................................................ 16
Portfolio Transactions and Brokerage................................................... 17
Purchase of Fund Shares................................................................ 21
Redemption of Fund Shares.............................................................. 29
Dividends, Distributions and Taxes..................................................... 30
Description of Shares.................................................................. 33
Custodian and Transfer Agent........................................................... 34
Independent Accountants................................................................ 34
Reports to Shareholders................................................................ 34
Legal Counsel.......................................................................... 35
Experts................................................................................ 35
Registration Statement................................................................. 35
Financial Statements................................................................... 35
Appendix............................................................................... 36
</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
April 25, 1988 under the name "Dean Witter/Sears California Tax-Free Daily
Income Trust." On February 19, 1993, the Trust Agreement was amended to change
the Fund's name to Dean Witter California Tax-Free Daily Income Trust.
As of December 31, 1995 no shareholder was known to own beneficially or of
record as much as 5% of the outstanding shares of the Fund. The percentage
ownership of shares of the Fund changes from time to time depending on purchases
and redemptions by shareholders and the total number of shares outstanding.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc., a Delaware corporation, (the "Investment
Manager" or "InterCapital"), 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 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 of investments by the Fund's Trustees. In
addition, Trustees of the Fund provide guidance on economic factors and interest
rate trends. Information as to these Trustees and Officers is contained under
the caption "Trustees and Officers".
InterCapital is also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc., InterCapital
Income Securities Inc., Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Developing Growth Securities Trust,
Dean Witter American Value Fund, Dean Witter Dividend Growth Securities Inc.,
Dean Witter Natural Resource Development Securities Inc., Dean Witter U.S.
Government Money Market Trust, Dean Witter California Tax-Free Income Fund, 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 New York Tax-Free Income Fund, Dean Witter
Convertible Securities Trust, Dean Witter Federal Securities Trust, Dean Witter
Value-Added Market Series, High Income Advantage Trust, High Income Advantage
Trust II, High Income Advantage Trust III, Dean Witter Government Income Trust,
Dean Witter Tax-Exempt Securities Trust, Dean Witter Utilities Fund, Dean Witter
Strategist Fund, Dean Witter World Wide Income Trust, Dean Witter Intermediate
Income Securities, Dean Witter Capital Growth Securities, Dean Witter European
Growth Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter Precious
Metals and Minerals Trust, Dean Witter Global Short-Term Income Fund Inc., Dean
Witter Multi-State Municipal Series Trust, Dean Witter New York Municipal Money
Market Trust, InterCapital Quality Municipal Investment Trust, Dean Witter
Premier Income Trust, Dean Witter Short-Term U.S. Treasury Trust, InterCapital
Insured Municipal Bond Trust, InterCapital Insured Municipal Trust, InterCapital
Quality Municipal Income Trust, Dean Witter Diversified Income Trust, Dean
Witter Health Sciences Trust, Dean Witter Retirement Series, 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, Dean Witter Global Utilities Fund, Dean Witter
National Municipal Trust, Dean Witter High Income Securities, Dean Witter
International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter Global
Asset Allocation Fund, Dean Witter Select Dimensions Investment Series, Dean
Witter Balanced Growth Fund, Dean Witter Balanced Income Fund, Dean Witter
Hawaii Municipal Trust, Dean Witter Capital Appreciation Fund, Dean Witter
Intermediate Term U.S. Treasury Trust, Dean Witter Information Fund,
InterCapital Insured Municipal Securities, InterCapital Insured California
Municipal
3
<PAGE>
Securities, InterCapital Insured Municipal Income Trust, InterCapital California
Insured Municipal Income Trust, Active Assets Money Trust, Active Assets
California Tax-Free Trust, Active Assets 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,
Municipal Premium Income Trust and Prime Income Trust. The foregoing investment
companies, together with the Fund, are collectively referred to as the Dean
Witter Funds.
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, 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, TCW/DW Term Trust
2003, TCW/DW Mid-Cap Equity Trust, TCW/DW Emerging Markets Opportunities Trust,
and TCW/ DW Total Return Trust (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.
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.
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 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. On April 17,
1995, DWSC was reorganized in the State of Delaware, necessitating the entry
into a new Services Agreement by InterCapital and DWSC on that date. The
foregoing internal reorganizations did not result in any change in the nature or
scope of the administrative services being provided to the Fund or any of the
fees being paid by the Fund for the overall services being performed under the
terms of the existing Management Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributors of the Fund's shares, Dean Witter Distributors Inc.
("Distributors" or the "Distributor"), (see "Purchase of Fund Shares") will be
paid by the Fund. The expenses borne by the Fund include, but are not limited
to: the distribution fee under the Plan pursuant to Rule 12b-1 (see "Purchase of
Fund Shares"); 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'
4
<PAGE>
meetings and of preparing, printing and mailing of proxy statements and reports
to shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, withdrawal or redemption options; charges and expenses of any outside
service used for pricing of the Fund's shares; fees and expenses of legal
counsel, including counsel to the Trustees who are not interested persons of the
Fund or of the Investment Manager (not including compensation or expenses of
attorneys who are employees of the Investment Manager) and independent
accountants; membership dues of industry associations; interest on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Trustees) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification relating thereto); and all other costs
of the Fund's operation.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates to the net assets of the Fund, determined as of the close
of business on each business day: 0.50% of the portion of the daily net assets
not exceeding $500 million; 0.425% of the portion of the daily net assets
exceeding $500 million but not exceeding $750 million; 0.375% of the portion of
the daily net assets exceeding $750 million but not exceeding $1 billion; 0.35%
of the portion of the daily net assets exceeding $1 billion but not exceeding
$1.5 billion; 0.325% of the portion of the daily net assets exceeding $1.5
billion but not exceeding $2 billion; 0.30% of the portion of the daily net
assets exceeding $2 billion but not exceeding $2.5 billion; 0.275% of the
portion of the daily net assets exceeding $2.5 billion but not exceeding $3
billion; and 0.25% of the portion of the daily net assets exceeding $3 billion.
The Fund accrued to the Investment Manager $1,403,743, $1,290,675 and $1,153,594
in total compensation under the Agreement for the fiscal years ended December
31, 1993, 1994 and 1995, 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
2.5% of the first $30,000,000 of average daily net assets, 2% of the next
$70,000,000 and 1.5% 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's expenses did not
exceed this expense limitation or the then existing most restrictive limitation
during the fiscal years ended December 31, 1993, 1994 and 1995.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder, the
Investment Manager is not liable to the Fund or any of its investors for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors. The Agreement in no way restricts the Investment Manager from
acting as investment manager or adviser to others.
The Agreement was initially approved by the Trustees on October 22, 1992,
and by the shareholders of the Fund at a Special Meeting of Shareholders held on
January 12, 1993. The Agreement is substantially identical to a prior investment
management agreement which was initially approved by the Trustees on June 20,
1988 and by DWR, as the then sole shareholder, on June 22, 1988. 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). The Agreement took effect on June 30, 1993, upon the spin-off by Sears,
Roebuck and Co. of its remaining shares of DWDC. The Agreement may be terminated
at any time, without penalty, on thirty days notice, by the Board of Trustees of
the Fund, by the holders of a majority, as defined in the Investment Company
5
<PAGE>
Act of 1940, as amended (the "Act"), of the outstanding shares of the Fund, or
by the Investment Manager. The Agreement will automatically terminate in the
event of its assignment (as defined in the Act).
Under its terms, the Agreement had an initial term ending April 30, 1994,
and provides that it will continue in effect from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the vote
of the holders of a majority (as defined in the Act) of the outstanding shares
of the Fund, or by the Board of Trustees of the Fund; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees of the Fund who are not parties to the Agreement or "interested
persons" (as defined in the Act) of any such party (the "Independent Trustees"),
which vote must be cast in person at a meeting called for the purpose of voting
on such approval. At their meeting held on April 20, 1995, the Fund's Board of
Trustees, including a majority of the Independent Trustees, approved the most
recent continuation of the Agreement until April 30, 1996.
The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that DWR or its parent company may use, or at any time,
permit others to use, the name "Dean Witter". The Fund has also agreed that in
the event the Agreement is terminated, or if the affiliation between
InterCapital and the Fund is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate the
name "Dean Witter" from its name if DWR or its parent company shall so request.
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 79 Dean Witter Funds and the 12 TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Michael Bozic (55) .......................... Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of the
c/o Levitz Furniture Corporation Dean Witter Funds; formerly President and Chief Executive Officer
6111 Broken Sound Parkway, N.W. of Hills Department Stores (May, 1991-July, 1995); formerly
Boca Raton, Florida Chairman and Chief Executive Officer (January, 1987-August, 1990)
and President and Chief Operating Officer (August, 1990-February,
1991) of the Sears Merchandise Group of Sears, Roebuck and Co.;
Director of Eaglemark Financial Services, Inc., the United Negro
College Fund, Weirton Steel Corporation and Domain Inc. (home
decor retailer).
Charles A. Fiumefreddo* (62) ................ Chairman, Chief Executive Officer and Director of InterCapital,
Chairman of the Board, Distributors and DWSC; Executive Vice President and Director or
President, Chief Executive Officer DWR; Chairman, Director or Trustee, President and Chief Executive
and Trustee Officer of the Dean Witter Funds; Chairman, Chief Executive
Two World Trade Center Officer and Trustee of the TCW/DW Funds; Chairman and Director of
New York, New York Dean Witter Trust Company ("DWTC"); Director and/or officer of
various DWDC subsidiaries; formerly, Director and Executive Vice
President of DWDC (until February 1993).
Edwin J. Garn (62) .......................... Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah) (1974-1992) and Chairman, Senate Banking
c/o Huntsman Chemical Corporation Committee (1980-1986); formerly Mayor of Salt Lake City, Utah
500 Huntsman Way (1971-1974); formerly Astronaut, Space Shuttle Discovery (April
Salt Lake City, Utah 12-19, 1985); Vice Chairman, Huntsman Chemical Corporation (since
January, 1993); Director of Franklin Quest (time management
systems) and John Alden Financial Corp.; Member of the board of
various civic and charitable organizations.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
John R. Haire (71) .......................... Chairman of the Audit Committee and Chairman of the Committee of
Trustee Independent Directors or Trustees of each of the Dean Witter
Two World Trade Center Funds; and Director or Trustee of the Dean Witter Funds; Trustee
New York, New York of the TCW/DW Funds; formerly President, Council for Aid to
Education (1978-October, 1989) and Chairman and Chief Executive
Officer of Anchor Corporation, an Investment Adviser (1964-1978);
Director of Washington National Corporation (insurance).
Dr. Manuel H. Johnson (46) .................. Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Koch Professor of International Economics and Director of
c/o Johnson Smick International Inc. the Center for Global Market Studies at George Mason University
1133 Connecticut Avenue, N.W. (since September, 1990); Co- Chairman and a founder of the Group
Washington, DC 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 NASDAQ (since
June, 1995); Director of Greenwich Capital Markets Inc.
(broker-dealer); formerly Vice Chairman of the Board of Governors
of the Federal Reserve System (February, 1986-August, 1990) and
Assistant Secretary of the U.S. Treasury (1982-1986).
Paul Kolton (72) ............................ Director or Trustee of the Dean Witter Funds; Chairman of the
Trustee Audit Committee and Chairman of the Committee of the Independent
c/o Gordon Altman Butowsky Weitzen Trustees and Trustee of the TCW/DW Funds; formerly Chairman of the
Shalov & Wein Financial Accounting Standards Advisory Council and Chairman and
Counsel to the Independent Trustees Chief Executive Officer of the American Stock Exchange; Director
114 West 47th Street of UCC Investors Holding Inc. (Uniroyal Chemical Company, Inc.);
New York, New York director or trustee of various not-for-profit organizations.
Michael E. Nugent (59) ...................... General Partner, Triumph Capital, L.P., a private investment
Trustee partnership (since April, 1988); Director or Trustee of the Dean
c/o Triumph Capital, L.P. Witter Funds, and Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital Corporation
New York, New York (1984-1988); Director of various business organizations.
Philip J. Purcell* (52) ..................... Chairman of the Board of Directors and Chief Executive Officer of
Trustee DWDC, DWR and Novus Credit Services Inc.; Director of
Two World Trade Center InterCapital, DWSC and Distributors; Director or Trustee of the
New York, New York Dean Witter Funds; Director and/or officer of various DWDC
subsidiaries.
John L. Schroeder (65) ...................... Retired; Director or Trustee of the Dean Witter Funds; Trustee of
Trustee the TCW/DW Funds; Director of Citizens Utilities Company; formerly
c/o Gordon Altman Butowsky Weitzen Executive Vice President and Chief Investment Officer of the Home
Shalov & Wein Insurance Company (August, 1991-September, 1995); formerly
Counsel to the Independent Trustees Chairman and Chief Investment Officer of Axe-Houghton Management
114 West 47th Street and the Axe-Houghton Funds (April, 1983-June, 1991) and President
New York, New York of USF&G Financial Services, Inc. (June, 1990-June, 1991).
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Sheldon Curtis (64) ......................... Senior Vice President, Secretary and General Counsel of
Vice President, Secretary and InterCapital and DWSC; Senior Vice President and Secretary of
General Counsel DWTC; Senior Vice President, Assistant Secretary and Assistant
Two World Trade Center General Counsel of Distributors; Assistant Secretary of DWR; Vice
New York, New York President, Secretary and General Counsel of the Dean Witter Funds
and the TCW/DW Funds.
Katherine H. Stromberg (47) ................. Vice President of InterCapital; Vice President of various Dean
Vice President Witter Funds; formerly Vice President of Kidder Peabody Asset
Two World Trade Center Management (from September, 1985-October, 1991).
New York, New York
Thomas F. Caloia (49) ....................... First Vice President (since May, 1991) and Assistant Treasurer
Treasurer (since January, 1993) of InterCapital; First Vice President and
Two World Trade Center Assistant Treasurer of DWSC; and Treasurer of the Dean Witter
New York, New York Funds and TCW/DW Funds.
<FN>
- ------------
*Denotes Trustees who are "interested persons" of the Fund, as defined in the
Act.
</TABLE>
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and Director
of DWTC and Edmund C. Puckhaber, Executive Vice President of InterCapital and
Director of DWTC, and Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and DWTC and Joseph J. McAlinden, Peter M.
Avelar, James F. Willison, Joseph Arcieri, Kevin Hurley and Jonathan R. Page,
Senior Vice Presidents of InterCapital, are Vice Presidents of the Fund. Marilyn
K. Cranney and Barry Fink, First Vice Presidents and Assistant General Counsels
of InterCapital and DWSC, and LouAnne D. McInnis and Ruth Rossi, Vice Presidents
and Assistant General Counsels of InterCapital and DWSC, and Carsten Otto, a
Staff Attorney with InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same individuals
also serve as directors or trustees for all of the Dean Witter Funds, and are
referred to in this section as Trustees. As of the date of this Statement of
Additional Information, there are a total of 79 Dean Witter Funds, comprised of
119 portfolios. As of December 31, 1995, the Dean Witter Funds had total net
assets of approximately $71.5 billion and more than five million shareholders.
Seven Trustees (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own any
stock or other securities issued by InterCapital's parent company, DWDC. These
are the "disinterested" or "independent" Trustees. The other two Trustees (the
"management Trustees") are affiliated with InterCapital. Five of the seven
independent Trustees are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Trustees. The Dean Witter Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee and
the Committee of the Independent Trustees. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1995,
the three Committees held a combined total of fifteen
8
<PAGE>
meetings. The Committees hold some meetings at InterCapital's offices and some
outside InterCapital. Management Trustees or officers do not attend these
meetings unless they are invited for purposes of furnishing information or
making a report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to time.
The Independent Trustees are required to select and nominate individuals to fill
any Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1
plan of distribution. Most of the Dean Witter Funds have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He screens
and/or prepares written materials and identifies critical issues for the
Independent Trustees to consider, develops agendas for Committee meetings,
determines the type and amount of information that the Committees will need to
form a judgment on various issues, and arranges to have that information
furnished to Committee members. He also arranges for the services of independent
experts and consults with them in advance of meetings to help refine reports and
to focus on critical issues. Members of the Committees believe that the person
who serves as Chairman of all three Committees and guides their efforts is
pivotal to the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In effect,
the Chairman of the Committees serves as a combination of chief executive and
support staff of the Independent Trustees.
The Chairman of the Committees is not employed by any other organization and
devotes his time primarily to the services he performs as Committee Chairman and
Independent Trustee of the Dean Witter Funds and as an Independent Trustee of
the TCW/DW Funds. The current Committee Chairman has had more than 35 years
experience as a senior executive in the investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Trustees
9
<PAGE>
arriving at conflicting decisions regarding operations and management of the
Funds and avoids the cost and confusion that would likely ensue. Finally, having
the same Independent Trustees serve on all Fund Boards enhances the ability of
each Fund to obtain, at modest cost to each separate Fund, the services of
Independent Trustees, and a Chairman of their Committees, of the caliber,
experience and business acumen of the individuals who serve as Independent
Trustees of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 ($1,200 prior
to September 30, 1995) plus a per meeting fee of $50 for meetings of the Board
of Trustees or committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an annual fee of $750 and pays the
Chairman of the Committee of the Independent Trustees an additional annual fee
of $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 an Independent Trustee
who retires after serving for at least five years (or such lesser period as may
be determined by the Board) as an Independent Director or Trustee of any Dean
Witter Fund that has adopted the retirement program (each such Fund referred to
as an "Adopting Fund" and each such Trustee referred to as an "Eligible
Trustee") is entitled to retirement payments upon reaching the eligible
retirement age (normally, after attaining age 72). Annual payments are based
upon length of service. Currently, upon retirement, each Eligible Trustee is
entitled to receive from the Fund, commencing as of his or her retirement date
and continuing for the remainder of his or her life, an annual retirement
benefit (the "Regular Benefit") equal to 25.0% of his or her Eligible
Compensation plus 0.4166666% of such Eligible Compensation for each full month
of service as an Independent Director or Trustee of any Adopting Fund in excess
of five years up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(1) "Eligible Compensation" is one-fifth
of the total compensation earned by such Eligible Trustee for service to the
Fund in the five year period prior to the date of the Eligible Trustee's
retirement. Benefits under the retirement program are not secured or funded by
the Fund. As of the date of this Statement of Additional Information, 57 Dean
Witter Funds have adopted the retirement program.
- ------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of such Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
10
<PAGE>
The following table illustrates the compensation paid and the retirement
benefits accrued to the Fund's Independent Trustees by the Fund for the fiscal
year ended December 31, 1995 and the estimated retirement benefits for the
Fund's Independent Trustees as of December 31, 1995.
<TABLE>
<CAPTION>
FUND COMPENSATION ESTIMATED RETIREMENT BENEFITS
------------------------------- --------------------------------------------------------------------
ESTIMATED ESTIMATED
RETIREMENT CREDIT YEARS ESTIMATED ANNUAL
AGGREGATE BENEFITS OF SERVICE AT PERCENTAGE OF ESTIMATED BENEFITS
NAME OF INDEPENDENT COMPENSATION ACCRUED AS RETIREMENT ELIGIBLE ELIGIBLE UPON
TRUSTEE FROM THE FUND FUND EXPENSES (MAXIMUM 10) COMPENSATION COMPENSATION(2) RETIREMENT(3)
- -------------------- -------------- -------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic....... $ 1,800 $ 454 10 57.5% $1,950 $ 1,121
Edwin J. Garn....... 1,950 698 10 57.5 1,950 1,121
John R. Haire....... 4,550(4) 3,613 10 57.5 5,093 2,929
Dr. Manuel H.
Johnson............ 1,950 281 10 57.5 1,950 1,121
Paul Kolton......... 1,950 1,601 10 57.0 2,425 1,383
Michael E. Nugent... 1,800 498 10 57.5 1,950 1,121
John L. Schroeder... 1,950 843 8 47.9 1,950 934
</TABLE>
- ------------
(2) Based on current levels of compensation.
(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
(4) Of Mr. Haire's compensation from the Fund, $3,150 is paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($750).
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for services
to the 79 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Kolton
and Nugent, the 11 TCW/DW Funds that were in operation at December 31, 1995.
With respect to Messrs. Haire, Johnson, Kolton and Nugent, the TCW/DW Funds are
included solely because of a limited exchange privilege between those Funds and
five Dean Witter Money Market Funds. Mr. Schroeder was elected as a Trustee of
the TCW/DW Funds on April 20, 1995.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS TOTAL CASH
FOR SERVICE CHAIRMAN OF COMPENSATION
AS DIRECTOR OR COMMITTEES OF FOR SERVICES
TRUSTEE AND FOR SERVICE AS INDEPENDENT TO
COMMITTEE MEMBER TRUSTEE AND DIRECTORS/ 79 DEAN
OF 79 DEAN COMMITTEE MEMBER TRUSTEES AND WITTER
WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- --------------------------- ---------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Michael Bozic.............. $126,050 -- -- $126,050
Edwin J. Garn.............. 136,450 -- -- 136,450
John R. Haire.............. 98,450 $82,038 $217,350(5) 397,838
Dr. Manuel H. Johnson...... 136,450 82,038 -- 218,488
Paul Kolton................ 136,450 54,788 36,900(6) 228,138
Michael E. Nugent.......... 124,200 75,038 -- 199,238
John L. Schroeder.......... 136,450 46,964 -- 183,414
</TABLE>
- ------------
(5) For the 79 Dean Witter Funds in operation at December 31, 1995.
(6) For the 11 TCW/DW Funds in operation at December 31, 1995.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
11
<PAGE>
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
PORTFOLIO SECURITIES
TAXABLE SECURITIES. As discussed in the Prospectus, the Fund may invest up
to 20% of its total assets in taxable money market instruments, repurchase
agreements and non-California tax-exempt securities. Investments in taxable
money market instruments would generally be made under any one of the following
circumstances: (a) pending investment proceeds of sale of Fund shares or of
portfolio securities; (b) pending settlement of purchases of portfolio
securities; and (c) to maintain liquidity for the purpose of meeting anticipated
redemptions. Only those non-California tax-exempt securities which satisfy the
standards established for California tax-exempt securities may be purchased by
the Fund.
In addition, the Fund may temporarily invest more than 20% of its total
assets in non-California tax-exempt securities and taxable money market
instruments, or in short-term tax-exempt securities subject to the federal
alternative minimum tax for individual shareholders, to maintain a "defensive"
posture when, in the opinion of the Investment Manager, it is advisable to do so
because of market conditions. The types of taxable money market instruments in
which the Fund may invest are limited to the following short-term fixed-income
securities (maturing in one year or less from the time of purchase): (i)
obligations of the United States Government, its agencies, instrumentalities or
authorities; (ii) commercial paper rated P-1 by Moody's Investors Services, Inc.
("Moody's") or A-1 by Standard & Poor's Corporation ("S&P"); (iii) certificates
of deposit of domestic banks with assets of $1 billion or more; and (iv)
repurchase agreements with respect to portfolio securities.
TAX-EXEMPT SECURITIES. As discussed in the Prospectus, at least 80% of the
Fund's total assets will be invested in California tax-exempt securities
(California Municipal Bonds, California Municipal Notes and California Municipal
Commercial Paper). In regard to the Moody's and S&P ratings discussed in the
Prospectus, it should be noted that the ratings represent the organizations'
opinions as to the quality of the securities which they undertake to rate and
the ratings are general and not absolute standards of quality. For a description
of Municipal Bond, Municipal Note and Municipal Commercial Paper ratings by
Moody's and S&P, see the Appendix to this Statement of Additional Information.
The percentage and rating limitations discussed above and in the Prospectus
apply at the time of acquisition of a security based upon the last previous
determination of the Fund's net asset value; any subsequent change in any
ratings by a rating service or change in percentages resulting from market
fluctuations or other changes in total assets will not require elimination of
any security from the Fund's portfolio.
The payment of principal and interest by issuers of certain Municipal
Obligations purchased by the Fund may be guaranteed by letters of credit or
other credit facilities offered by banks or other financial institutions. Such
guarantees will be considered in determining whether a Municipal Obligation
meets the Fund's investment quality requirements. In addition, some issues may
contain provisions which permit the Fund to demand from the issuer repayment of
principal at some specified period(s) prior to maturity.
MUNICIPAL BONDS. Municipal Bonds, as referred to in the Prospectus, are
debt obligations of a state, its cities, municipalities and municipal agencies
(all of which are generally referred to as "municipalities") which generally
have a maturity at the time of issue of one year or more, and the interest from
which is, in the opinion of bond counsel, exempt from federal income tax. In
addition to these requirements, the interest from California Municipal Bonds
must be, in the opinion of bond counsel, exempt from California personal income
tax. They are issued to raise funds for various public purposes, such as
construction of a wide range of public facilities, to refund outstanding
obligations and to obtain funds for general operating expenses or to loan to
other public institutions and facilities. In addition, certain types of
industrial development bonds and pollution control bonds are issued by or on
behalf of public authorities to provide funding for various privately operated
facilities.
12
<PAGE>
MUNICIPAL NOTES. Municipal Notes are short-term obligations of
municipalities, generally with a maturity at the time of issuance ranging from
six months to three years, the interest from which is, in the opinion of bond
counsel, exempt from federal income tax. In addition to those requirements, the
interest from California Municipal Notes must be, in the opinion of bond
counsel, exempt from California personal income tax. The principal types of
Municipal Notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes and project notes, although there are other types of
Municipal Notes in which the Fund may invest. Notes sold in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project Notes are
issued by local agencies and are guaranteed by the United States Department of
Housing and Urban Development. Such notes are secured by the full faith and
credit of the United States Government.
MUNICIPAL COMMERCIAL PAPER. Municipal Commercial Paper refers to short-term
obligations of municipalities the interest from which is, in the opinion of bond
counsel, exempt from federal income tax. In addition to those requirements, the
interest from California Commercial Paper must be, in the opinion of bond
counsel, exempt from California personal income tax. It may be issued at a
discount and is sometimes referred to as Short-Term Discount Notes. Municipal
Commercial Paper is likely to be used to meet seasonal working capital needs of
a municipality or interim construction financing and to be paid from general
revenues of the municipality or refinanced with long-term debt. In most cases
Municipal Commercial Paper is backed by letters of credit, lending agreements,
note repurchase agreements or other credit facility agreements offered by banks
or other institutions.
The two principal classifications of Municipal Bonds, Notes and Commercial
Paper are "general obligation" and "revenue" bonds, notes or commercial paper.
General obligation bonds, notes or commercial paper are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. Issuers of general obligation bonds, notes or commercial paper include
a state, its counties, cities, towns and other governmental units. Revenue
bonds, notes or commercial paper are payable from the revenues derived from a
particular facility or class of facilities or, in some cases, from specific
revenue sources. Revenue bonds, notes or commercial paper are issued for a wide
variety of purposes, including the financing of electric, gas, water and sewer
systems and other public utilities; industrial development and pollution control
facilities; single and multi-family housing units; public buildings and
facilities; air and marine ports; transportation facilities such as toll roads,
bridges and tunnels; and health and educational facilities such as hospitals and
dormitories. They rely primarily on user fees to pay debt service, although the
principal revenue source is often supplemented by additional security features
which are intended to enhance the creditworthiness of the issuer's obligations.
In some cases, particularly with respect to revenue bonds issued to finance
housing and public buildings, a direct or implied "moral obligation" of a
governmental unit may be pledged to the payment of debt service. In other cases,
a special tax or other charge may augment user fees.
Issuers of these obligations are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or any state extending the time for payment of principal or interest,
or both, or imposing other constraints upon enforcement of such obligations or
upon municipalities to levy taxes. There is also the possibility that as a
result of litigation or other conditions the power or ability of any one or more
issuers to pay, when due, principal of and interest on its, or their, Municipal
Bonds, Municipal Notes and Municipal Commercial Paper may be materially
affected.
PORTFOLIO MANAGEMENT
VARIABLE RATE AND FLOATING RATE OBLIGATIONS. As stated in the Prospectus,
the Fund may invest in Municipal Bonds and Municipal Notes ("Municipal
Obligations") of the type called "variable rate" and "floating rate"
obligations.
The interest rate payable on a variable rate Municipal Obligation is
adjusted either at predesignated periodic intervals and on "floating rate"
Municipal Obligations whenever there is a change in the market rate of interest
on which the interest rate payable is based. Other features may include the
right whereby
13
<PAGE>
the Fund may demand prepayment of the principal amount of the obligation prior
to its stated maturity (a "demand feature") and the right of the issuer to
prepay the principal amount prior to maturity. The principal benefit of a
variable rate Municipal Obligation is that the interest rate adjustment
minimizes changes in the market value of the obligation. As a result, the
purchase of variable rate and floating rate Municipal Obligations could enhance
the ability of the Fund to maintain a stable net asset value per share (see
"Purchase of Fund Shares--Determination of Net Asset Value" in the Prospectus).
The principal benefit to the Fund of purchasing obligations with a demand
feature is that liquidity, and the ability of the Fund to obtain repayment of
the full principal amount of a Municipal Obligation prior to maturity, is
enhanced.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As stated in the Prospectus,
the Fund may purchase tax-exempt securities on a when-issued or delayed delivery
basis. When such transactions are negotiated, the price is fixed at the time of
commitment, but delivery and payment can take place a month or more after the
date of the commitment. While the Fund will only purchase securities on a when-
issued or delayed delivery basis with the intention of acquiring the securities,
the Fund may sell the securities before the settlement date, if it is deemed
advisable. The securities so purchased or sold are subject to market fluctuation
and no interest accrues to the purchaser during this period. At the time the
Fund makes the commitment to purchase a Municipal Obligation on a when-issued or
delayed delivery basis, it will record the transaction and thereafter reflect
the value, each day, of the Municipal Obligation in determining its net asset
value. The Fund will also establish a segregated account with its custodian bank
in which it will maintain liquid assets such as cash, U.S. government securities
or other appropriate high grade debt obligations equal in value to commitments
for such when-issued or delayed delivery securities. The Fund does not believe
that its net asset value or income will be adversely affected by its purchase of
Municipal Obligations on a when-issued or delayed delivery basis. During the
fiscal year ended December 31, 1995, the Fund's investments in when-issued and
delayed delivery securities did not exceed 5% of its net assets.
REPURCHASE AGREEMENTS. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Fund. These
agreements, which may be viewed as a type of secured lending by the Fund,
typically involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
("collateral"), which is held by the Fund's Custodian, at a specified price and
at a fixed time in the future, which is usually not more than seven days from
the date of purchase. 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 and
may exceed one year.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well capitalized and well established financial institutions, whose
financial condition will be continually monitored. In addition, the value of the
collateral underlying the repurchase agreement will always be at least equal to
the repurchase price, including any accrued interest earned on the repurchase
agreement. Such collateral will consist of Government securities or "Eligible
Securities" (as described under the caption "How Net Asset Value is Determined")
rated in the highest grade by a nationally recognized statistical rating
organization (a "NRSRO") whose ratings qualify the collateral as an Eligible
Security. In the event of a default or bankruptcy by a selling financial
institution, the Fund will seek to liquidate such collateral. However, the
exercise 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 asset held by the Fund, amount to more than 10% of its
total assets. The Fund's investments in repurchase agreements
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may, at times, be substantial when, in the view of the Investment Manager,
liquidity or other considerations warrant. During the fiscal year ended December
31, 1995, the Fund did not enter into any repurchase agreements.
PUT OPTIONS. The Fund may purchase securities together with the right to
resell them to the seller at an agreed upon price or yield within a specified
period prior to the maturity date of such securities. Such a right to resell is
commonly known as a "put," and the aggregate price which the Fund pays for
securities with puts may be higher than the price which otherwise would be paid
for the securities. Consistent with the Fund's investment objectives and subject
to the supervision of the Board of Trustees, the primary purpose of this
practice is to permit the Fund to be fully invested in securities the interest
on which is exempt from Federal and California personal income tax, while
preserving the necessary flexibility and liquidity to purchase securities on a
when-issued basis, to meet unusually large redemptions and to purchase at a
later date securities other than those subject to the put. The Fund's policy is,
generally, to exercise the puts on their expiration date, when the exercise
price is higher than the current market price for the related securities. Puts
may be exercised prior to the expiration date in order to fund obligations to
purchase other securities or to meet redemption requests. These obligations may
arise during periods in which proceeds from sales of Fund shares and from recent
sales of portfolio securities are insufficient to meet such obligations or when
the funds available are otherwise allocated for investment. In addition, puts
may be exercised prior to their expiration date in the event the Investment
Manager revises its evaluation of the creditworthiness of the issuer of the
underlying security. In determining whether to exercise puts prior to their
expiration date and in selecting which puts to exercise in such circumstances,
the Investment Manager considers, among other things, the amount of cash
available to the Fund, the expiration dates of the available puts, any future
commitments for securities purchases, the yield, quality and maturity dates of
the underlying securities, alternative investment opportunities and the
desirability of retaining the underlying securities in the Fund's portfolio.
The Fund values securities which are subject to puts at their amortized cost
and values the put, apart from the security, at zero. Thus, the cost of the put
will be carried on the Fund's books as an unrealized loss from the date of
acquisition and will be reflected in realized gain or loss when the put is
exercised or expires. Since the value of the put is dependent on the ability of
the put writer to meet its obligation to repurchase, the Fund's policy is to
enter into put transactions only with municipal securities dealers who are
approved by the Fund's Board of Trustees. Each dealer will be approved on its
own merits and it is the Fund's general policy to enter into put transactions
only with those dealers which are determined to present minimal credit risks. In
connection with such determination, the Board of Trustees will review, among
other things, the ratings, if available, of equity and debt securities of such
municipal securities dealers, their reputations in the municipal securities
markets, the net worth of such dealers and their efficiency in consummating
transactions. Bank dealers normally will be members of the Federal Reserve
System, and other dealers will be members of the National Association of
Securities Dealers, Inc. or members of a national securities exchange. The Board
has directed the Investment Manager not to enter into put transactions with, and
to exercise outstanding puts of, any municipal securities dealer which, in the
judgment of the Investment Manager, ceases at any time to present a minimal
credit risk. In the event that a dealer should default on its obligation to
repurchase an underlying security, the Fund is unable to predict whether all or
any portion of any loss sustained could be subsequently recovered from such
dealer. During the fiscal year ended December 31, 1995, the Fund did not
purchase any put options.
In Revenue Ruling 82-144, the Internal Revenue Service stated that, under
certain circumstances, a purchaser of tax-exempt obligations which are subject
to puts will be considered the owner of the obligations for Federal income tax
purposes. In connection therewith, the Fund has received an opinion of counsel
to the effect that interest on Municipal Obligations subject to puts will be
tax-exempt to the Fund.
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INVESTMENT RESTRICTIONS
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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 the holders of a
majority of the outstanding voting securities of the Fund, as defined in the
Act. Such a majority is defined in the Act as the lesser of (a) 67% or more of
the shares present at a Meeting of Shareholders of the Fund, if the holders of
more than 50% of the outstanding shares of the Fund are present or represented
by proxy at the meeting, or (b) more than 50% of the outstanding shares of the
Fund. For purposes of the following restrictions and those recited in the
Prospectus: (a) an "issuer" of a security is the entity whose assets and
revenues are committed to the payment of interest and principal on that
particular security, provided that the guarantee of a security will be
considered a separate security and provided further that a guarantee of a
security shall not be deemed to be a security issued by the guarantor if the
value of all securities issued or guaranteed by the guarantor and owned by the
Fund does not exceed 10% of the value of the total assets of the Fund; (b) a
"taxable security" is any security the interest on which is subject to federal
income tax; and (c) all percentage limitations apply immediately after a
purchase or initial investment, and any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.
The term "bank obligations" as referred to in Investment Restriction 3 in
the Prospectus refers to short-term obligations (including certificates of
deposit and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks.
The Fund may not:
1. Invest in common stock.
2. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or trustee of the Fund or any officer or director of the
Investment Manager owns more than 1/2 of 1% of the outstanding securities of
such issuer, and such officers, trustees and directors who own more than 1/2
of 1% own in the aggregate more than 5% of the outstanding securities of
such issuer.
3. Purchase or sell real estate or interests therein, although it may
purchase securities secured by real estate or interests therein.
4. Purchase or sell commodities or commodity futures contracts.
5. Purchase oil, gas or other mineral leases, rights or royalty
contracts, or exploration or development programs.
6. Write, purchase or sell puts, calls, or combinations thereof except
that it may acquire rights to resell Municipal Obligations at an agreed upon
price and at or within an agreed upon time.
7. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
8. Borrow money, except that the Fund may borrow from a bank or the
Investment Manager for temporary or emergency purposes in amounts not
exceeding 5% (taken at the lower of cost or current value) of the value of
its total assets (not including the amount borrowed).
9. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(8). To meet the requirements of regulations in certain states, the Fund, as
a matter of operating policy but not as a fundamental policy, will limit any
pledge of its assets to 10% of its net assets so long as shares of the Fund
are being sold in those states.
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10. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of: (a)
purchasing any securities on a when-issued or delayed delivery basis; or (b)
borrowing money in accordance with restrictions described above.
11. Make loans of money or securities, except: (a) by the purchase of
debt obligations in which the Fund may invest consistent with its investment
objective and policies; and (b) by investment in repurchase agreements.
12. Make short sales of securities.
13. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of purchases of portfolio securities.
14. 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.
15. Invest for the purpose of exercising control or management of any
other issuer.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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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. The Fund expects that the primary
market for the securities in which it intends to invest will generally be the
over-the-counter market. Securities are generally traded in the over-the-counter
market on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually includes
a profit to the dealer. The Fund also expects that securities will be purchased
at times in underwritten offerings where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or discount.
On occasion the Fund may also purchase certain money market instruments directly
from an issuer, in which case no commissions or discounts are paid. During the
Fund's fiscal years ended December 31, 1993, 1994 and 1995, the Fund did not pay
any brokerage commissions on agency transactions.
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 policy of the Fund, regarding purchases and sales of securities for its
portfolio, is that primary consideration be given to obtaining the most
favorable prices and efficient execution of transactions. In seeking to
implement the Fund's policies, the Investment Manager effects transactions with
those brokers and dealers who the Investment Manager believes provide the most
favorable prices and are capable of providing efficient executions. If the
Investment Manager believes such price and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Investment Manager. Such services may include, but
are not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investment; wire services; and appraisals
or evaluations of portfolio securities.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly. While the receipt of such information and services is useful in
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varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the Fund does not reduce the management fee it
pays to the Investment Manager by any amount that may be attributable to the
value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e. Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper (not including Tax-Exempt Municipal
Paper). Such transactions will be effected with DWR only when the price
available from DWR is better than that available from other dealers. During the
fiscal years ended December 31, 1993, 1994 and 1995, the Fund did not effect any
principal transactions with DWR.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR. In order for DWR to effect portfolio transactions for the
Fund, the commissions, fees or other remuneration received by DWR must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow DWR to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Trustees of the Fund,
including a majority of the Trustees who are not "interested" Trustees (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.
Subject to the principle of obtaining best price and execution, the
Investment Manager may consider a broker-dealer's sales of shares of the Fund as
a factor in selecting from among those broker-dealers qualified to provide
comparable prices and execution on the Fund's portfolio transactions. The Fund
does not, however, require a broker-dealer to sell shares of the Fund in order
for it to be considered to execute portfolio transactions, and will not enter
into any arrangement whereby a specific amount or percentage of the Fund's
transactions will be directed to a broker which sells shares of the Fund to
customers. The Board of Trustees reviews, periodically, the allocation of
brokerage orders to monitor the operation of these policies.
Portfolio turnover rate is defined as the lesser of the value of the
securities purchased or securities sold, excluding all securities whose
maturities at time of acquisition were one year or less, divided by the average
monthly value of such securities owned during the year. Because the Fund's
portfolio consists of municipal obligations maturing within one year, the Fund
is unable to calculate its turnover rate as so defined. However, because of the
short-term nature of the Fund's portfolio securities, it is anticipated that the
number of purchases and sales of maturities of such securities will be
substantial. Brokerage commissions are not normally charged on purchases and
sales of short-term municipal obligations, but such transactions may involve
transaction costs in the form of spreads between bid and asked prices.
SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA TAX-EXEMPT SECURITIES
The Fund will be affected by any political, economic or regulatory
developments affecting the ability of California issuers to pay interest or
repay principal. Various developments regarding the California Constitution and
State statutes which limit the taxing and spending authority of California
governmental entities may impair the ability of California issuers to maintain
debt service on their obligations.
In 1978, Proposition 13, an amendment to the California Constitution, was
approved, limiting real property valuation for property tax purposes and the
power of local governments to increase real property tax revenues and revenues
from other sources. Legislation adopted after Proposition 13 provided for
assistance to local governments, including the redistribution of the
then-existing surplus in the General Fund, reallocation of revenues to local
governments, and assumption by the State of certain local government
obligations. However, more recent legislation reduced such state assistance.
There
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can be no assurance that any particular level of State aid to local governments
will be maintained in future years. In NORDLINGER V. HAHN, the United States
Supreme Court upheld certain provisions of Proposition 13 against claims that it
violated the equal protection clause of the Constitution.
In 1979, an amendment was passed adding Article XIIIB to the State
Constitution. As amended in 1990, Article XIIIB imposes an "appropriations
limit" on the spending authority of the State and local government entities. In
general, the appropriations limit is based on certain 1978-1979 expenditures,
adjusted annually to reflect changes in the cost of living, population and
certain services provided by State and local government entities.
"Appropriations limit" does not include appropriations for qualified capital
outlay projects, certain increases in transportation-related taxes, and certain
emergency appropriations.
If a government entity raises revenues beyond its "appropriations limit" in
any year, a portion of the excess which cannot be appropriated within the
following year's limit must be returned to the entity's taxpayers within two
subsequent fiscal years, generally by a tax credit, refund or temporary
suspension of tax rates or fee schedules. "Debt service" is excluded from these
limitations, and is defined as "appropriations required to pay the cost of
interest and redemption charges, including the funding of any reserve or sinking
fund required in connection therewith, on indebtedness existing or legally
authorized as of January 1, 1979 or on bonded indebtedness thereafter approved
[by the voters]." In addition, Article XIIIB requires the State Legislature to
establish a prudent State reserve, and to require the transfer of 50% of excess
revenue to the State School Fund; any amounts allocated to the State School Fund
will increase the appropriations limit.
In June 1982, the voters of California passed two initiative measures to
repeal the California gift and inheritance tax laws and to enact, in lieu
thereof, California death taxes. California voters also passed an initiative
measure to increase, for taxable years commencing on or after January 1, 1982,
the amount to account for the effects of inflation. Decreases in State and local
revenues in future fiscal years as a consequence of these initiatives may result
in reductions in allocations of state revenues to California issuers or in the
ability of California issuers to pay their obligations.
In 1986, California voters approved an initiative statute known as
Proposition 62. This initiative (i) requires that any tax for general
governmental purposes imposed by local governments be approved by resolution or
ordinance adopted by a two-thirds vote of the governmental entity's legislative
body and by a majority vote of the electorate of the governmental entity, (ii)
requires that any special tax (defined as tax levied for other than general
governmental purposes) imposed by a local governmental entity be approved by a
two-thirds vote of the voters within that jurisdiction, (iii) restricts the use
of revenues from a special tax to the purposes or for the service for which the
special tax was imposed, (iv) prohibits the imposition of ad valorem taxes on
real property by local governmental entities except as permitted by the
Proposition 13 amendment, (v) prohibits the imposition of transaction taxes and
sales taxes on the sale of real property by local governments, (vi) requires
that any tax imposed by a local government on or after August 1, 1985, be
ratified by a majority vote of the electorate within two years of the adoption
of the initiative or be terminated by November 15, 1989, (vii) requires that, in
the event a local government fails to comply with the provisions of this
measure, a reduction of the amount of property tax revenue allocated to such
local government occurs in an amount equal to the revenues received by such
entity attributable to the tax levied in violation of the initiative, and (viii)
permits these provisions to be amended exclusively by the voters of the State of
California.
In September 1995, the California Supreme Court upheld the constitutionality
of Proposition 62, creating uncertainty as to the legality of certain local
taxes enacted by non-charter cities in California without voter approval. It is
not possible to predict the impact of the decision.
In 1988, State voters approved Proposition 87, which amended Article XVI of
the State Constitution to authorize the State Legislature to prohibit
redevelopment agencies from receiving any property tax revenues raised by
increased property taxes to repay bonded indebtedness of local government which
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is not approved by voters on or before January 1, 1989. It is not possible to
predict whether the State Legislature will enact such a prohibition, nor is it
possible to predict the impact of Proposition 87 on redevelopment agencies and
their ability to make payments on outstanding debt obligations.
In November 1988, California voters approved Proposition 98. This initiative
requires that (i) revenues in excess of amounts permitted to be spent and which
would otherwise be returned by revision of tax rates or fee schedules, be
transferred and allocated (up to a maximum of 40%) to the State School Fund and
be expended solely for purposes of instructional improvement and accountability.
No such transfer or allocation of funds will be required if certain designated
state officials determine that annual student expenditures and class size meet
certain criteria as set forth in Proposition 98. Any funds allocated to the
State School Fund shall cause the appropriation limits to be annually increased
for any such allocation made in the prior year. Proposition 98 also requires the
State of California to provide a minimum level of funding for public schools and
community colleges. The initiative permits the enactment of legislation, by a
two-thirds vote, to suspend the minimum funding requirement for one year.
On November 3, 1992, voters approved an initiative statute, Proposition 163,
which exempts certain food products, including candy and other snack foods, from
California's sales tax. The sales tax had been broadened to include those items
as part of the 1991-92 budget legislation. The State Legislative Analyst
estimates a resultant revenue reduction of $200 million for the remainder of the
1992-93 fiscal year and $300-330 million per year thereafter.
The State is a party to numerous legal proceedings, many of which normally
occur in governmental operations and, if decided against the State, might
require the State to make significant future expenditures or impair future
revenue sources.
Since 1990, California has faced the worst economic, fiscal and budget
conditions since the 1930s. After experiencing strong growth throughout much of
the 1980s, the State was adversely affected by the national recession and
cutbacks in aerospace and defense spending, both of which had a severe impact on
the economy in Southern California. California is still experiencing some
effects of the recession. However, economic data indicate that the State's
economy grew at a modest rate in 1995, and continued growth is expected in 1996.
On August 3, 1995, the Governor signed into law a new $57.5 billion budget
which, among other things, reduces welfare payments and increases education
spending from the previous fiscal year. The fiscal 1995-96 budget calls for
$44.1 billion in revenues and $43.4 billion in spending, an increase of over
3.5% and 4.0%, respectively, from the fiscal 1994-95 budget. Although the
State's budget projects an operating surplus of approximately $600 million, it
continues to rely on federal actions, both to fund programs relating to MediCal
and incarceration costs associated with illegal immigrants and to relieve the
State from federally mandated spending, which are not certain of occurring.
Accordingly, the surplus may not be realized unless the economy outperforms
expectations or spending falls below planned levels.
Although an improving economy and healthier tax revenues are anticipated,
the political environment and voter initiatives may constrain the State's
financial flexibility. For example, according to the Legislative Analyst's
Office the passage of Proposition 187 in the November 1994 election, which in
part denies certain social services to illegal immigrants, could jeopardize $15
billion in federal funding. In addition, the passage of Proposition 184 in the
November 1994 election, which imposes mandatory, lengthy prison sentences on
individuals convicted of three felonies, is expected to increase prison
operating costs by $3 billion annually and increase prison construction costs by
$20 billion.
Because of the State of California's continuing budget problems, the State's
General Obligation bonds were downgraded in July 1994 from A1 to Aa by Moody's,
to A from A+ by Standard & Poor's, and from A to AA by Fitch Investors Service,
Inc. All three rating agencies expressed uncertainty in the State's ability to
balance its budget by 1996.
On December 6, 1994, Orange County (California) became the largest
municipality in the United States to file for protection under the Federal
bankruptcy laws. The filing stemmed from approximately
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$1.7 billion in losses suffered by the County's investment pool due to
investments in high risk "derivative" securities. In September 1995 the state
legislature approved legislation permitting Orange County to use for bankruptcy
recovery $820 million over 20 years in sales taxes previously earmarked for
highways, transit and development. Such legislation also permits the Governor to
appoint a trustee to take over Orange County's financial affairs if the County
does not have a full recovery plan filed with the Bankruptcy Court by May 1996.
Los Angeles County, the nation's largest county, is also experiencing
financial difficulty. In August 1995 the credit rating of the county's long-term
bonds was downgraded for the third time since 1992 as a result of, and among
other things, severe operating deficits for the county's health care system. In
September 1995, federal and state aid to Los Angeles County totalling $514
million was pledged, providing a short-term solution to the County's budget
problems. Despite such efforts, the County is facing a potential budget gap of
$1.0 billion in the 1996-97 fiscal year.
The effect of these various constitutional and statutory amendments and
budget developments upon the ability of California issuers to pay interest and
principal on their obligations remains unclear and in any event may depend upon
whether a particular California tax-exempt security is a general or limited
obligation bond and on the type of security provided for the bond. It is
possible that other measures affecting the taxing or spending authority of
California or its political subdivisions may be approved or enacted in the
future.
PURCHASE OF FUND SHARES
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As discussed in of the Prospectus, the Fund offers its shares for sale to
the public on a continuous basis, without a sales charge. Pursuant to a
Distribution Agreement between the Fund and Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager, and a wholly-owned
subsidiary of DWDC, shares of the Fund are distributed by the Distributor and
through certain selected broker-dealers who have entered into agreements with
the Distributor ("Selected Broker-Dealers") at an offering price equal to the
net asset value per share next determined following receipt of an effective
purchase order (accompanied by Federal Funds). Dealers in the securities markets
in which the Fund will invest usually require immediate payment in federal
funds. Since the payment by a Fund shareholder for his or her other shares
cannot be invested until it is converted into and available to the Fund in
federal funds, the Fund requires such payments to be so available before a share
purchase order can be considered effective. All checks submitted for payment are
accepted subject to collection at full face value in United States funds and
must be drawn in United States dollars in a United States bank.
The Board of Trustees of the Fund, including a majority of the Trustees who
are not and were not at the time of their vote "interested persons" (as defined
in the Act) of either party to the Distribution Agreement (the "Independent
Trustees"), approved, at its meeting held on October 30, 1992, the current
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 had an initial term ending April 30, 1994,
and provides that it will remain in effect from year to year thereafter if
approved by the Board. At its meeting held on April 20, 1995, the Fund's Board
of Trustees, including all of the Independent Trustees, approved the most recent
continuation of the Distribution Agreement until April 30, 1996.
SHAREHOLDER INVESTMENT ACCOUNT. Upon the purchase of shares of the Fund, a
Shareholder Investment Account is opened for the investor on the books of the
Fund, maintained by the Fund's Transfer Agent, Dean Witter Trust Company (the
"Transfer Agent"). This is an open account in which shares owned by the investor
are credited by the Transfer Agent in lieu of issuance of a share certificate.
If a share certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares and may be redeposited
in the account at any time. There is no charge to the investor for issuance of a
certificate. Whenever a shareholder instituted transaction takes place in the
Shareholder Investment Account, the shareholder will be mailed a written
confirmation of such transaction.
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DIRECT INVESTMENTS THROUGH TRANSFER AGENT. A shareholder may make
additional investments in Fund shares at any time through the Shareholder
Investment Account by sending a check payable to Dean Witter California Tax-Free
Daily Income Trust in any amount, not less than $100, directly to the Transfer
Agent. The shares so purchased will be credited to the Shareholder Investment
Account.
ACCOUNT STATEMENTS. All purchases of Fund shares will be credited to the
shareholder in a Shareholder Investment Account maintained for the shareholder
by the Transfer Agent in full and fractional shares of the Fund (rounded to the
nearest 1/100 of a share with the exception of purchases made through
reinvestment of dividends, which are rounded to the last 1/100 of a share). A
statement of the account will be mailed to the shareholder after each purchase
or redemption transaction effected through the Transfer Agent. A quarterly
statement of the account is sent to all shareholders. Share certificates will
not be issued unless requested in writing by the shareholder. No certificates
will be issued for fractional shares or to shareholders who have elected the
checking account or predesignated bank account methods of withdrawing cash from
their accounts.
The Fund reserves the right to reject any order for the purchase of its
shares. In addition, the offering of Fund shares may be suspended at any time
and resumed at any time thereafter.
EXCHANGE PRIVILEGE. As discussed in the Prospectus under the caption
"Exchange Privilege", an Exchange Privilege exists whereby investors who have
purchased shares of any of the Dean Witter Funds sold with either a front-end
sales charge ("FESC funds") or a contingent deferred sales charge ("CDSC funds")
will be permitted, after the shares of the fund acquired by purchase (not by
exchange or dividend reinvestment) have been held for thirty days, to redeem all
or part of their shares in that fund, have the proceeds invested in shares of
the Fund, Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter New York Municipal Money Market Trust, or Dean Witter U.S.
Government Money Market Trust (these five funds are hereinafter called "money
market funds") or, Dean Witter Limited Term Municipal Trust, Dean Witter
Short-Term Bond Fund. Dean Witter Short-Term U.S. Treasury Trust, Dean Witter
Balanced Income Fund, Dean Witter Balanced Growth Fund and Dean Witter
Intermediate Term U.S. Treasury Trust (these eleven funds, including the Fund,
are collectively referred to herein as the "Exchange Funds"). There is no
waiting period for shares acquired by exchange or dividend reinvestment.
Subsequently, shares of the Exchange Funds received in an exchange for shares of
an FESC fund (regardless of the type of fund originally purchased) may be
redeemed and exchanged for shares of the other Exchange Funds, FESC funds or
CDSC funds (however, shares of CDSC funds, including shares acquired in exchange
for (i) shares of FESC funds or (ii) shares of the Exchange Funds which were
acquired in exchange for shares of FESC funds, may not be exchanged for shares
of FESC funds). Additionally, shares of the Exchange Funds received in an
exchange for shares of a CDSC fund (regardless of the type of fund originally
purchased) may be redeemed and exchanged for shares of the Exchange Funds, or
CDSC funds. Ultimately, any applicable contingent deferred sales charge ("CDSC")
will have to be paid upon redemption of shares originally purchased from a CDSC
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.
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.)
When shares of any CDSC fund are exchanged for shares of the Fund or any
other Exchange Funds, 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 Funds (calculated from
the last day of the month in which the Exchange Funds shares were acquired), the
holding period or "year since purchase payment made" is frozen. When shares are
redeemed out of the
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Exchange Funds, 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 cases
of shares of a CDSC fund exchanged into an Exchange Fund, fund on or after April
23, 1990, upon 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 money market 12b-1 distribution fees incurred on or after that date which
are attributable to those shares. Shareholders acquiring shares of Exchange
Funds pursuant to this exchange privilege may exchange those shares back into a
CDSC fund from Exchange Funds, with no CDSC being imposed on such exchange. The
holding period previously frozen when shares were first exchanged for shares of
Exchange Funds resumes on the last day of the month in which shares of a CDSC
fund are reacquired. Thus, 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. Shares of a CDSC fund acquired in exchange for shares of an FESC
fund (or in exchange for shares of other Dean Witter Funds for which shares of
an FESC 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 Exchange Funds, 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 FESC funds, or for
shares of other Dean Witter Funds for which shares of FESC funds have been
exchanged (all such shares called "Free Shares"), will be exchanged first.
Shares of Dean Witter Strategist Fund acquired prior to November 8, 1989, Dean
Witter American Value Fund acquired prior to April 30, 1984, and shares of Dean
Witter Dividend Growth Securities Inc. and Dean Witter Natural Resource
Development Securities Inc. acquired prior to July 2, 1984, are also considered
Free Shares and will be the first Free Shares to be exchanged. After an
exchange, all dividends earned on shares in the money market fund will be
considered Free Shares. If the exchanged amount exceeds the value of such Free
Shares, an exchange is made, on a block-by-block basis, of non-Free Shares held
for the longest period of time (except that if shares held for identical periods
of time but subject to different CDSC schedules are held in the same Exchange
Privilege account, the shares of that block that are subject to a lower CDSC
rate will be exchanged prior to the shares of that block that are subject to a
higher CDSC rate). Shares equal to any appreciation in the value of non-Free
Shares exchanged will be treated as Free Shares, and the amount of the purchase
payments for the non-Free Shares of the fund exchanged into will be equal to the
lesser of (a) the purchase payments for, or (b) the current net asset value of,
the exchanged non-Free Shares. If an exchange between funds would result in
exchange of only part of a particular block of non-Free Shares, then shares
equal to any appreciation in the value of the block (up to the amount of the
exchange) will be treated as Free Shares and exchanged first, and the purchase
payment for that block will be allocated on a pro rata basis between the
non-Free Shares of that block to be retained and the non-Free Shares to be
exchanged. The prorated amount of such purchase payment attributable to the
retained non-Free Shares will remain as the purchase payment for such shares,
and the amount of purchase payment for the exchanged non-Free Shares will be
equal to the lesser of (a) the prorated amount of the purchase payment for, or
(b) the current net asset value of, those exchanged non-Free Shares. Based upon
the exchange procedures described in the CDSC fund Prospectus under the caption
"Contingent Deferred Sales Charge", any applicable CDSC will be imposed upon the
ultimate redemption of shares of any fund, regardless of the number of exchanges
since those shares were originally purchased.
With respect to the 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
repur-
23
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chases, 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,
Distributor or any Selected Broker-Dealer.
Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of various
TCW/DW Funds, a group of funds distributed by the Distributor for which TCW
Funds Management, Inc. serves as Adviser, under the terms and conditions
described in the Prospectus and Statement of Additional Information of each
TCW/DW Fund.
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 the 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.
Shares of the Fund acquired pursuant to the Exchange Privilege will be held
by the Fund's transfer agent in an Exchange Privilege Account distinct from any
account of the same shareholder who may have acquired shares of the Fund
directly. A shareholder of the Fund will not be permitted to make additional
investments in such Exchange Privilege Account, except through the exchange of
additional shares of the fund in which the shareholder had initially invested,
and the proceeds of any shares redeemed from such Account may not thereafter be
placed back into that Account. If such a shareholder desires to make any
additional investments in the Fund, a separate account will be maintained for
receipt of such investments. The Fund will have additional costs for account
maintenance if a shareholder has more than one account with the Fund.
The Fund also maintains Exchange Privilege Accounts for shareholders who
acquired their shares of the Fund pursuant to exchange privileges offered by
other investment companies with which the Investment Manager is not affiliated.
The Fund also expects to make available such exchange privilege accounts to
other investment companies that may hereafter be managed by the Investment
Manager.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $10,000 for
Dean Witter Short-Term U.S. Treasury Trust and $5,000 for the Fund, Dean Witter
Liquid Asset Fund Inc., Dean Witter 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 for all other Dean Witter Funds for which the Exchange Privilege is
available is $1,000.) Upon exchange into a money market fund, the shares of that
fund will be held in a special Exchange Privilege Account separately from
accounts of those shareholders who have acquired their shares directly from that
fund. As a result, certain services normally available to shareholders of money
market funds, including the check writing feature, will not be available for
funds held in that account.
The Fund 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, 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 the Exchange Funds, TCW/DW North American Government Income
Trust, TCW/DW Income and Growth Fund and TCW/DW Balanced Fund pursuant to this
Exchange Privilege, and provided further that the Exchange Privilege may be
terminated or materially revised 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
24
<PAGE>
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(s), policies and restrictions.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss. However, the ability to deduct capital losses on
an exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made. For further
information regarding the Exchange Privilege, shareholders should contact their
DWR or other Selected Broker-Dealer account executive or the Transfer Agent.
PLAN OF DISTRIBUTION
In accordance with a Plan of Distribution pursuant to Rule 12b-1 under the
Act between the Fund and the Distributor, the Distributor provides certain
services and finances certain activities in connection with the distribution of
Fund shares. (The "Plan" refers to the Plan and Agreement of Distribution prior
to the reorganization and to the Plan of Distribution after the reorganization.)
A Plan was approved by the Board of Trustees on June 20, 1988 and by DWR, as the
Fund's then sole shareholder, on June 22, 1988, whereupon the Plan went into
effect. The vote of the Trustees, which was cast in person at a meeting called
for the purpose of voting on such Plan, included a majority of the Trustees who
are not and were not at the time of their voting interested persons of the Fund
(as defined in the Act) and who have and had at the time of their votes no
direct or indirect financial interest in the operation of the Plan (the
"Independent Trustees").
The Plan remained in effect until April 30, 1989, and will continue in
effect from year to year thereafter, provided such continuance is approved
annually by a vote of the Trustees, including a majority of the Independent
Trustees. An amendment to increase materially the maximum amount authorized to
be spent under the Plan must be approved by the shareholders of the Fund, and
all material amendments to the Plan must be approved by the Trustees in the
manner described above. The Plan may be terminated at any time, without payment
of any penalty, by vote of the holders of a majority of the Independent 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 30 days written notice to any other party
to the Plan. So long as the Plan is in effect, the selection or nomination of
the Independent 12b-1 Directors is committed to the discretion of the
Independent 12b-1 Directors.
Pursuant to the Plan, the Trustees were provided at their meeting held on
April 20, 1995, with all the information the Trustees deemed necessary to make
an informed determination on whether the Plan should be continued. In making
their determination to continue the Plan until April 30, 1996, the Trustees,
including all of the Independent 12b-1 Trustees, unanimously arrived at the
conclusion that the Plan had benefitted the Fund and also unanimously concluded
that, in their judgment, there is a reasonable likelihood that the Plan will
continue to benefit the Fund and its shareholders.
The Plan provides that the Distributor bears the expense of all promotional
and distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor under the Plan and
Agreement: (1) compensation to and expenses of DWR's and other Selected
Broker-Dealer account executives and other employees, including overhead and
telephone expenses; (2) sales incentives and bonuses to sales representatives
and to marketing personnel in connection with promoting sales of the Fund's
shares; (3) expenses incurred in connection with promoting sales of the Fund's
shares; (4) preparing and distributing sales literature; and (5) providing
advertising and promotional activities, including direct mail solicitation and
television, radio, newspaper, magazine and other media advertisements.
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
25
<PAGE>
designed to reflect the fact that upon the reorganization described above, the
share distribution activities, theretofore performed by the Fund or for the Fund
by DWR were assumed by the Distributor and DWR's sales activities are now being
performed pursuant to the terms of a selected dealer agreement between the
Distributor and DWR. The amendments provide that payments under the Plan will be
made to the Distributor rather than to the Investment Manager as before the
amendment, and that the Distributor in turn is authorized to make payments to
DWR, its affiliates or other Selected Broker-Dealers (or direct that the Fund
pay such entities directly). The Distributor is also authorized to retain part
of such fee as compensation for its own distribution-related expenses.
DWR account executives are paid an annual residual commission, currently a
gross residual of up to 0.10% of 1% of the current value of the respective
accounts for which they are the account executives of record. The "gross
residual" is a charge which reflects residual commissions paid by DWR to its
account executives and DWR's expenses associated with the servicing of
shareholder's accounts, including the expenses of operating DWR's branch offices
in connection with the servicing of shareholders accounts, which expenses
include lease costs, the salaries and employee benefits of operations and sales
support personnel, utility costs, communications costs and the costs of
stationery and supplies and other expenses relating to branch office serving of
shareholder accounts.
The Fund is authorized to reimburse the Distributor for specific expenses
the Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. Reimbursement is made through monthly payments in amounts
determined in advance of each fiscal quarter by the Trustees, including a
majority of the Independent Trustees. The amount of each monthly payment may in
no event exceed an amount equal to a payment at the annual rate of 0.15 of 1% of
the Fund's average daily net assets during the month. No interest or other
financing charges will be incurred for which reimbursement payments under the
Plan will be made. In addition, no interest charges, if any, incurred on any
distribution expense incurred pursuant to the Plan, will be reimbursable under
the Plan. In making quarterly determinations of the amounts that may be expended
by the Fund, the Distributor provides and the Trustees review a quarterly budget
of projected incremental distribution expenses to be incurred on behalf of the
Fund, together with a report explaining the purposes and anticipated benefits of
incurring such expenses. The Trustees determine which particular expenses, and
the portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's shares.
The Fund reimbursed $227,070 to the Distributor, pursuant to the then
current Plan, for the fiscal year ended December 31, 1995. This is 0.10 of 1% of
the Fund's average daily net assets for its fiscal year ended December 31, 1995.
Based upon the total amounts spent by the Distributor during the period, it is
estimated that the amount paid by the Fund for distribution was spent in
approximately the following ways: (i) advertising--$-0-; (ii) printing and
mailing prospectuses to other than current shareholders--$-0-; (iii)
compensation to underwriters--$-0-; (iv) compensation to dealers--$-0-; (v)
compensation to sales personnel--$-0-; and (vi) other, which includes payments
to the Distributor for expenses substantially all of which relate to
compensation of sales personnel and associated overhead expenses--$227,070.
Under the Plan, the Distributor uses its best efforts in rendering services
to the Fund, but in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations, the Distributor is not
liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each calendar
quarter, a written report regarding the incremental distribution expenses
incurred by the Distributor on behalf of the Fund during such calendar quarter,
which report includes (1) an itemization of the types of expenses and the
purposes therefore; (2) the amounts of such expenses; and (3) a description of
the benefits derived by the Fund. In the Trustees' quarterly review of the Plan
they consider its continued appropriateness and the level of compensation
provided therein.
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<PAGE>
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 DWR,
the Distributor or the Investment Manager, or certain of their employees, may be
deemed to have such an interest as a result of benefits derived from the
successful operation of the Plan, or as a result of receiving a portion of the
amounts expended thereunder by the Fund.
DETERMINATION OF NET ASSET VALUE
As discussed in the Prospectus, the net asset value of the Fund is
determined as of the close of trading on each day that the New York Stock
Exchange is open. The New York Stock Exchange currently observes the following
holidays: New Year's Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.
The Fund utilizes the amortized cost method in valuing its portfolio
securities for purposes of determining the net asset value of shares of the
Fund. The Fund utilizes the amortized cost method in valuing its portfolio
securities even though the portfolio securities may increase or decrease in
market value, generally, in connection with changes in interest rates. The
amortized cost method of valuation involves valuing a security at its cost at
the time of purchase adjusted by a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the instrument. During such periods, the yield to investors in the Fund may
differ somewhat from that obtained in a similar company which uses mark to
market values for all its portfolio securities. For example, if the use of
amortized cost resulted in a lower (higher) aggregate portfolio value on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher (lower) yield than would result from investment in such a
similar company and existing investors would receive less (more) investment
income. The purpose of this method of calculation is to facilitate the
maintenance of a constant net asset value per share of $1.00.
The Fund's use of the amortized cost method to value its portfolio
securities and the maintenance of the per share net asset value of $1.00 is
permitted pursuant to Rule 2a-7 of the Act (the "Rule"), and is conditioned on
its compliance with various conditions contained in the Rule including: (a) the
Fund's Trustees are obligated, as a particular responsibility within the overall
duty of care owed to the Fund's shareholders, to establish procedures reasonably
designed, taking into account current market conditions and the Fund's
investment objectives, to stabilize the net asset value per share as computed
for the purpose of distribution and redemption at $1.00 per share; (b)(i) the
procedures include calculation, at such intervals as are reasonable in light of
current market conditions, of the deviation, if any between net asset value per
share using amortized cost to value portfolio securities and net asset value per
share based upon available market quotations with respect to such portfolio
securities (for the purpose of determining market value, securities as to which
the Fund has a "put" will be valued at the higher of market value or exercise
price); (ii) periodic review by the Trustees of the amount of deviation as well
as methods used to calculate it; and (iii) maintenance of written records of the
procedures, the Trustees' considerations made pursuant to them and any actions
taken upon such consideration; (c) the Trustees will consider what steps should
be taken, if any, in the event of a difference of more than 1/2 of 1% between
the two methods of valuation; and (d) the Trustees should take such action as
they deem appropriate to eliminate or reduce, to the extent reasonably
practicable, material dilution or other unfair results to investors or existing
shareholders. Such action may include: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten the average portfolio
maturity of the Fund; withholding dividends; utilizing a net asset value per
share as determined by using available market quotations or reducing the number
of its outstanding shares. Any reduction of outstanding shares will be effected
by having each shareholder proportionately contribute to the Fund's capital a
number of shares which represent the difference between the amortized cost
valuation and market valuation of the portfolio. Each shareholder will be deemed
to have agreed to such contribution by his or her investment in the Fund.
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<PAGE>
The Rule further requires that the Fund limit its investments to U.S.
dollar-denominated instruments which the Board of Trustees determines present
minimal credit risks and which are Eligible Securities (as defined below). The
Rule also requires the Fund to maintain a dollar-weighted average portfolio
maturity (not more than 90 days) appropriate to its objective of maintaining a
stable net asset value of $1.00 per share and precludes the purchase of any
instrument with a remaining maturity of more than 397 days. Should the
disposition of a portfolio security result in a dollar weighted average
portfolio maturity of more than 90 days, the Fund would be required to invest
its available cash in such a manner as to reduce such maturity to 90 days or
less as soon as is reasonably practicable.
The Rule further requires that the Fund limit its investments to U.S.
dollar-denominated instruments which the Trustees determine present minimal
credit risks and which are Eligible Securities (as defined below). The Rule also
requires the Fund to maintain a dollar-weighted average portfolio maturity (not
more than 90 days) appropriate to its objective of maintaining a stable net
asset value of $1.00 per share and precludes the purchase of any instrument with
a remaining maturity of more than 397 days. Should the disposition of a
portfolio security result in a dollar-weighted average portfolio maturity of
more than 90 days, the Fund will invest its available cash in such a manner as
to reduce such maturity to 90 days or less as soon as is reasonably practicable.
At the time the Fund makes the commitment to purchase a Municipal Obligation
on a when-issued or delayed delivery basis, it will record the transaction and
thereafter reflect the value, each day, of the Municipal Obligation in
determining its net asset value. Repurchase agreements are valued at the face
value of the repurchase agreement plus any accrued interest thereon to date.
Generally, for purposes of the procedures adopted under the Rule, the
maturity of a portfolio instrument is deemed to be the period remaining
(calculated from the trade date or such other date on which the Fund's interest
in the instrument is subject to market action) until the date noted on the face
of the instrument as the date on which the principal amount must be paid, or in
the case of an instrument called for redemption, the date on which the
redemption payment must be made.
A variable rate obligation that is subject to a demand feature is deemed to
have a maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand. A floating rate instrument that is
subject to a demand feature is deemed to have a maturity equal to the period
remaining until the principal amount can be recovered through demand.
An Eligible Security is defined in the Rule to mean a security which: (a)
has a remaining maturity of thirteen months or less; (b)(i) is rated in the two
highest short-term rating categories by any two NRSROs that have issued a
short-term rating with respect to the security or class of debt obligations of
the issuer, or (ii) if only one NRSRO has issued a short-term rating with
respect to the security, then by that NRSRO; (c) was a long-term security at the
time of issuance whose issuer has outstanding a short-term debt obligation which
is comparable in priority and security and has a rating as specified in clause
(b) above; or (d) if no rating is assigned by any NRSRO as provided in clauses
(b) and (c) above, the unrated security is determined by the Board to be of
comparable quality to any such rated security.
As permitted by the Rule, the Board has delegated to the Fund's Investment
Manager, subject to the Board's oversight pursuant to guidelines and procedures
adopted by the Board, the authority to determine which securities present
minimal credit risks and which unrated securities are comparable in quality to
rated securities.
Also, as required by the Rule, the Fund will limit its investments in
securities, other than Government securities, so that, at the time of purchase:
(a) except as further limited in (b) below with regard to certain securities, no
more than 5% (10% if a guarantee) of its total assets will be invested in the
securities of any one issuer; and (b) with respect to Eligible Securities that
have received a rating in less than the highest category by any one of the
NRSROs whose ratings are used to qualify the security as an Eligible
28
<PAGE>
Security, or determined to be of comparable quality: (i) no more than 5% will be
invested in the aggregate of the Fund's total assets in all such securities, and
(ii) no more than the greater of 1% of total assets, or $1 million, will be
invested in the securities of any one issuer.
If the Board determines that it is no longer in the best interests of the
Fund and its shareholders to maintain a stable price of $1 per share or if the
Board believes that maintaining such price no longer reflects a market-based net
asset value per share, the Board has the right to change from an amortized cost
basis of valuation to valuation based on market quotations. The Fund will notify
shareholders of any such changes.
The Fund will manage its portfolio in an effort to maintain a constant $1.00
per share price, but it cannot assure that the value of its shares will never
deviate from this price. Since dividends from net investment income are declared
and reinvested on a daily basis, the net asset value per share, under ordinary
circumstances, is likely to remain constant. Realized and unrealized gains and
losses will not be distributed on a daily basis but will be reflected in the
Fund's net asset value. The amounts of such gains and losses will be considered
by the Board of Trustees in determining the action to be taken to maintain the
Fund's $1.00 per share net asset value. Such action may include distribution at
any time of part or all of the then accumulated undistributed net realized
capital gains, or reduction or elimination of daily dividends by an amount equal
to part or all of the then accumulated net realized capital losses. However, if
realized losses should exceed the sum of net investment income plus realized
gains on any day, the net asset value per share on that day might decline below
$1.00 per share. In such circumstances, the Fund may reduce or eliminate the
payment of daily dividends for a period of time in an effort to restore the
Fund's $1.00 per share net asset value. A decline in prices of securities could
result in significant unrealized depreciation on a mark-to-market basis. Under
these circumstances the Fund may reduce or eliminate the payment of dividends
and utilize a net asset value per share as determined by using available market
quotations.
REDEMPTION OF FUND SHARES
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As discussed in the Prospectus, shares of the Fund may be redeemed at net
asset value at any time. When a redemption is made by check and a check is
presented to the Transfer Agent for payment, the Transfer Agent will redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. This enables the shareholder to continue earning
daily income dividends until the check has cleared.
A check drawn by a shareholder against his or her account in the Fund
constitutes a request for redemption of a number of shares sufficient to provide
proceeds equal to the amount of the check. Payment of the proceeds of a check
will normally be made on the next business day after receipt by the Transfer
Agent of the check in proper form. Subject to the foregoing, if a check is
presented for payment to the Transfer Agent by a shareholder or payee in person,
the Transfer Agent will make payment by means of a check drawn on the Fund's
account or, in the case of a shareholder payee, to the shareholder's
predesignated bank account, but will not make payment in cash.
The Fund reserves the right to suspend redemptions or postpone the date of
payment (1) for any periods during which the New York Stock Exchange is closed
(other than for customary weekend and holiday closings), (2) when trading on
that Exchange is restricted or an emergency exists, as determined by the
Securities and Exchange Commission, so that disposal of the Fund's investments
or determination of the Fund's net asset value is not reasonably practicable, or
(3) for such other periods as the Commission by order may permit for the
protection of the Fund's investors.
As discussed in the Prospectus, due to the relatively high cost of handling
small investments, the Fund reserves the right to redeem, at 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 shareholders have a value
of less than $1,000 or such lesser amounts as may be fixed by the Board of
Trustees. However, before the Fund redeems
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such shares and sends the proceeds to the shareholder, it will notify the
shareholder that the value of his or her shares is less than $1,000 and allow
him or her sixty days to make an additional investment in an amount which will
increase the value of his or her account to $1,000 or more before the redemption
is processed.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan is available for shareholders who own or purchase shares of the
Fund having a minimum value of at least $5,000, which provides for monthly or
quarterly checks in any dollar amount not less than $25 or in any whole
percentage of the account balance, on an annualized basis. The Transfer Agent
acts as agent for the shareholder in tendering to the Fund for redemption
sufficient full and fractional shares to provide the amount of the periodic
withdrawal payment designated in the application. The shares will be redeemed at
their net asset value determined, at the shareholder's option, on the tenth or
twenty-fifth day (or next business day) of the relevant month or quarter and
normally a check for the proceeds will be mailed by the Transfer Agent within
five days after the date of redemption. The withdrawal plan may be terminated at
any time by the Fund.
Any shareholder who wishes to have payments under the withdrawal plan made
to a third party, or sent to an address other than the one listed on the
account, must send complete written instructions to the Transfer Agent to enroll
in the withdrawal plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her Account Executive or by written notification to the Transfer Agent.
In addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature guarantees
required in the manner described above. The shareholder may also terminate the
withdrawal plan at any time by written notice to the Transfer Agent. In the
event of such termination, the account will be continued as a regular
shareholder investment account. The shareholder may also redeem all or part of
the shares held in the withdrawal plan account (see "Redemption of Fund Shares"
in the Prospectus) at any time. If the number of shares redeemed is greater than
the number of shares paid as dividends, such redemptions may, of course,
eventually result in liquidation of all the shares in the account. The automatic
cash withdrawal method of redemption is not available for shares held in an
Exchange Privilege Account.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund intends to declare dividends on
each day the New York Stock Exchange is open for business and distribute all of
its daily net investment income to shareholders of record as of the close of
business the preceding business day.
In computing net investment income, the Fund will amortize any premiums and
original issue discounts on securities owned, if applicable. Capital gains or
losses realized upon sale or maturity of such securities will be based on their
amortized cost.
The Fund has qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). If so qualified, the Fund will not be subject to federal
income tax on its net investment income and capital gains, if any, realized
during any fiscal year in which it distributes such income and capital gains to
its shareholders.
As discussed in the Prospectus, the Fund intends to qualify to pay
"exempt-interest dividends" to its shareholders by maintaining, as of the close
of each quarter of its taxable years, at least 50% of the value of its total
assets in tax-exempt securities. An exempt-interest dividend is that part of a
dividend distribution made by the Fund which consists of interest received by
the Fund on tax-exempt securities upon which the shareholder incurs no federal
income taxes. Exempt-interest dividends are included, however, in determining
what portion, if any, of a person's Social Security benefits are subject to
federal income tax.
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The Trustees may revise the dividend policy, or postpone the payment of
dividends, if the Fund should have or anticipate any large unexpected expense,
loss or fluctuation in net assets which, in the opinion of the Trustees, might
have a significant adverse effect on shareholders. On occasion, in order to
maintain a constant $1.00 per share net asset value, the Trustees may direct
that the number of outstanding shares be reduced in each shareholder's account.
Such reduction may result in taxable income, if any, to a shareholder in excess
of the net increase (i.e., dividends, less such reductions), if any, in the
shareholder's account for a period. Furthermore, such reduction may be realized
as a capital loss when the shares are liquidated.
Alternative minimum taxable income is generally equal to taxable income with
certain adjustments and increased by certain "tax preference items" which may
include a portion of the Fund's dividends as described above. In addition, the
Code further provides that for taxable years beginning in 1990 and thereafter,
corporations are subject to an alternative minimum tax based, in part, on 75% of
any excess of "adjusted current earnings" over taxable income as adjusted for
other tax preferences. Because an exempt-interest dividend paid by the Fund will
be included in adjusted current earnings, a corporate shareholder may therefore
be required to pay an increased alternative minimum tax as the result of
receiving exempt-interest dividends paid by the Fund.
In determining amounts to be distributed, capital gains will be offset by
any capital loss carryovers incurred in prior years. To the extent that these
carryover losses are used to offset future capital gains, it is probable that
the gains so offset will not be distributed to shareholders since any such
distributions may be taxable to shareholders as ordinary income.
The Code provides that every person required to file a tax return must
include on such return the amount of exempt-interest dividends received from the
Fund during the taxable year.
The Superfund Amendments and Reauthorization Act of 1986 (the "Superfund
Act") imposes a deductible tax on a corporation's alternative minimum taxable
income (computed without regard to the alternative tax net operating loss
deduction) at a rate of $12 per $10,000 (0.12%) of alternative minimum taxable
income in excess of $2,000,000. The tax will be imposed for taxable years
beginning after December 31, 1986 and before January 1, 1996. The tax will be
imposed even if the corporation is not required to pay an alternative minimum
tax because the corporation's regular income tax liability exceeds its minimum
tax liability. Exempt-interest dividends paid by the Fund that create
alternative minimum tax preferences for corporate shareholders under the Code
(as described above) may be subject to the tax.
After the end of the calendar year, the Fund will mail to shareholders a
statement indicating the percentage of the dividend distributions for such
calendar year which constitutes exempt-interest dividends and the percentage, if
any, that is taxable, and to what extent the taxable portion is short-term
capital gains or ordinary income. This percentage should be applied uniformly to
all monthly distributions made during the fiscal year to determine what
proportion of the dividends paid is tax-exempt. The percentage may differ from
the percentage of tax-exempt dividend distributions for any particular month.
Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of net
short-term capital gains. Such interest and realized net short-term capital
gains dividends and distributions are taxable to the shareholder as ordinary
dividend income regardless of whether the shareholder receives such
distributions in additional shares or in cash. Distributions of long-term
capital gains, if any, are taxable as long-term capital gains, regardless of how
long the shareholder has held the Fund shares and regardless of whether the
distribution is received in additional shares or cash. Since the Fund's income
is expected to be derived entirely from interest rather than dividends, it is
anticipated that none of such dividend distributions will be eligible for the
federal dividends received deduction available to corporations.
Any loss on the sale or exchange of shares of the Fund which are held for 6
months or less is disallowed to the extent of the amount of any exempt-interest
dividend paid with respect to such shares. Treasury Regulations may provide for
a reduction in such required holding periods.
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<PAGE>
The Code requires each regulated investment company to pay a nondeductible
4% excise tax to the extent the company does not distribute, during each
calendar year, 98% of its ordinary income, determined on a calendar year basis,
and 98% of its capital gains, determined in general on an October 31 year end,
plus certain undistributed amounts from previous years. The required
distributions, however, are based only on the taxable income of a regulated
investment company. The excise tax, therefore, will generally not apply to the
tax-exempt income of a regulated investment company such as the Fund that pays
exempt-interest dividends. The Fund anticipates that it will make sufficient
timely distributions to avoid imposition of the excise tax.
Interest on indebtedness incurred or continued by a shareholder to purchase
or carry shares of the Fund is not deductible. Furthermore, entities or persons
who are "substantial users" (or related persons) of facilities financed by
industrial development bonds should consult their tax advisers before purchasing
shares of the Fund. "Substantial user" is defined generally by Income Tax
Regulation 1.103-11(b) as including a "non-exempt person" who regularly uses in
trade or business a part of a facility financed from the proceeds of industrial
development bonds.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund could be affected. In that event, the Fund
would re-evaluate its investment objective and policies.
To the extent that dividends are derived from interest on California
tax-exempt securities and on certain U.S. government securities, such dividends
will also be exempt from California personal income taxes. Under California law,
a fund which qualifies as a regulated investment company must have at least 50%
of its total assets invested in California state and local issues or in U.S.
obligations which pay interest excludable from income or in a combination of
such obligations at the end of each quarter of its taxable year in order to be
eligible to pay dividends to California residents which will be exempt from
California personal income taxes. Unlike federal law, California law provides
that no portion of the exempt-interest dividends will constitute an item of tax
preference for California personal income alternative minimum tax purposes.
For California personal income tax purposes, the shareholders of the Fund
will not be subject to tax, or receive a credit for taxes paid by the Fund, on
undistributed capital gains, if any. Under the California Revenue and Taxation
Code, interest on indebtedness incurred or continued to purchase or carry shares
of an investment company paying exempt-interest dividends, such as the Fund,
will not be deductible by the investor for state personal income tax purposes.
The foregoing relates to federal income taxation and to California personal
income taxation as in effect as of the date of the Prospectus. Distributions
from interest income and capital gains, including exempt-interest dividends, may
be subject to California franchise taxes if received by a corporation doing
business in California, to state taxes in states other than California and to
local taxes.
Any dividends or capital gains distributions received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's shares in that fund by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions are, and
some portion of the dividends may be, subject to income tax. If the net asset
value of the shares should be reduced below a shareholder's cost as a result of
the payment of dividends, such payment or distribution would be in part a return
of the shareholder's investment to the extent of such reduction below the
shareholder's cost but nonetheless would be fully taxable at ordinary rates.
Therefore, an investor should consider the tax implications of purchasing Fund
shares immediately prior to a distribution record date.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
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INFORMATION ON COMPUTATION OF YIELD
The Fund's current yield for the seven days ending December 31, 1995 was
3.55%. The effective annual yield on December 31, 1995 was 3.61%, assuming daily
compounding.
The Fund's annualized current yield, as may be quoted from time to time in
advertisements and other communications to shareholders and potential investors,
is computed by determining, for a stated seven-day period, the net change,
exclusive of capital changes and including the value of additional shares
purchased with dividends and any dividends declared therefrom (which reflect
deductions of all expenses of the Fund such as management fees), in the value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
multiplying the base period to obtain the base period return by (365/7).
The Fund's annualized effective yield, as may be quoted from time to time in
advertisements and other communications to shareholders and potential investors,
is computed by determining (for the same stated seven-day period as for the
current yield), the net change, exclusive of capital changes and including the
value of additional shares purchased with dividends and any dividends declared
therefrom (which reflect deductions of all expenses of the Fund such as
management fees), in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, and dividing the difference
by the value of the account at the beginning of the base period to obtain the
base period return, and then compounding the base period return by adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result.
The yields quoted in any advertisement or other communication should not be
considered a representation of the yields of the Fund in the future since the
yield is not fixed. Actual yields will depend not only on the type, quality and
maturities of the investments held by the Fund and changes in interest rates on
such investments, but also on changes in the Fund's expenses during the period.
Yield information may be useful in reviewing the performance of the Fund and
for providing a basis for comparison with other investment alternatives.
However, unlike bank deposits or other investments which typically pay a fixed
yield for a stated period of time, the Fund's yield fluctuates.
Based upon a combined Federal and California personal income tax bracket of
46.24%, the Fund's tax-equivalent yield for the seven days ending December 31,
1995 was 6.60%.
Tax-equivalent yield is computed by dividing that portion of the current
yield (calculated as described above) which is tax-exempt by 1 minus a stated
tax rate and adding the quotient to that portion, if any, of the yield of the
Fund that is not tax-exempt.
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 the sum of all
distributions on 10,000, 50,000 or 100,000 shares of the Fund since inception to
$10,000, $50,000 and $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 $12,946,
$64,730 and $129,460, respectively, at December 31, 1995.
DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
held. All of the Trustees, except for Messrs. Bozic, Purcell and Schroeder, have
been elected by the shareholders of the Fund, most recently at a Special Meeting
of Shareholders held on January 12, 1993. Messrs. Bozic, Purcell and Schroeder
were elected by the other Trustees of the Fund on April 8, 1994. The Trustees
themselves have the power to alter the number and the terms of office of the
Trustees, and they may at any time lengthen their own terms or make their terms
of unlimited duration and appoint their own successors, provided that always at
least a majority of the Trustees has been elected by the shareholders of the
Fund. Under certain circumstances the Trustees may be removed by action of the
Trustees. The shareholders also have the right under certain circumstances to
remove the Trustees. The voting rights of
sharehold-
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ers are not cumulative, so that holders of more than fifty percent of the shares
voting can, if they choose, elect all Trustees being selected, while the holders
of the remaining shares would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances). However, the Trustees have not authorized
any such additional series or classes of shares.
The Declaration of Trust further provides that no Trustee, officer, employee
or agent of the Fund is liable to the Fund or to a shareholder, nor is any
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Fund, except as such liability may arise from his/her or
its own bad faith, willful misfeasance, gross negligence, or reckless disregard
of his duties. It also provides that all third persons shall look solely to the
Fund property for satisfaction of claims arising in connection with the affairs
of the Fund. With the exceptions stated, the Declaration of Trust provides that
a Trustee, officer, employee or agent is entitled to be indemnified against
liability 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.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. The Custodian has no part in deciding the Fund's
investment policies or which securities are to be purchased or sold for the
Fund's portfolios. 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, including
providing subaccounting and record keeping services for certain retirement
accounts; disbursing cash dividends and reinvesting dividends; processing
account registration changes; handling purchase and redemption transactions;
mailing prospectuses and reports; mailing and tabulating proxies; processing
share certificate transactions; and maintaining shareholder records and lists.
For these services Dean Witter Trust Company receives a per shareholder account
fee from the Fund.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.
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<PAGE>
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 the Prospectus and
incorporated by reference in this Statement of Additional Information have been
so included and incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Fund for the fiscal year ended
December 31, 1995, and the report of the independent accountants thereon, are
set forth in the Fund's Prospectus, and are incorporated herein by reference.
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APPENDIX
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RATINGS OF INVESTMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
MUNICIPAL 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 Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times in the future. Uncertainty
of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
CONDITIONAL RATING: Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
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<PAGE>
RATING REFINEMENTS: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and a modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
MUNICIPAL NOTE RATINGS
Moody's ratings for state and municipal note and other short-term loans are
designated Moody's Investment Grade (MIG). MIG 1 denotes best quality and means
there is present strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing. MIG 2 denotes high quality and means that margins of protection are
ample although not as large as in MIG 1. MIG 3 denotes favorable quality and
means that all security elements are accounted for but that the undeniable
strength of the previous grades, MIG 1 and MIG 2, is lacking. MIG 4 denotes
adequate quality and means that the protection commonly regarded as required of
an investment security is present and that while the notes are not distinctly or
predominantly speculative, there is specific risk.
VARIABLE RATE DEMAND OBLIGATIONS
A short-term rating, in addition to the Bond or MIG ratings, designated VMIG
may also be assigned to an issue having a demand feature. The assignment of the
VMIG symbol reflects such characteristics as payment upon periodic demand rather
than fixed maturity dates and payment relying on external liquidity. The VMIG
rating criteria are identical to the MIG Criteria discussed above.
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. These ratings apply to Municipal Commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations, all
judged to be investment grade, to indicate the relative repayment capacity of
rated issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
MUNICIPAL BOND RATINGS
A Standard & Poor's municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
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<PAGE>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt in
higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which would
lead to inadequate capacity or willingness to pay interest and repay
principal.
B Debt rated "B" has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC Debt rated "CCC" has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayments of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
CC The rating "CC" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC" rating.
C The rating "C" is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating.
CI The rating "CI" is reserved for income bonds on which no interest is being
paid.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of
speculation and "C" the highest degree of speculation. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing with the
major ratings categories.
The foregoing ratings are sometimes followed by a "p" which indicates that
the rating is provisional. A provisional rating assumes the successful
completion of the project being financed by the bonds being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This
rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood or risk of default upon
failure of such completion.
38
<PAGE>
MUNICIPAL NOTE RATINGS
Commencing on July 27, 1984, Standard & Poor's instituted a new rating
category with respect to certain municipal note issues with a maturity of less
than three years. The new note ratings denote the following:
SP-1 denotes a very strong or strong capacity to pay principal and interest.
Issues determined to possess overwhelming safety characteristics are given
a plus (+) designation (SP-1+).
SP-2 denotes a satisfactory capacity to pay principal and interest.
SP-3 denotes a speculative capacity to pay principal and interest.
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by S&P from other sources it considers reliable. The ratings
may be changed, suspended or withdrawn as a result of changes in or
unavailability of such information. Ratings are graded into group categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Ratings are applicable to both taxable and tax-exempt commercial paper. The
categories are as follows:
Issuers 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.
39
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME 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 for the period July 22, 1988
through December 31, 1988 and for the years ended
December 31, 1989, 1990, 1991, 1992, 1993, 1994
and 1995 ......................................... 4
Statement of assets and liabilities at
December 31, 1995................................... 20
Statement of operations for the year ended
December 31, 1995................................... 21
Statement of changes in net assets for the
years ended December 31, 1994 and 1995.............. 22
Notes to Financial Statements........................ 23
Portfolio of Investments at December 31, 1995....... 26
(2) Financial statements included in the Statement of
Additional Information (Part B):
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
1. (a) -- Declaration of Trust of the Registrant*
(b) -- Amendment to the Declaration of Trust
dated February 19, 1993*
8. -- Custodian Agreement between Registrant and
The Bank of New York*
9. -- Services Agreement between Dean Witter InterCapital
Inc. and Dean Witter Services Company Inc.
11. -- Consent of Independent Accountants
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
<PAGE>
- --------------------
*Previously filed; re-filed via EDGAR with this Amendment
to the Registration Statement. All other exhibits previously filed and
incorporated by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at January 31, 1996
-------------- ------------------------
Shares of Beneficial Interest 10,091
Item 27. INDEMNIFICATION.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for 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
2
<PAGE>
or paid by a trustee, officer, or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment adviser. The following information is given regarding
officers of Dean Witter InterCapital Inc. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. The principal address of the Dean
Witter Funds is Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
3
<PAGE>
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
OPEN-END INVESTMENT COMPANIES:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(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
4
<PAGE>
(40) Active Assets Tax-Free Trust
(41) Dean Witter Limited Term Municipal Trust
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
5
<PAGE>
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee, President
and Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co. ("DWDC"); Director and/or officer
of various DWDC subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds; Member (since
January, 1993) and Chairman (since January,
1995) of the Board of Directors of NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
David A. Hughey Executive Vice President and Chief Administrative
Executive Vice Officer of DWSC, Distributors and DWTC; Director
President and Chief of DWTC; Vice President of the Dean Witter Funds
Administrative Officer and the TCW/DW Funds.
Edmund C. Puckhaber Director of DWTC; Vice President of the Dean
Executive Vice Witter Funds.
President
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone
Senior Vice President Senior Vice President of DWSC, Distributors
and DWTC; Vice President of the Dean Witter Funds
and the TCW/DW Funds.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Joseph J. McAlinden
Senior Vice President Vice President of the Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira Ross
Senior Vice President Vice President of various Dean Witter Funds.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Douglas Brown
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Peter W. Gurman
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of Dean Witter Mid-Cap Growth Fund.
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
Stanley Kapica
Vice President
Michael Knox Vice President of Dean Witter Convertible
Vice President Securities Trust.
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Hugh Rose
Vice President
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Marianne Zalys
Vice President
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
11
<PAGE>
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
12
<PAGE>
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
- ---- ------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service
contract.
Item 32. UNDERTAKINGS
Not Applicable.
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, 1996.
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
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. 8 has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 02/23/96
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 02/23/96
----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 02/23/96
----------------------------
Sheldon Curtis
Attorney-in-Fact
Michael Bozic
Edwin J. Garn
John R. Haire
Manuel H. Johnson
Paul Kolton
Michael E. Nugent
John L. Schroeder
By /s/ David M. Butowsky 02/23/96
----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
EXHIBIT INDEX
1.(a) -- Declaration of Trust of the Registrant*
(b) -- Amendment to the Declaration of Trust*
dated February 19, 1993
8. -- Custodian Agreement between the Registrant
and the Bank of New York
9. -- Services Agreement between Dean Witter InterCapital
Inc. and Dean Witter Services Company Inc.
11. -- Consent of Independent Accountants
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
- -------------------------
*Previously filed; re-filed via EDGAR with this Amendment to the
Registration Statement
<PAGE>
DEAN WITTER/SEARS CALIFORNIA TAX-FREE DAILY INCOME TRUST
DECLARATION OF TRUST
Dated: April 20, 1988
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I -- NAME AND DEFINITIONS 2
Section 1.1 Name 2
Section 1.2 Definitions 2
ARTICLE II -- TRUSTEES 4
Section 2.1 Number of Trustees 4
Section 2.2 Election and Term 4
Section 2.3 Resignation and Removal 4
Section 2.4 Vacancies 5
Section 2.5 Delegation of Power to Other Trustees 5
ARTICLE III -- POWERS OF TRUSTEES 6
Section 3.1 General 6
Section 3.2 Investments 6
Section 3.3 Legal Title 7
Section 3.4 Issuance and Repurchase of Securities 7
Section 3.5 Borrowing Money; Lending Trust Assets 8
Section 3.6 Delegation; Committees 8
Section 3.7 Collection and Payment 8
Section 3.8 Expenses 8
Section 3.9 Manner of Acting; By-Laws 8
Section 3.10 Miscellaneous Powers 9
Section 3.11 Principal Transactions 9
Section 3.12 Litigation 10
ARTICLE IV -- INVESTMENT ADVISER, DISTRIBUTOR,
CUSTODIAN AND TRANSFER AGENT 11
Section 4.1 Investment Adviser 11
Section 4.2 Administrative Services 11
Section 4.3 Distributor 11
Section 4.4 Transfer Agent 12
Section 4.5 Custodian 12
Section 4.6 Parties to Contract 12
-i-
<PAGE>
PAGE
----
ARTICLE V -- LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS 13
Section 5.1 No Personal Liability of Shareholders, Trustees, etc. 13
Section 5.2 Non-Liability of Trustees, etc. 13
Section 5.3 Indemnification 14
Section 5.4 No Bond Required of Trustees 14
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments, etc. 14
Section 5.6 Reliance on Experts, etc. 15
ARTICLE VI -- SHARES OF BENEFICIAL INTEREST 16
Section 6.1 Beneficial Interest 16
Section 6.2 Rights of Shareholders 16
Section 6.3 Trust Only 16
Section 6.4 Issuance of Shares 17
Section 6.5 Register of Shares 17
Section 6.6 Transfer of Shares 17
Section 6.7 Notices 18
Section 6.8 Voting Powers 18
Section 6.9 Series or Classes of Shares 19
ARTICLE VII -- REDEMPTIONS 23
Section 7.1 Redemptions 23
Section 7.2 Redemption at the Option of the Trust 23
Section 7.3 Effect of Suspension of Determination of Net Asset Value 23
Section 7.4 Suspension of Right of Redemption 24
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PAGE
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ARTICLE VIII -- DETERMINATION OF NET ASSET VALUE, NET INCOME AND
DISTRIBUTIONS
Section 8.1 Net Asset Value 25
Section 8.2 Distributions to Shareholders 25
Section 8.3 Determination of Net Income 26
Section 8.4 Power of Modify Foregoing Procedures 26
ARTICLE IX -- DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC. 27
Section 9.1 Duration 27
Section 9.2 Termination of Trust or a Series 27
Section 9.3 Amendment Procedure 28
Section 9.4 Merger, Consolidation and Sale of Assets 29
Section 9.5 Incorporation 29
ARTICLE X -- REPORTS TO SHAREHOLDERS 31
ARTICLE XI -- MISCELLANEOUS 32
Section 11.1 Filing 32
Section 11.2 Resident Agent 32
Section 11.3 Governing Law 32
Section 11.4 Counterparts 32
Section 11.5 Reliance by Third Parties 32
Section 11.6 Provisions in Conflict with Law or Regulations 33
Section 11.7 Use of the Name "Dean Witter" 33
SIGNATURE PAGE 34
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<PAGE>
DECLARATION OF TRUST
OF
DEAN WITTER/SEARS CALIFORNIA TAX-FREE DAILY INCOME TRUST
Dated: April 20, 1988
THE DECLARATION OF TRUST of Dean Witter/Sears California Tax-Free Daily
Income Trust is made the 20th day of April, 1988 by the parties signatory
hereto, as trustees (such persons, so long as they shall continue in office in
accordance with the terms of this Declaration of Trust, and all other persons
who at the time in question have been duly elected or appointed as trustees in
accordance with the provisions of this Declaration of Trust and are then in
office, being hereinafter called the "Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is provided that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1. NAME. The name of the trust created hereby is the "Dean
Witter/Sears California Tax-Free Daily Income Trust," and so far as may be
practicable the Trustees shall conduct the Trust's activities, execute all
documents and sue or be sued under that name, which name (and the word "Trust"
wherever herein used) shall refer to the Trustees as Trustees, and not as
individuals, or personally, and shall not refer to the officers, agents,
employees or Shareholders of the Trust. Should the Trustees determine that the
use of such name is not advisable, they may use such other name for the Trust as
they deem proper and the Trust may hold its property and conduct its activities
under such other name.
SECTION 1.2. DEFINITIONS. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "BY-LAWS" means the By-Laws referred to in Section 3.9 hereof, as from
time to time amended.
(b) the terms "COMMISSION," "AFFILIATED PERSON" and "INTERESTED PERSON,"
have the meanings given them in the 1940 Act.
(c) "DECLARATION" means this Declaration of Trust as amended from time to
time. Reference in this Declaration of Trust to "DECLARATION," "HEREOF,"
"HEREIN" and "HEREUNDER" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(d) "DISTRIBUTOR" means the party, other than the Trust, to a contract
described in Section 4.3 hereof.
(e) "FUNDAMENTAL POLICIES" shall mean the investment policies and
restrictions set forth in the Prospectus and Statement of Additional Information
and designated as fundamental policies therein.
(f) "INVESTMENT ADVISER" means any party, other than the Trust, to a
contract described in Section 4.1 hereof.
(g) "MAJORITY SHAREHOLDER VOTE" means the vote of the holders of a majority
of Shares, which shall consist of: (i) a majority of Shares represented in
person or by proxy and entitled to vote at a meeting of Shareholders at which a
quorum, as determined in accordance with the By-Laws, is present; (ii) a
majority of Shares issued and outstanding and entitled to vote when action is
taken by written consent of Shareholders; and (iii) a "majority of the
outstanding voting securities," as the phrase is defined in the 1940 Act, when
any
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action is required by the 1940 Act by such majority as so defined.
(h) "1940 ACT" means the Investment Company Act of 1940 and the rules and
regulations thereunder as amended from time to time.
(i) "PERSON" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(j) "PROSPECTUS" means the Prospectus and Statement of Additional
Information constituting parts of the Registration Statement of the Trust under
the Securities Act of 1933 as such Prospectus and Statement of Additional
Information may be amended or supplemented and filed with the Commission from
time to time.
(k) "SERIES" means one of the separately managed components of the Trust
(or, if the Trust shall have only one such component, then that one) as set
forth in Section 6.1 hereof or as may be established and designated from time to
time by the Trustees pursuant to that section.
(l) "SHAREHOLDER" means a record owner of outstanding Shares.
(m) "SHARES" means the units of interest into which the beneficial interest
in the Trust shall be divided from time to time, including the shares of any and
all series or classes which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares.
(n) "TRANSFER AGENT" means the party, other than the Trust, to the contract
described in Section 4.4 hereof.
(o) "TRUST" means the Dean Witter/Sears California Tax-Free Daily Income
Trust.
(p) "TRUST PROPERTY" means any and all property, real or personal, tangible
or intangible, which is owned or held by or for the account of the Trust or the
Trustees.
(q) "TRUSTEES" means the persons who have signed the Declaration, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly elected or appointed, qualified
and serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
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ARTICLE II
TRUSTEES
SECTION 2.1. NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three (3) nor more than fifteen (15).
SECTION 2.2. ELECTION AND TERM. The Trustees shall be elected by a
Majority Shareholder Vote at the first meeting of Shareholders following the
public offering of Shares of the Trust. The Trustees shall have the power to set
and alter the terms of office of the Trustees, and they may at any time lengthen
or lessen their own terms or make their terms of unlimited duration, subject to
the resignation and removal provisions of Section 2.3 hereof. Subject to Section
16(a) of the 1940 Act, the Trustees may elect their own successors and may,
pursuant to Section 2.4 hereof, appoint Trustees to fill vacancies. The Trustees
shall adopt By-Laws not inconsistent with this Declaration or any provision of
law to provide for election of Trustees by Shareholders at such time or times as
the Trustees shall determine to be necessary or advisable.
SECTION 2.3. RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (provided the aggregrate number
of Trustees after such removal shall not be less than the number required by
Section 2.1 hereof) by the action of two-thirds of the remaining Trustees or by
the action of the Shareholders of record of not less than two-thirds of the
Shares outstanding (for purposes of determining the circumstances and procedures
under which such removal by the Shareholders may take place, the provisions of
Section 16(c) of the 1940 Act shall be applicable to the same extent as if the
Trust were subject to the provisions of that Section). Upon the resignation or
removal of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute
and deliver such documents as the remaining Trustees shall require for the
purpose of conveying to the Trust or the remaining Trustees any Trust Property
held in the name of the resigning or removed Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall execute and deliver on his
behalf such documents as the remaining Trustees shall require as provided in the
preceding sentence.
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SECTION 2.4. VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy existing by reason of an
increase in the number of Trustees, subject to the provisions of Section 16(a)
of the 1940 Act, the remaining Trustees or, prior to the public offering of
Shares of the Trust, if only one Trustee shall then remain in office, the
remaining Trustee, shall fill such vacancy by the appointment of such other
person as they or he, in their or his discretion, shall see fit, made by a
written instrument signed by a majority of the remaining Trustees or by the
remaining Trustee, as the case may be. Any such appointment shall not become
effective, however, until the person named in the written instrument of
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of the Declaration. An appointment of a Trustee
may be made in anticipation of a vacancy to occur at a later date by reason of
retirement, resignation or increase in the number of Trustees, provided that
such appointment shall not become effective prior to such retirement,
resignation or increase in the number of Trustees. Whenever a vacancy in the
number of Trustees shall occur, until such vacancy is filled as provided in this
Section 2.4, the Trustees in office, regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the duties imposed
upon the Trustees by the Declaration. A written instrument certifying the
existence of such vacancy signed by a majority of the Trustees shall be
conclusive evidence of the existence of such vacancy.
SECTION 2.5. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise expressly provided.
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ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities wheresoever in the world they may be
located as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
the Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
SECTION 3.2. INVESTMENTS. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, distribute, lend or
otherwise deal in or dispose of negeotiable or nonnegotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, options, commodities, commodity futures contracts and related
options, currencies, currency futures and forward contracts, and other
securities, investment contracts and other instruments of any kind,
including, without limitation, those issued, guaranteed or sponsored by any
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and all Persons including, without limitation, states, territories and
possessions of the United States, the District of Columbia and any of the
political subdivisions, agencies or instrumentalities thereof, and by the
United States Government or its agencies or instrumentalities, foreign or
international instrumentalities, or by any bank or savings institution, or
by any corporation or organization organized under the laws of the United
States or of any state, territory or possession thereof, and of
corporations or organizations organized under foreign laws, or in "when
issued" contracts for any such securities, or retain Trust assets in cash
and from time to time change the investments of the assets of the Trust;
and to exercise any and all rights, powers and privileges of ownership or
interest in respect of any and all such investments of every kind and
description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more
persons, firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional securities in which the Trust may invest should the
Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by any
law limiting the investments which may be made by fiduciaries.
Section 3.3. LEGAL TITLE. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Trust therein is appropriately protected. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
SECTION 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section
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6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
SECTION 3.5. BORROWING MONEY; LENDING TRUST ASSETS. Subject to the
Fundamental Policies, the Trustees shall have power to borrow money or otherwise
obtain credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Trust, to endorse, guarantee, or
undertake the performance of any obligation, contract or engagement of any other
Person and to lend Trust assets.
SECTION 3.6. DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Trustees or otherwise as the Trustees may deem expedient.
SECTION 3.7. COLLECTION AND PAYMENT. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay all
claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
SECTION 3.8. EXPENSES. Subject to Section 6.9 hereof, the Trustees shall
have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees.
SECTION 3.9. MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by
written consents of all the Trustees. The Trustees may adopt By-Laws not
inconsistent with this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such By-Laws to the extent such power is not
reserved to the Shareholders.
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SECTION 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust or any Series thereof; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) remove Trustees or fill vacancies in or add to their number, elect and
remove such officers and appoint and terminate such agents or employees as they
consider appropriate, and appoint from their own number, and terminate, any one
or more committees which may exercise some or all of the power and authority of
the Trustees as the Trustees may determine; (d) purchase, and pay for out of
Trust Property or the property of the appropriate Series of the Trust, insurance
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or independent contractors
of the Trust against all claims arising by reason of holding any such position
or by reason of any action taken or omitted to be taken by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) to the extent permitted by law, indemnify any person with whom
the Trust or any Series thereof has dealings, including any Investment Adviser,
Distributor, Transfer Agent and selected dealers, to such extent as the Trustees
shall determine; (g) guarantee indebtedness or contractual obligations of
others; (h) determine and change the fiscal year of the Trust or any Series
thereof and the method by which its accounts shall be kept; and (i) adopt a seal
for the Trust but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
SECTION 3.11. PRINCIPAL TRANSACTIONS. Except in transactions permitted by
the 1940 Act or any rule or regulation thereunder, or any order of exemption
issued by the Commission, or effected to implement the provisions of any
agreement to which the Trust is a party, the Trustees shall not, on behalf of
the Trust, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Trust or any Series thereof
to, any Trustee or officer of the Trust or any firm of which any such Trustee or
officer is a member acting as principal, or have any such dealings with any
Investment Adviser, Distributor or Transfer Agent or with any Affiliated Person
of such Person; but the Trust or any Series thereof may employ any such Person,
or firm or company in which such Person is an Interested Person, as broker,
legal counsel, registrar, transfer agent, dividend disbursing agent or custodian
upon customary terms.
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SECTION 3.12. LITIGATION. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series thereof
to pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, to dismiss any
action, suit, proceeding, dispute, claim, or demand, derivative or otherwise,
brought by any person, including a Shareholder in its own name or the name of
the Trust, whether or not the Trust or any of the Trustees may be named
individually therein or the subject matter arises by reason of business for or
on behalf of the Trust.
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ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
SECTION 4.1. INVESTMENT ADVISER. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time enter
into one or more investment advisory or management contracts or, if the Trustees
establish multiple Series, separate investment advisory or management contracts
with respect to one or more Series whereby the other party or parties to any
such contracts shall undertake to furnish the Trust or such Series such
management, investment advisory, administration, accounting, legal, statistical
and research facilities and services, promotional or marketing activities, and
such other facilities and services, if any, as the Trustees shall from time to
time consider desirable and all upon such terms and conditions as the Trustees
may in their discretion determine. Notwithstanding any provisions of the
Declaration, the Trustees may authorize the Investment Advisers, or any of them,
under any such contracts (subject to such general or specific instructions as
the Trustees may from time to time adopt) to effect purchases, sales, loans or
exchanges of portfolio securities and other investments of the Trust on behalf
of the Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of such
Investment Advisers, or any of them (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees. The Trustees may, in their sole
discretion, call a meeting of Shareholders in order to submit to a vote of
Shareholders at such meeting the approval or continuance of any such investment
advisory or management contract. If the Shareholders of any one or more of the
Series of the Trust should fail to approve any such investment advisory or
management contract, the Investment Adviser may nonetheless serve as Investment
Adviser with respect to any Series whose Shareholders approve such contract.
SECTION 4.2. ADMINISTRATIVE SERVICES. The Trustees may in their
discretion from time to time contract for administrative personnel and services
whereby the other party shall agree to provide the Trustees or the Trust
administrative personnel and services to operate the Trust on a daily or other
basis, on such terms and conditions as the Trustees may in their discretion
determine. Such services may be provided by one or more persons or entities.
SECTION 4.3. DISTRIBUTOR. The Trustees may in their discretion from time
to time enter into one or more contracts,
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providing for the sale of Shares to net the Trust or the applicable Series of
the Trust not less than the net asset value per Share (as described in Article
VIII hereof) and pursuant to which the Trust may either agree to sell the Shares
to the other parties to the contracts, or any of them, or appoint any such other
party its sales agent for such Shares. In either case, any such contract shall
be on such terms and conditions as the Trustees may in their discretion
determine not inconsistent with the provisions of this Article IV, including,
without limitation, the provision for the repurchase or sale of shares of the
Trust by such other party as principal or as agent of the Trust.
SECTION 4.4. TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such terms
and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or more
Persons.
SECTION 4.5. CUSTODIAN. The Trustees may appoint or otherwise engage one
or more banks or trust companies, each having an aggregate capital, surplus and
undivided profits (as shown in its last published report) of at least five
million dollars ($5,000,000) to serve as Custodian with authority as its agent,
but subject to such restrictions, limitations and other requirements, if any, as
may be contained in the By-Laws of the Trust.
SECTION 4.6. PARTIES TO CONTRACT. Any contract of the character described
in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other contract
may be entered into with any Person, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship; nor shall any Person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article IV. The same Person may be the
other party to any contracts entered into pursuant to Sections 4.1, 4.2, 4.3,
4.4 or 4.5 above or otherwise, and any individual may be financially interested
or otherwise affiliated with Persons who are parties to any or all of the
contracts mentioned in this Section 4.6.
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ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
SECTION 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with the Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property, or to the Property of one or more specific Series
of the Trust if the claim arises from the conduct of such Trustee, officer,
employee or agent with respect to only such Series, for satisfaction of claims
of any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee or agent, as such, of the Trust is made
a party to any suit or proceeding to enforce any such liability, he shall not,
on account thereof, be held to any personal liability. The Trust shall indemnify
and hold each Shareholder harmless from and against all claims and liabilities,
to which such Shareholder may become subject by reason of his being or having
been a Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability; provided that, in the event the Trust shall consist of more than one
Series, Shareholders of a particular Series who are faced with claims or
liabilities solely by reason of their status as Shareholders of that Series
shall be limited to the assets of that Series for recovery of such loss and
related expenses. The rights accruing to a Shareholder under this Section 5.1
shall not exclude any other right to which such Shareholder may be lawfully
entitled, nor shall anything herein contained restrict the right of the Trust to
indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
SECTION 5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless disregard
of his duties.
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SECTION 5.3. INDEMNIFICATION. (a) The Trustees shall provide for
indemnification by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, of any person
who is, or has been, a Trustee, officer, employee or agent of the Trust against
all liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a
Trustee, officer, employee or agent and against amounts paid or incurred by him
in the settlement thereof, in such manner as the Trustees may provide from time
to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
SECTION 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
SECTION 5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC.
No purchaser, lender, transfer agent or other Person dealing with the Trustees
or any officer, employee or agent of the Trust or a Series thereof shall be
bound to make any inquiry concerning the validity of any transaction purporting
to be made by the Trustees or by said officer, employee or agent or be liable
for the application of money or property paid, loaned or delivered to or on the
order of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or a
Series thereof or undertaking, and every other act or thing whatsoever executed
in connection with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity as officers,
employees or agents of the Trust or a Series thereof. Every written obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking made or issued by the Trustees shall recite that the same is
executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust or a Series thereof under any
such instrument are not binding upon any of the Trustees or Shareholders,
individually, but bind only the Trust Estate (or, in the event the Trust shall
consist of more than one Series, in the case of any such obligation
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which relates to a specific Series, only the Series which is a party thereto),
and may contain any further recital which they or he may deem appropriate, but
the omission of such recital shall not affect the validity of such obligation,
contract instrument, certificate, Share, security or undertaking and shall not
operate to bind the Trustees or Shareholders individually. The Trustees shall at
all times maintain insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
SECTION 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by any Investment Adviser, Distributor,
Transfer Agent, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
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ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.01 par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the authority to establish and
designate one or more Series or classes of shares. Each share of any Series
shall represent an equal proportionate share in the assets of that Series with
each other Share in that Series. The Trustees may divide or combine the shares
of any Series into a greater or lesser number of shares in that Series without
thereby changing the proportionate interests in the assets of that Series.
Subject to the provisions of Section 6.9 hereof, the Trustees may also authorize
the creation of additional series of shares (the proceeds of which may be
invested in separate, independently managed portfolios) and additional classes
of shares within any series. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares or a split in
Shares, shall be fully paid and nonassessable.
SECTION 6.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in the Declaration specifically set forth. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights, except as the Trustees may determine with respect to any series
of Shares.
SECTION 6.3. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
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SECTION 6.4. ISSUANCE OF SHARES. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares of any Series,
in addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. The Trustees may from time to
time divide or combine the Shares of any Series into a greater or lesser number
without thereby changing the proportionate beneficial interests in that Series.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and/or fractions of a Share as described in the Prospectus.
SECTION 6.5. REGISTER OF SHARES. A register shall be kept in respect of
each Series at the principal office of the Trust or at an office of the Transfer
Agent which shall contain the names and addresses of the Shareholders and the
number of Shares of each Series held by them respectively and a record of all
transfers thereof. Such register may be in written form or any other form
capable of being converted into written form within a reasonable time for visual
inspection. Such register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or distributions or
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall
be entitled to receive payment of any dividend or distribution, nor to have
notice given to him as herein or in the By-Laws provided, until he has given his
address to the Transfer Agent or such other officer or agent of the Trustees as
shall keep the said register for entry thereon. It is not contemplated that
certificates will be issued for the Shares; however, the Trustees, in their
discretion, may authorize the issuance of Share certificates and promulgate
appropriate rules and regulations as to their use.
SECTION 6.6. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such
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Shares for all purposes hereunder and neither the Trustees nor any Transfer
Agent or registrar nor any officer, employee or agent of the Trust shall be
affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law, except as may otherwise be provided by the laws of
the Commonwealth of Massachusetts.
SECTION 6.7. NOTICES. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust. Annual reports and proxy
statements need not be sent to a shareholder if: (i) an annual report and proxy
statement for two consecutive annual meetings, or (ii) all, and at least two,
checks (if sent by first class mail) in payment of dividends or interest and
shares during a twelve month period have been mailed to such shareholder's
address and have been returned undelivered. However, delivery of such annual
reports and proxy statements shall resume once a Shareholder's current address
is determined.
SECTION 6.8. VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.2 hereof, (ii)
for the removal of Trustees as provided in Section 2.3 hereof, (iii) with
respect to any investment advisory or management contract as provided in Section
4.1, (iv) with respect to termination of the Trust as provided in Section 9.2,
(v) with respect to any amendment of the Declaration to the extent and as
provided in Section 9.3, (vi) with respect to any merger, consolidation or sale
of assets as provided in Section 9.4, (vii) with respect to incorporation of the
Trust to the extent and as provided in Section 9.5, (viii) to the same extent as
the stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders
(provided that Shareholders of a
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Series are not entitled to vote in connection with the bringing of a derivative
or class action with respect to any matter which only affects another other
Series or its Shareholders), (ix) with respect to any plan adopted pursuant to
Rule 12b-1 (or any successor rule) under the 1940 Act and (x) with respect to
such additional matters relating to the Trust as may be required by law, the
Declaration, the By-Laws or any registration of the Trust with the Commission
(or any successor agency) or any state, or as and when the Trustees may consider
necessary or desirable. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust as of the record date, as determined in accordance with
the By-Laws, shall not be voted. On any matter submitted to a vote of
Shareholders, all Shares shall be voted by individual Series except (1) when
required by the 1940 Act, Shares shall be voted in the aggregate and not by
individual Series; and (2) when the Trustees have determined that the matter
affects only the interests of one or more Series, then only the Shareholders of
such Series shall be entitled to vote thereon. The Trustees may, in conjunction
with the establishment of any further Series or any classes of Shares, establish
conditions under which the several series or classes of Shares shall have
separate voting rights or no voting rights. There shall be no cumulative voting
in the election of Trustees. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, the
Declaration or the By-Laws to be taken by Shareholders. The By-Laws may include
further provisions for Shareholders' votes and meetings and related matters.
SECTION 6.9. SERIES OR CLASSES OF SHARES. The following provisions are
applicable regarding the Series of Shares of the Trust established in Section
6.1 hereof and shall be applicable if the Trustees shall establish additional
Series or shall divide the shares of any Series into two or more classes, also
as provided in Section 6.1 hereof, and all provisions relating to the Trust
shall apply equally to each Series thereof except as the context requires:
(a) The number of authorized shares and the number of shares of each
Series or of each class that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued shares or any shares previously issued and
reacquired of any Series or class into one or more Series or one or more classes
that may be established and designated from time to time. The Trustees may hold
as treasury shares (of the same or some other Series or class), reissue for such
consideration and on such terms as they may determine, or cancel any shares of
any Series or any class reacquired by the Trust at their discretion from time to
time.
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(b) The power of the Trustees to invest and reinvest the Trust Property
shall be governed by Section 3.2 of this Declaration with respect to any one or
more Series which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional Series and the power of
the Trustees to invest and reinvest assets applicable to any other Series shall
be as set forth in the instrument of the Trustees establishing such series which
is hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
shares of a particular Series or class together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series or class for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series or class, the Trustees shall allocate them
among any one or more of the Series or classes established and designated from
time to time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the shareholders of all Series or classes for all
purposes. No holder of Shares of any Series shall have any claim on or right to
any assets allocated or belonging to any other Series.
(d) The assets belonging to each particular Series shall be charged with
the liabilities of the Trust in respect of that Series and all expenses, costs,
charges and reserves attributable to that Series. All expenses and liabilities
incurred or arising in connection with a particular Series, or in connection
with the management thereof, shall be payable solely out of the assets of that
Series and creditors of a particular Series shall be entitled to look solely to
the property of such Series for satisfaction of their claims. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and
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binding upon the holders of all Series for all purposes. The Trustees shall have
full discretion, to the extent not inconsistent with the 1940 Act, to determine
which items shall be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
shareholders.
(e) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 8.2 of this Declaration with respect to any one or
more Series or classes which represents the interests in the assets of the Trust
immediately prior to the establishment of any additional Series or classes. With
respect to any other Series or class, dividends and distributions on shares of a
particular Series or class may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of shares of that Series or class, from such of the
income and capital gains, accrued or realized, from the assets belonging to that
Series or class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Series or class. All dividends and
distributions on shares of a particular Series or class shall be distributed pro
rata to the holders of that Series or class in proportion to the number of
shares of that Series or class held by such holders at the date and time of
record established for the payment of such dividends or distributions.
(f) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and dividend
rights, of each class and Series of Shares.
(g) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of Shares of any
Series or class shall have the right to convert or exchange said Shares into
Shares of one or more Series of Shares in accordance with such requirements and
procedures as may be established by the Trustees.
(h) The establishment and designation of any Series or class of shares in
addition to those established in Section 6.1 hereof shall be effective upon the
execution by a majority of the then Trustees of an instrument setting forth such
establishment and designation and the relative rights, preferences, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of such Series or class, or as otherwise provided in
such instrument. At any time that there are no shares outstanding of any
particular Series or class previously
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established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that Series or class and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
(i) Shareholders of a Series shall not be entitled to participate in a
derivative or class action with respect to any matter which only affects another
Series or its Shareholders.
(j) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of distributions of income and
capital gains made with respect to such Series. In the event of the liquidation
of a particular Series, the Shareholders of that Series which has been
established and designated and which is being liquidated shall be entitled to
receive, when and as declared by the Trustees, the excess of the assets
belonging to that Series over the liabilities belonging to that Series. The
holders of Shares of any Series shall not be entitled hereby to any distribution
upon liquidation of any other Series. The assets so distributable to the
Shareholders of any Series shall be distributed among such Shareholders in
proportion to the number of Shares of that Series held by them and recorded on
the books of the Trust. The liquidation of any particular Series in which there
are Shares then outstanding may be authorized by an instrument in writing,
without a meeting, signed by a majority of the Trustees then in office, subject
to the approval of a majority of the outstanding voting securities of that
Series, as that phrase is defined in the 1940 Act.
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ARTICLE VII
REDEMPTIONS
SECTION 7.1. REDEMPTIONS. Each Shareholder of a particular Series shall
have the right at such times as may be permitted by the Trust to require the
Trust to redeem all or any part of his Shares of that Series, upon and subject
to the terms and conditions provided in this Article VII. The Trust shall, upon
application of any Shareholder or pursuant to authorization from any
Shareholder, redeem or repurchase from such Shareholder outstanding shares for
an amount per share determined by the Trustees in accordance with any applicable
laws and regulations; provided that (a) such amount per share shall not exceed
the cash equivalent of the proportionate interest of each share or of any class
or Series of shares in the assets of the Trust at the time of the redemption or
repurchase and (b) if so authorized by the Trustees, the Trust may, at any time
and from time to time charge fees for effecting such redemption or repurchase,
at such rates as the Trustees may establish, as and to the extent permitted
under the 1940 Act and the rules and regulations promulgated thereunder, and
may, at any time and from time to time, pursuant to such Act and such rules and
regulations, suspend such right of redemption. The procedures for effecting and
suspending redemption shall be as set forth in the Prospectus from time to time.
Payment will be made in such manner as described in the Prospectus.
SECTION 7.2. REDEMPTION AT THE OPTION OF THE TRUST. Each Share of the
Trust or any Series of the Trust shall be subject to redemption at the option of
the Trust at the redemption price which would be applicable if such Share were
then being redeemed by the Shareholder pursuant to Section 7.1: (i) at any time,
if the Trustees determine in their sole discretion that failure to so redeem may
have materially adverse consequences to the holders of the Shares of the Trust
or of any Series, or (ii) upon such other conditions with respect to maintenance
of Shareholder accounts of a minimum amount as may from time to time be
determined by the Trustees and set forth in the then current Prospectus of the
Trust. Upon such redemption the holders of the Shares so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price.
SECTION 7.3. EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE.
If, pursuant to Section 7.4 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or of
any Series thereof,
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the rights of Shareholders (including those who shall have applied for
redemption pursuant to Section 7.1 hereof but who shall not yet have received
payment) to have Shares redeemed and paid for by the Trust or a Series thereof
shall be suspended until the termination of such suspension is declared. Any
record holder who shall have his redemption right so suspended may, during the
period of such suspension, by appropriate written notice of revocation at the
office or agency where application was made, revoke any application for
redemption not honored and withdraw any certificates on deposit. The redemption
price of Shares for which redemption applications have not been revoked shall be
the net asset value of such Shares next determined as set forth in Section 8.1
after the termination of such suspension, and payment shall be made within seven
(7) days after the date upon which the application was made plus the period
after such application during which the determination of net asset value was
suspended.
SECTION 7.4. SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust or a Series
thereof of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Trust or a Series thereof fairly to determine the
value of its net assets, or (iv) during any other period when the Commission may
for the protection of security holders of the Trust by order permit suspension
of the rights of redemption or postponement of the date of payment or
redemption; provided that applicable rules and regulations of the Commission
shall govern as to whether the conditions prescribed in (ii), (iii) or (iv)
exist. Such suspension shall take effect at such time as the Trust shall specify
but not later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
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ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
SECTION 8.1. NET ASSET VALUE. The net asset value of each outstanding
Share of each Series of the Trust shall be determined on such days and at such
time or times as the Trustees may determine. The method of determination of net
asset value shall be determined by the Trustees and shall be as set forth in the
Prospectus and Statement of Additional Information. The power and duty to make
the daily calculations may be delegated by the Trustees to any Investment
Adviser, the Custodian, the Transfer Agent or such other person as the
Trustees by resolution may determine. The Trustees may suspend the daily
determination of net asset value to the extent permitted by the 1940 Act.
SECTION 8.2. DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from time
to time distribute ratably among the Shareholders of the Trust or of any Series
such proportion of the net income, earnings, profits, gains, surplus (including
paid-in surplus), capital, or assets of the Trust or of such Series held by the
Trustees as they may deem proper. Such distribution may be made in cash or
property (including without limitation any type of obligations of the Trust or
of such Series or any assets thereof), and the Trustees may distribute ratably
among the Shareholders of the Trust or of that Series additional Shares issuable
hereunder in such manner, at such times, and on such terms as the Trustees may
deem proper. Such distributions may be among the Shareholders of record
(determined in accordance with the Prospectus and Statement of Additional
Information) of the Trust or of such Series at the time of declaring a
distribution or among the Shareholders of record of the Trust or of such
Series at such later date as the Trustees shall determine. The Trustees may
always retain from the net income, earnings, profits or gains of the Trust or
of such Series such amount as they may deem necessary to pay the debts or
expenses of the Trust or of such Series or to meet obligations of the Trust or
of such Series, or as they may deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders of the Trust or of any Series
such dividend reinvestment plans, cash dividend payout plans or related plans
as the Trustees deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted
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to give the Trustees the power in their discretion to distribute for any fiscal
year as ordinary dividends and as capital gains distributions, respectively,
additional amounts sufficient to enable the Trust to avoid or reduce liability
for taxes.
SECTION 8.3. DETERMINATION OF NET INCOME. The Trustees shall have the
power to determine the net income of any Series of the Trust and from time to
time to distribute such net income ratably among the Shareholders as dividends
in cash or additional Shares of such Series issuable hereunder. The
determination of net income and the resultant declaration of dividends shall be
as set forth in the Prospectus and Statement of Additional Information. The
Trustees shall have full discretion to determine whether any cash or property
received by any Series of the Trust shall be treated as income or as principal
and whether any item of expense shall be charged to the income or the
principal account, and their determination made in good faith shall be
conclusive upon the Shareholders. In the case of stock dividends received, the
Trustees shall have full discretion to determine, in the light of the
particular circumstances, how much, if any, of the value thereof shall be
treated as income, the balance, if any, to be treated as principal.
SECTION 8.4. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or desirable
to enable the Trust to comply with any provision of the 1940 Act, or any rule or
regulation thereunder, including any rule or regulation adopted pursuant to
Section 22 of the 1940 Act by the Commission or any securities association
registered under the Securities Exchange Act of 1934, or any order of exemption
issued by said Commission, all as in effect now or hereafter amended or
modified. Without limiting the generality of the foregoing, the Trustees may
establish classes or additional Series of Shares in accordance with Section 6.9.
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ARTICLE IX
DURATION; TERMINATION OF
TRUST; AMENDMENT; MERGERS, ETC.
SECTION 9.1. DURATION. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
"SECTION 9.2. TERMINATION OF TRUST. (a) The Trust or any Series may be
terminated (i) by the affirmative vote of the holders of not less than
two-thirds of the Shares outstanding and entitled to vote at any meeting of
Shareholders of the Trust or the appropriate Series thereof, (ii) by an
instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than two-thirds of
such Shares of the Trust or the appropriate Series thereof, or by such
other vote as may be established by the Trustees with respect to any class
or Series of Shares, or (iii) with respect to a Series as provided in
Section 6.9(h). Upon the termination of the Trust or the Series:
(i) The Trust or the Series shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust or the
Series and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust shall have been wound up, including
the power to fulfill or discharge the contracts of the Trust or the Series,
collect its assets, sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property or Trust
Property allocated or belonging to such Series to one or more persons at
public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay
its liabilities, and to do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
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Property or Trust Property allocated or belonging to such Series shall
require Shareholder approval in accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or Trust Property allocated or
belonging to such Series, in cash or in kind or partly each, among the
Shareholders of the Trust according to their respective rights."
2. The Trustees of the Trust hereby reaffirm the Declaration, as
amended, in all respects.
3. This Amendment may be executed in more than one counterpart, each
of which shall be deemed original, but all of which together shall
constitute one and the same document.
SECTION 9.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended by
a Majority Shareholder Vote, at a meeting of Shareholders, or by written consent
without a meeting. The Trustees may also amend this Declaration without the vote
or consent of Shareholders (i) to change the name of the Trust or any Series or
classes of Shares, (ii) to supply any omission, or cure, correct or supplement
any ambiguous, defective or inconsistent provision hereof, (iii) if they deem it
necessary to conform this Declaration to the requirements of applicable federal
or state laws or regulations or the requirements of the Internal Revenue Code,
or to eliminate or reduce any federal, state or local taxes which are or may be
payable by the Trust or the Shareholders, but the Trustees shall not be liable
for failing to do so, or (iv) for any other purpose which does not adversely
affect the rights of any Shareholder with respect to which the amendment is or
purports to be applicable.
(b) No amendment may be made under this Section 9.3 which would change any
rights with respect to any Shares of the Trust or of any Series of the Trust by
reducing the amount payable thereon upon liquidation of the Trust or of such
Series of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote or consent of the holders of
two-thirds of the Shares of the Trust or of such Series outstanding and
entitled to vote, or by such other vote as may be established by the Trustees
with respect to any s1heries or class of Shares. Nothing contained in this
Declaration shall permit the amendment of this Declaration to impair the
exemption from personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust or to permit assessments upon Shareholders.
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<PAGE>
(c) A certificate signed by a majority of the Trustees or by the Secretary
or any Assistant Secretary of the Trust, setting forth an amendment and reciting
that it was duly adopted by the Shareholders or by the Trustees as aforesaid or
a copy of the Declaration, as amended, and executed by a majority of the
Trustees or certified by the Secretary or any Assistant Secretary of the Trust,
shall be conclusive evidence of such amendment when lodged among the records of
the Trust. Unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
SECTION 9.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust or any
Series thereof may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property or Trust Property allocated or belonging to such
Series, including its good will, upon such terms and conditions and for such
consideration when and as authorized, at any meeting of Shareholders called for
the purpose, by the affirmative vote of the holders of not less than two-thirds
of the Shares of the Trust or such Series outstanding and entitled to vote, or
by an instrument or instruments in writing without a meeting, consented to by
the holders of not less than two-thirds of such Shares, or by such other vote as
may be established by the Trustees with respect to any series or class of
Shares; provided, however, that, if such merger, consolidation, sale, lease or
exchange is recommended by the Trustees, a Majority Shareholder Vote shall be
sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to the laws of the Commonwealth of Massachusetts.
SECTION 9.5. INCORPORATION. With approval of a Majority Shareholder Vote,
or by such other vote as may be established by the Trustees with respect to any
Series or class of Shares, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the Trust Property or the Trust Property allocated or belonging to such
Series or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property or the Trust Property allocated or belonging to such Series to any such
corporation, trust, partnership, association or organization in exchange for the
shares or
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<PAGE>
securities thereof or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such corporation, trust,
partnership, association or organization in which the Trust or such Series holds
or is about to acquire shares or any other interest. The Trustees may also cause
a merger or consolidation between the Trust or any successor thereto and any
such corporation, trust, partnership, association or other organization if and
to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organization or entities.
-30-
<PAGE>
ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit or cause the officers of
the Trust to submit to the Shareholders a written financial report of each
Series of the Trust, including financial statements which shall at least
annually be certified by independent public accountants.
-31-
<PAGE>
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. FILING. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee or by the Secretary or any Assistant Secretary of the
Trust stating that such action was duly taken in a manner provided herein. A
restated Declaration, integrating into a single instrument all of the provisions
of the Declaration which are then in effect and operative, may be executed from
time to time by a majority of the Trustees and shall, upon filing with the
Secretary of the Commonwealth of Massachusetts, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration and the various amendments thereto.
SECTION 11.2. RESIDENT AGENT. The Prentice-Hall Corporation System, Inc.,
84 State Street, Boston, Massachusetts 02109 is the resident agent of the Trust
in the Commonwealth of Massachusetts.
SECTION 11.3. GOVERNING LAW. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
laws thereof and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State.
SECTION 11.4. COUNTERPARTS. The Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
SECTION 11.5. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary of the Trust, certifying to: (a)
the number or identity of Trustees or Shareholders, (b) the due authorization of
the execution of any instrument or writing, (c) the form of any vote passed at a
meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this
-32-
<PAGE>
Declaration (e) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
SECTION 11.6. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation to
the extent necessary to eliminate such conflict; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) I any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
SECTION 11.7. USE OF THE NAME "DEAN WITTER." Dean Witter Reynolds Inc.
("DWR") has consented to the use by the Trust of the identifying name "Dean
Witter," which is a property right of DWR. The Trust will only use the name
"Dean Witter" as a component of its name and for no other purpose, and will not
purport to grant to any third party the right to use the name "Dean Witter" for
any purpose. DWR, or any corporate affiliate of the parent of DWR, may use or
grant to others the right to use the name "Dean Witter", or any combination or
abbreviation thereof, as all or a portion of a corporate or business name or for
any commercial purpose, including a grant of such right to any other investment
company. At the request of DWR or its parent, the Trust will take such action as
may be required to provide its consent to the use by DWR or its parent, or any
corporate affiliate of DWR's parent, or by any person to whom DWR or its parent
or an affiliate of DWR's parent shall have granted the right to the use, of the
name "Dean Witter," or any combination or abbreviation thereof. Upon the
termination of any investment advisory or investment management agreement into
which DWR and the Trust may enter, the Trust shall, upon request by DWR or its
parent, cease to use the name "Dean Witter" as a component of its name, and
shall not use the name, or any combination or abbreviation thereof, as a part of
its name or for any other commercial purpose, and shall cause its officers,
trustees and shareholders to take any and all actions which DWR or its parent
may request to effect the foregoing and to reconvey to DWR or its parent any and
all rights to such name.
-33-
<PAGE>
SECTION 11.8. USE OF THE NAME "SEARS." Sears, Roebuck & Co. ("Sears")
has consented to the use by the Trust of the indentifying name "Sears", which is
a property right of Sears. The Trust will only use the name of "Sears" as a
component of its name and for no other purpose, and will not purport to grant to
any third party the right to use the name "Sears" for any purpose. Sears, or
nay corporate affiliate of Sears, may use or grant to others the right to use
the name "Sears", or any combination or abbreviation thereof, as all or a
portion of a corporate or business name or for any commercial purpose, including
a grant of such right to any other investment company. At the request of Sears,
the Trust will take such action as may be required to provide its consent to the
use by Sears, or any corporate affiliate of Sears, or by any person to whom
Sears or its affiliate shall hve granted the right to the use, of the name
"Sears", or any combination or abbreviation thereof. Upon the termination of
any investment advisory agreement into which Dean Witter Reynolds Inc. and the
Trust may enter, or upon termination of affiliation of Dean Witter Reynolds Inc.
with Sears, the Trust shall, upon request by Sears, cease to use the name
"Sears" 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
commerical purpose, and shall cause its officers, trustees and shareholders to
take any and all actions which Sears may request to effect the foregoing and to
reconvey to Sears any and all rights to such name.
-34-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Declaration of Trust
this 20th day of April, 1988.
/s/ Charles A. Fiumefreddo /s/ Andrew J. Melton, Jr.
- ----------------------------- ----------------------------
Charles A. Fiumefreddo, as Andrew J. Melton, Jr., as
Trustee and not individually Trustee and not individually
One World Trade Center Two World Trade Center
New York, New York 10048 New York, New York 10048
/s/ Sheldon Curtis
- -----------------------------
Sheldon Curtis, as Trustee
and not individually
One World Trade Center
New York, New York 10048
-34-
<PAGE>
STATE OF NEW YORK )
):ss.:
COUNTY OF NEW YORK)
On this 20th day of April, 1988, ANDREW J. MELTON, JR., CHARLES A.
FIUMEFREDDO and SHELDON CURTIS, known to me and known to be the individuals
described in and who executed the foregoing instrument, personally appeared
before me and they severally acknowledged the foregoing instrument to be their
free act and deed.
/s/ BARRY FINK
-----------------------------
Notary Public
BARRY FINK
Notary Public, State of New York
No. 41-471960
Qualified in Suffolk County
Certificate filed in New York County
Commission Expires Dec. 31, 1988
My commission expires:
-35-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument this 25th
day of April, 1988.
/s/ David M. Elwood
------------------------------
, as Trustee
and not individually
One Federal Street
Boston, MA 02110
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. Boston, MA
, 1988
Then personally appeared the above-named David M. Elwood who acknowledged
the foregoing instrument to be his free act and deed.
before me.
/s/ Renee J. Ducharne
---------------------------------------
Notary Public
My commission expires: August 6, 1993
-----------------
-36-
<PAGE>
CERTIFICATE
The undersigned hereby certifies that he is the Secretary of Dean
Witter/Sears California Tax-Free Daily Income Trust (the "Trust"), an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts, that annexed hereto is an Amendment to the Declaration of Trust
of the Trust adopted by a majority of the Trustees on February 19, 1993, as
provided in Section 9.3 of the said Declaration, said Amendment to take effect
on February 19, 1993, and I do hereby further certify that such Amendment has
not been amended and is on the date hereof in full force and effect.
Dated this 19th day of February, 1993.
/s/ Sheldon Curtis
-------------------
Sheldon Curtis
Secretary
<PAGE>
AMENDMENT
Dated: February 19, 1993
To Be Effective: February 19, 1993
TO
DEAN WITTER/SEARS CALIFORNIA TAX-FREE DAILY INCOME TRUST
DECLARATION OF TRUST
APRIL 20, 1988
<PAGE>
Amendment dated February 19, 1993
to the Declaration of Trust (the
"Declaration") of Dean Witter/Sears
California Tax-Free Daily Income
Trust (the "Trust") dated April 20,
1988
WHEREAS, the Trust was established by the Declaration on the date hereinabove
set forth under the laws of the Commonwealth of Massachusetts; and
WHEREAS, the Trustees of the Trust have deemed it advisable to change the
name of the Trust to "Dean Witter California Tax-Free Daily Income Trust," to
be effective on February 19, 1993;
1. Section 1.1 of Article I of the Declaration is hereby amended so
that that Section shall read in its entirety as follows:
"SECTION 1.1 NAME. The name of the Trust created hereby is the "Dean
Witter California Tax-Free Daily Income Trust," and so far as may be
practicable the Trustees shall conduct the Trust's activities, execute all
documents and sue or be sued under that name, which name (and the word
"Trust" whenever herein used) shall refer to the Trustees as Trustees, and
not as individuals, or personally, and shall not refer to the officers,
agents, employees or Shareholders of the Trust. Should the Trustees
determine that the use of such name is not advisable, they may use such
other name for the Trust as they deem proper and the Trust may hold its
property and conduct its activities under such other name."
2. Subsection (o) of Section 1.2 of Article I of the Declaration is
hereby amended so that that Section shall read in its entirety as follows:
"SECTION 1.2 DEFINITIONS. . . . .
"(o) "TRUST" means the "Dean Witter California Tax-Free Daily Income
Trust."
3. Section 11.7 of Article XI of the Declaration is hereby amended so
that that Section shall read in its entirety as follows:
"SECTION 11.7. USE OF THE NAME "DEAN WITTER." Dean Witter Reynolds Inc.
("DWR") has consented to the use by the Trust of the identifying name "Dean
Witter," which is a property right of DWR. The Trust will only use the
name "Dean Witter" as a component of its name and for no other purpose, and
will not purport to grant to any third party the right to use the name
"Dean Witter" for any purpose. DWR, or any corporate affiliate of the
parent of DWR, may use or grant to others the
<PAGE>
right to use the name "Dean Witter", or any combination or abbreviation
thereof, as all or a portion of a corporate or business name or for any
commercial purpose, including a grant of such right to any other investment
company. At the request of DWR or its parent, the Trust will take such
action as may be required to provide its consent to the use by DWR or its
parent, or any corporate affiliate of DWR's parent, or by any person to
whom DWR or its parent or an affiliate of DWR's parent shall have granted
the right to the use, of the name "Dean Witter," or any combination
or abbreviation thereof. Upon the termination of any investment advisory
or investment management agreement into which DWR or an affiliate of DWR
and the Trust may enter, the Trust shall, upon request by DWR or its
parent, cease to use the name "Dean Witter" as a component of its name, and
shall not use the name, or any combination or abbreviation thereof, as a
part of its name or for any commercial purpose, and shall cause its
officers, trustees and shareholders to take any and all actions which DWR
or its parent may request to effect the foregoing and to reconvey to DWR or
its parent any and all rights to such name."
4. Section 11.8 of Article XI of the Declaration is hereby deleted.
5. The Trustees of the Trust hereby reaffirm the Declaration, as amended,
in all respects.
6. This Amendment may be executed in more than one counterpart, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
<PAGE>
IN WITNESS WHEREOF, the undersigned, a majority of the Trustees of the
Trust, have executed this instrument this 19th day of February , 1993.
/s/ JACK. F. BENNETT /s/ PAUL KOLTON
- ----------------------------------- ---------------------------------------
Jack F. Bennett, as Trustee Paul Kolton, as Trustee
and not individually and not individually
141 Taconic Road 9 Huntington Ridge Road
Greenwich, CT 06831 Stamford, CT 06903
/s/ ROBERT M. GARDINER /s/ CHARLES A. FIUMEFREDDO
- ----------------------------------- ---------------------------------------
Robert M. Gardiner, as Trustee Charles A. Fiumefreddo, as Trustee
and not individually and not individually
Two World Trade Center Two World Trade Center
New York, NY 10048 New York, NY 10048
/s/ JOHN R. HAIRE /s/ MICHAEL E. NUGENT
- ----------------------------------- ---------------------------------------
John R. Haire, as Trustee Michael E. Nugent, as Trustee
and not individually and not individually
439 East 51st Street 237 Park Avenue
New York, NY 10022 New York, NY 10017
/s/ ALBERT T. SOMMERS
- ----------------------------------- ---------------------------------------
John E. Jeuck, as Trustee Albert T. Sommers, as Trustee
and not individually and not individually
70 East Cedar Street 16 Bonnie Heights Road
Chicago, IL 60611 Manhasset, NY 11030
/s/ MANUEL H. JOHNSON /s/ EDWARD R. TELLING
- ----------------------------------- ---------------------------------------
Manuel H. Johnson, as Trustee Edward R. Telling, as Trustee
and not individually and not individually
7521 Old Dominion Dr. Sears, Roebuck and Co.
MacLean, VA 22102 Sears Tower, 68th Floor
Chicago, IL 60684
/s/ EDWIN J. GARN
- -----------------------------------
Edwin J. Garn, as Trustee
and not individually
2000 Eagle Gate Tower
Salt Lake City, Utah 84111
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK)
On this 19th day of February, 1993, CHARLES A. FIUMEFREDDO, JACK F.
BENNETT, EDWIN J. GARN, MICHAEL E. NUGENT, MANUEL H. JOHNSON, PAUL KOLTON,
ROBERT M. GARDINER, JOHN R. HAIRE, ALBERT T. SOMMERS and EDWARD R. TELLING,
known to me to be the individuals described in and who executed the foregoing
instrument, personally appeared before me and they severally acknowledged the
foregoing instrument to be their free act and deed.
/s/ MARILYN K. CRANNEY
-----------------------------
Notary Public
My commission expires:
<PAGE>
EXHIBIT 8
CUSTODY AGREEMENT
Agreement made as of this 20th day of September, 1991, between DEAN
WITTER SEARS CALIFORNIA TAX-FREE DAILY INCOME TRUST, a Massachusetts business
trust organized and existing under the laws of the Commonwealth of
Massachusetts, having its principal office and place of business at
2 World Trade Center, New York, New York 10048 (hereinafter called the "Fund"),
and THE BANK OF NEW YORK, a New York corporation authorized to do a banking
business, having its principal office and place of business at 48 Wall Street,
New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, shall
have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices and
Certifications described in the Exhibits delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether or not such person
is an Officer or employee of the Fund, duly authorized by the Board of Trustees
of the Fund to give Oral Instructions and Written Instructions on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time, provided that
each person who is designated in any such Certificate as an "Officer of DWTC"
shall be an Authorized Person only for purposes of Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
<PAGE>
4. "Call Option" shall mean an exchange traded option with respect to
Securities other than Index, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given
to the Custodian which is actually received (irrespective of constructive
receipt) by the Custodian and signed on behalf of the Fund by any two Officers.
The term Certificate shall also include instructions by the Fund to the
Custodian communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
10. "Financial Futures Contract" shall mean the firm commitment to buy or
sell financial instruments on a U.S. commodities exchange or board of trade at a
specified future time at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures Contract and/or
Index Futures Contracts.
- 2 -
<PAGE>
12. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
13. "Investment Company Act of 1940" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
14. "Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
index at the close of the last business day of the contract and the price at
which the futures contract is originally struck.
15. "Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or a Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's effecting an
appropriate entry in its books and records.
17. "Money Market Security" shall mean all instruments and obligations
commonly known as a money market instruments, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale, including, without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest and/or
principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to Securities and bank time deposits.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the
- 3 -
<PAGE>
Securities Exchange Act of 1934, its successor or successors, and its nominee or
nominees.
19. "Officers" shall mean the President, any Vice President, the
Secretary, the Clerk, the Treasurer, the Controller, any Assistant Secretary,
any Assistant Clerk, any Assistant Treasurer, and any other person or persons,
whether or not any such other person is an officer or employee of the Fund, but
in each case only if duly authorized by the Board of Trustees of the Fund to
execute any Certificate, instruction, notice or other instrument on behalf of
the Fund and listed in the Certificate annexed hereto as Appendix B or such
other Certificate as may be received by the Custodian from time to time;
provided that each person who is designated in any such Certificate as holding
the position of "Officer of DWTC" shall be an Officer only for purposes of
Articles XII and XIII hereof.
20. "Option" shall mean a Call Option, Covered Call Option, Index Option
and/or a Put Option.
21. "Oral Instructions" shall mean verbal instructions actually received
(irrespective of constructive receipt) by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an Authorized
Person.
22. "Put Option" shall mean an exchange traded option with respect to
instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the writer
thereof for the exercise price.
23. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
24. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Index Options, Index Futures
Contracts, Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, over the
counter options on Securities, common stocks and other securities having
characteristics similar to common stocks, preferred stocks, debt obligations
issued by state or municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds, industrial bonds
and industrial development bonds), bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe
- 4 -
<PAGE>
for the same, or evidencing or representing any other rights or interest
therein, or rights to any property or assets.
25. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
26. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund, except that if the Fund does not have more than one portfolio, "Series"
shall mean the Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only one portfolio.
27. "Shares" shall mean the shares of beneficial interest of the Fund and
its Series.
28. "Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each use of the
Terminal Link the use of an authorization code provided by the Custodian and at
least two access codes established by the Fund, provided, that the Fund shall
have delivered to the Custodian a Certificate substantially in the form of
Appendix C.
29. "Transfer Agent" shall mean Dean Witter Trust Company, a New Jersey
limited purpose trust company, its successors and assigns.
30. "Transfer Agent Account" shall mean any account in the name of the
Transfer Agent maintained with The Bank of New York pursuant to a Cash
Management and Related Services Agreement between The Bank of New York and the
Transfer Agent.
31. "Written Instructions" shall mean written communications actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an
Authorized Person by telex or any other such system whereby the receiver of such
communications is able to verify by codes or otherwise with a reasonable degree
of certainty the identity of the sender of such communication.
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ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated, and the Custodian shall not
be responsible for any Securities or money not so delivered. The Custodian shall
physically segregate, keep and maintain the Securities of the Series separate
and apart from each other Series and from other assets held by the Custodian.
Except as otherwise expressly provided in this Agreement, the Custodian will not
be responsible for any Securities and moneys not actually received by it, unless
the Custodian has been negligent or has engaged in willful misconduct with
respect thereto. The Custodian will be entitled to reverse any credits of money
made on the Fund's behalf where such credits have been previously made and
moneys are not finally collected, unless the Custodian has been negligent or has
engaged in willful misconduct with respect thereto. The Fund shall deliver to
the Custodian a certified resolution of the Board of Trustees of the Fund,
substantially in the form of Exhibit A hereto, approving, authorizing and
instructing the Custodian on a continuous and on-going basis to deposit in the
Book-Entry System all Securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated and to utilize the
Book-Entry System to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities and deliveries and
returns of Securities collateral. Prior to a deposit of Securities specifically
allocated to a Series in any Depository, the Fund shall deliver to the Custodian
a certified resolution of the Board of Trustees of the Fund,
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substantially in the form of Exhibit B hereto, approving, authorizing and
instructing the Custodian on a continuous and ongoing basis until instructed to
the contrary by a Certificate to deposit in such Depository all Securities
specifically allocated to such Series eligible for deposit therein, and to
utilize such Depository to the extent possible with respect to such Securities
in connection with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities collateral. Securities and
moneys deposited in either the Book-Entry System or a Depository will be
represented in accounts which include only assets held by the Custodian for
customers, including, but not limited to, accounts in which the Custodian acts
in a fiduciary or representative capacity and will be specifically allocated on
the Custodian's books to the separate account for the applicable Series. Prior
to the Custodian's accepting, utilizing and acting with respect to Clearing
Member confirmations for Options and transactions in Options for a Series as
provided in this Agreement, the Custodian shall have received a certified
resolution of the Fund's Board of Trustees, substantially in the form of Exhibit
C hereto, approving, authorizing and instructing the Custodian on a continuous
and on-going basis, until instructed to the contrary by a Certificate, to
accept, utilize and act in accordance with such confirmations as provided in
this Agreement with respect to such Series. All securities are to be held or
disposed of by the Custodian for, and subject at all times to the instructions
of, the Fund pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of any
Securities except as provided by the terms of this Agreement, and shall have the
sole power to release and deliver Securities held pursuant to this Agreement.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Such moneys will be held in such manner and account as the Fund and the
Custodian shall agree upon in writing from time to time. Money credited to a
separate account for a Series shall be subject only to drafts, orders, or
charges of the Custodian pursuant to this Agreement and shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Resolutions of the Fund's Board of Trustees certified
by an Officer and by the Secretary or Assistant Secretary of the Fund setting
forth the name and address of the person to whom the payment is to be made, the
Series account from which payment is to be made, the purpose for which payment
is to be made, and declaring such purpose to
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be a proper corporate purpose; provided, however, that amounts representing
dividends, distributions, or redemptions proceeds with respect to Shares
shall be paid only to the Transfer Agent Account;
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series and authorized by this
Agreement; or
(d) Pursuant to Certificates to pay interest, taxes, management fees
or operating expenses (including, without limitation thereto, Board of Trustees'
fees and expenses, and fees for legal accounting and auditing services), which
Certificates set forth the name and address of the person to whom payment is to
be made, state the purpose of such payment and designate the Series for whose
account the payment is to be made.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series but held in a Depository, the Custodian shall upon such
transfer also by book-entry or otherwise identify such Securities as belonging
to such Series in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or a
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in a Depository in a separate
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account in the name of such Series physically segregated at all times from those
of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income and dividends due or payable;
(b) Promptly give notice to the Fund and promptly present for payment
and collect the amount of money or other consideration payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix D annexed hereto, which may be amended at
any time by the Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for the Fund's account
the amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in exchange for
definitive Securities;
(e) Promptly execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series, all
rights and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered holder (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
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6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Promptly execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held hereunder for
the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
right, warrant or conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series in exchange
therefor such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount payable upon
Securities which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940 in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates in connection with any such purchase, sale, writing, settlement or
closing out upon its receipt from a broker, dealer, or futures commission
merchant of a statement or confirmation reasonably believed by the Custodian to
be in the form customarily used by brokers, dealers, or future
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commission merchants with respect to such Futures Contracts, Options, or Futures
Contract Options, as the case may be, confirming that such Security is held by
such broker, dealer or futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstanding the foregoing,
payments to or deliveries from the Margin Account and payments with respect to
Securities to which a Margin Account relates, shall be made in accordance with
the terms and conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall, notwithstanding
any provision in this Agreement to the contrary, make payment for any Futures
Contract, Option, or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the provisions of this
Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each execution of a purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, or a Futures Contract
Option, the Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each purchase of Money Market Securities, a Certificate,
Oral Instructions or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of such Securities purchased by or for
the Fund, pay to the broker specified in
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the Certificate out of the moneys held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate, Oral Instructions or Written
Instructions.
2. Promptly after each execution of a sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures Contract Option, or
any Reverse Repurchase Agreement, the Fund shall deliver such to the Custodian
(i) with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate, Oral Instructions or Written Instructions, specifying
with respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale and settlement; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series to the broker in
accordance with generally accepted street practices and as specified in the
Certificate upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by the Fund
other than a closing purchase transaction the Fund shall deliver to the
Custodian a Certificate specifying with respect to each Option purchased: (a)
the Series to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or Security underlying such
Option and the number of Options, or the name of the in the case of an Index
Option, the index to which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in connection
with such purchase; and (h) the name of the Clearing Member through whom such
Option was purchased. The Custodian shall pay, upon receipt of a Clearing
Member's statement confirming the purchase of such Option held by such Clearing
Member for the account of the Custodian (or any duly appointed and registered
nominee of the
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Custodian) as custodian for the Fund, out of moneys held for the account of the
Series to which such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Certificate.
2. Promptly after the execution of a sale of any Option purchased by the
Fund, other than a closing sale transaction, pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the instrument, currency, or Security
underlying such Option and the number of Options, or the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Index
Option, the index to which such Option relates and the number of Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which previously supplied
the confirmation described in preceding paragraph 1 of this Article with respect
to such Option against payment to the Custodian of the total amount payable to
the Fund, provided that the same conforms to the total amount payable as set
forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise
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and settlement; (e) the exercise price per share; (f) the total amount to be
paid to the Fund upon such exercise; and (g) the name of the Clearing Member
through whom such Put Option was exercised. The Custodian shall, upon receipt of
the amount payable upon the exercise of the Put Option, deliver or direct a
Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Index Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Index Option: (a) the
Series to which such Index Option was specifically allocated; (b) the type of
Index Option (put or call); (c) the number of Options being exercised; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct a
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
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Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct a Depository to deliver, the underlying Securities as specified in the
Certificate against payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate, against delivery of such
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Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) whether such
Index Option is a put or a call; (c) the number of options written; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the Clearing Member through whom such Option was written; (h) the
premium to be received by the Fund; (i) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian shall, upon
receipt of the premium specified in the Certificate, make the deposits, if any,
into the Senior Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian has specifically agreed to
issue, which are in accordance with the customs prevailing among Clearing
Members in Index Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever an Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option being exercised;
(c) the Clearing Member through whom such Index Option is being exercised; (d)
the total amount payable upon such exercise, and whether such amount is to be
paid by or to the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f) the amount
of cash and/or amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
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12. Promptly after the execution of a purchase or sale by the Fund of any
Option identical to a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was written; (c)
the instrument, currency, or Security subject to the Option, or, in the case of
an Index Option, the index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g) the type of Option
(put or call); (h) the date of such purchase or sale; (i) the name of the
Clearing Member to whom the premium is to be paid or from whom the amount is to
be received; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium or receipt of the amount, as the case may be,
specified in the Certificate and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the
Option being liquidated through the Closing Purchase Transaction or the Closing
Sale Transaction, the Custodian shall remove, or direct a Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an Option
described in this Article shall be subject to Article IV hereof.
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ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract,(or with respect to any number of identical Futures Contract(s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying index or financial instrument); (c)
the number of identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the Futures Contract(s)
was (were) entered into and the maturity date; (f) whether the Fund is buying
(going long) or selling (going short) such Futures Contract(s); (g) the amount
of cash and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract was entered into;
and (i) the amount of fee or commission, if any, to be paid and the name of the
broker, dealer, or futures commission merchant to whom such amount is to be
paid. The Custodian shall make the deposits, if any, to the Margin Account in
accordance with the terms and conditions of the Margin Account Agreement. The
Custodian shall make payment out of the moneys specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the amount of cash and/or
the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian prior to the delivery or
settlement date a Certificate specifying: (a) the Futures Contract and the
Series to which the same relates; (b) with respect to an Index Futures Contract,
the total cash settlement amount to be paid
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or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically allocated to such Series the total
amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
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<PAGE>
2. Promptly after the execution of a sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Future Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in
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the Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract
Option is exercised; (e) the net total amount, if any, payable to the Fund upon
such exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
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<PAGE>
7. Promptly after the execution by the Fund of a purchase of any Futures
Contract Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction
is a closing transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the Futures Contract underlying the
Futures Option Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or futures
commission merchant to whom the premium is to be paid; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of Securities by any
Series of the Fund, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b) the name of
the issuer and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale
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price per unit; (f) the total amount credited to the Fund upon such sale, if
any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. Promptly after the execution of a purchase to close-out any short sale
of Securities, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or the principal amount, and accrued interest
or dividends, if any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase price per
unit; (f) the net total amount payable to the Fund upon such closing-out; (g)
the net total amount payable to the broker upon such closing-out; (h) the amount
of cash and the amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The Custodian
shall, upon receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/ or cancellation of the receipts, if any, issued
by the Custodian with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.
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ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral Instructions, or
Written Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker, dealer, or financial institution with whom the Reverse
Repurchase Agreement is entered; (d) the amount and kind of Securities to be
delivered by the Fund to such broker, dealer, or financial institution; (e) the
date of such Reverse Repurchase Agreement; and (f) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in a Senior Security Account for such Series in connection with
such Reverse Repurchase Agreement. The Custodian shall, upon receipt of the
total amount payable to the Fund specified in the Certificate, Oral
Instructions, or Written Instructions make the delivery to the broker, dealer,
or financial institution and the deposits, if any, to the Senior Security
Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate, Oral Instructions, or Written Instructions to the
Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and
the Series for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in connection
with such termination; (d) the date of termination; (e) the name of the broker,
dealer, or financial institution with whom the Reverse Repurchase Agreement is
to be terminated; and (f) the amount of cash and/or the amount and kind of
Securities to be withdrawn from the Senior Securities Account for such Series.
The Custodian shall, upon receipt of the amount and kind of Securities to be
received by the Fund specified in the Certificate, Oral Instructions, or Written
Instructions, make the payment to the broker, dealer, or financial institution
and the withdrawals, if any, from the Senior Security Account, specified in such
Certificate, Oral Instructions, or Written Instructions.
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<PAGE>
3. The Certificates, Oral Instructions, or Written Instructions described
in paragraphs 1 and 2 of this Article may with respect to any particular Reverse
Repurchase Agreement be combined and delivered to the Custodian at the time of
entering into such Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated in the
Certificate as to be delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than through the
Book-Entry System or a Depository only in the form of a certified or bank
cashier's check payable to the order of the Fund or the Custodian drawn on New
York Clearing House funds.
2. In connection with each termination of a loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
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ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from time
to time make such deposits thereto, or withdrawals therefrom, as specified in a
Certificate. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from, a Senior
Securities Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such deposit
has been made.
2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the
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Margin Account; (b) the amount and kind of Securities held therein; and (c) the
amount of money held therein. The Custodian shall make available upon request to
any broker, dealer, or futures commission merchant specified in the name of a
Margin Account a copy of the statement furnished the Fund with respect to such
Margin Account.
6. The Custodian shall establish a Collateral Account and from time to
time shall make such deposits thereto as may be specified in a Certificate.
Promptly after the close of business on each business day in which cash
and/or Securities are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind
of Securities held therein. No later than the close of business next
succeeding the delivery to the Fund of such statement, the Fund shall furnish
to the Custodian a Certificate or Written Instructions specifying the then
market value of the Securities described in such statement. In the event such
then market value is indicated to be less than the Custodian's obligation
with respect to any outstanding Put Option guarantee letter or similar
document, the Fund shall promptly specify in a Certificate the additional
cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein and the declaration of dividends and
distributions thereon the Custodian to rely on Oral Instructions, Written
Instructions, or a Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.
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2. Upon the payment date specified in such resolution, Oral Instructions,
Written Instructions, or Certificate, as the case may be, the Custodian shall
pay to the Transfer Agent Account out of the moneys held for the account of the
Series specified therein the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause to
be delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall pay, out
of the money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish, or cause to be
furnished, to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent Account out of the moneys held in the separate
account in the name of the Series the total amount
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specified in the Certificate issued pursuant to the foregoing paragraph 4 of
this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient to
pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate, Oral Instructions, or
Written Instructions or which results in an overdraft in the separate account of
such Series for some other reason, or if the Fund is for any other reason
indebted to the Custodian with respect to a Series, (except a borrowing for
investment or for temporary or emergency purposes using Securities as collateral
pursuant to a separate agreement and subject to the provisions of paragraph 2 of
this Article), such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to the Federal Funds Rate plus 1/2%,
such rate to be adjusted on the effective date of any change in such Federal
Funds Rate but in no event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien and security
interest in the aggregate amount of such overdrafts and indebtedness as may from
time to time exist in and to any property specifically allocated to such Series
at any time held by it for the benefit of such Series or in which the Fund may
have an interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's behalf. The
Fund authorizes the Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due thereon against any
money balance of account standing to such Series' credit on the Custodian's
books. In addition, the Fund hereby covenants that on each Business Day on which
either it intends to enter a Reverse Repurchase Agreement and/or otherwise
borrow from a third party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repurchase Agreement or
such a borrowing, it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify the Series to which
the same relates, and shall not incur any indebtedness, including pursuant to
any Reverse Repurchase Agreement, not so specified other than from the
Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a
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separate agreement, the Custodian) from which it borrows money for investment or
for temporary or emergency purposes using Securities held by the Custodian
hereunder as collateral for such borrowings, a notice or undertaking in the form
currently employed by any such bank setting forth the amount which such bank
will loan to the Fund against delivery of a stated amount of collateral. The
Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to each such borrowing: (a) the Series to which such borrowing relates;
(b) the name of the bank, (c) the amount and terms of the borrowing, which may
be set forth by incorporating by reference an attached promissory note, duly
endorsed by the Fund, or other loan agreement, (d) the time and date, if known,
on which the loan is to be entered into, (e) the date on which the loan becomes
due and payable, (f) the total amount payable to the Fund on the borrowing date,
(g) the market value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a statement specifying
whether such loan is for investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the Investment Company Act of
1940 and the Fund's prospectus. The Custodian shall deliver on the borrowing
date specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at the option of the
lending bank, keep such collateral in its possession, but such collateral shall
be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered as
collateral by the Custodian, to any such bank, the Custodian shall not be under
any obligation to deliver any Securities.
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ARTICLE XV
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of its
duties hereunder, and, except as hereinafter provided, neither the Custodian nor
its nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence, bad faith, or willful misconduct or that of its
officers, employees, or agents. The Custodian may, with respect to questions of
law arising hereunder or under any Margin Account Agreement, apply for and
obtain the advice and opinion of counsel to the Fund, at the expense of the
Fund, or of its own counsel, at its own expense, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the Fund for any loss
or damage resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the part of the
Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall be under no
obligation to inquire into, and shall not be liable for:
(a) The validity (but not the authenticity) of the issue of any
Securities purchased, sold, or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount paid or
received therefor, as specified in a Certificate, Oral Instructions, or Written
Instructions;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor, as specified in a
Certificate;
(c) The legality of the declaration or payment of any dividend by the
Fund, as specified in a resolution, Certificate, Oral Instructions, or Written
Instructions;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall
the Custodian be under any duty or obligation to see to it that the cash
collateral delivered to it by a broker, dealer, or financial institution or
held by it at any time as a result of such loan of portfolio Securities of the
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Fund is adequate collateral for the Fund against any loss it might sustain as a
result of such loan, except that this sub-paragraph shall not excuse any
liability the Custodian may have for failing to act in accordance with Article X
hereof or any Certificate, Oral Instructions, or Written Instructions given in
accordance with this Agreement. The Custodian specifically, but not by way of
limitation, shall not be under any duty or obligation periodically to check or
notify the Fund that the amount of such cash collateral held by it for the Fund
is sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund, except that this
sub-paragraph shall not excuse any liability the Custodian may have for failing
to establish, maintain, make deposits to or withdrawals from such accounts in
accordance with this Agreement. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer, futures commission merchant
or Clearing Member makes payment to the Fund of any variation margin payment or
similar payment which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. With respect to Securities held in a Depository, except as otherwise
provided in paragraph 5(b) of Article III hereof, the Custodian shall have no
responsibility and shall not be liable for ascertaining or acting upon any
calls, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to such Securities, unless the Custodian shall have actually
received timely notice from the
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Depository in which such Securities are held. In no event shall the Custodian
have any responsibility or liability for the failure of a Depository to collect,
or for the late collection or late crediting by a Depository of any amount
payable upon Securities deposited in a Depository which may mature or be
redeemed, retired, called or otherwise become payable. However, upon receipt of
a Certificate from the Fund of an overdue amount on Securities held in a
Depository the Custodian shall make a claim against the Depository on behalf of
the Fund, except that the Custodian shall not be under any obligation to appear
in, prosecute or defend any action suit or proceeding in respect to any
Securities held by a Depository which in its opinion may involve it in expense
or liability, unless indemnity satisfactory to it against all expense and
liability be furnished as often as may be required, or alternatively, the Fund
shall be subrogated to the rights of the Custodian with respect to such claim
against the Depository should it so request in a Certificate. This paragraph
shall not, however, excuse any failure by the Custodian to act in accordance
with a Certificate, Oral Instructions, or Written Instructions given in
accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after the Custodian has timely
and properly, in accordance with this Agreement, made due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action, but the Custodian
shall have such a duty if the Securities were not in default on the payable date
and the Custodian failed to timely and properly make such demand for payment and
such failure is the reason for the non-receipt of payment.
7. The Custodian may appoint one or more banking institutions as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians including,
but not limited to, banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed institution.
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8. The Custodian agrees to indemnify the Fund against and save the Fund
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of the negligence, bad
faith or willful misconduct of any Sub-Custodian of the Securities and moneys
owned by the Fund, provided such Sub-Custodian is a banking institution located
in a foreign country and appointed by the Custodian pursuant to paragraph 7 of
this Article.
9. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it, for
the account of the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the provisions of its then
current prospectus, or (b) to ascertain whether any transactions by the Fund,
whether or not involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all reasonable out-of-pocket expenses and such compensation as
may be agreed upon from time to time between the Custodian and the Fund. The
Custodian may charge such compensation, and any such expenses with respect to a
Series incurred by the Custodian in the performance of its duties under this
Agreement against any money specifically allocated to such Series. The Custodian
shall also be entitled to charge against any money held by it for the account of
a Series the amount of any loss, damage, liability or expense, including counsel
fees, for which it shall be entitled to reimbursement under the provisions of
this Agreement attributable to, or arising out of, its serving as Custodian for
such Series. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund. Notwithstanding the foregoing or anything else contained
in this Agreement to the contrary, the Custodian shall, prior to effecting any
charge for compensation, expenses, or any overdraft or indebtedness or interest
thereon, submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing, Oral Instructions, or Written Instructions
received by the Custodian and reasonably believed by the Custodian to be
genuine. The Fund agrees to forward to the Custodian a Certificate or facsimile
thereof confirming Oral Instructions or Written Instructions in such manner so
that such Certificate or facsimile thereof is received by the Custodian, whether
by hand delivery, telecopier or other similar device,
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or otherwise, by the close of business of the same day that such Oral
Instructions or Written Instructions are given to the Custodian. The Fund agrees
that the fact that such confirming instructions are not received by the
Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions thereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions or Written Instructions given to the Custodian hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member. This paragraph shall not excuse any failure by the Custodian to
have acted in accordance with any Margin Agreement it has executed or any
Certificate, Oral Instructions, or Written Instructions given in accordance with
this Agreement.
13. The books and records pertaining to the Fund, as described in Appendix
E hereto, which are in the possession of the Custodian shall be the property of
the Fund. Such books and records shall be prepared and maintained by the
Custodian as required by the Investment Company Act of 1940, as amended, and
other applicable securities laws and rules and regulations. The Fund, or the
Fund's authorized representatives, shall have access to such books and records
during the Custodian's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by the Custodian to
the Fund or the Fund's authorized representative, and the Fund shall reimburse
the Custodian its expenses of providing such copies. Upon reasonable request of
the Fund, the Custodian shall provide in hard copy or on micro-film, whichever
the Custodian elects, any records included in any such delivery which are
maintained by the Custodian on a computer disc, or are similarly maintained, and
the Fund shall reimburse the Custodian for its expenses of providing such hard
copy or micro-film.
14. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
each Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
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15. The Custodian shall furnish upon request annually to the Fund a letter
prepared by the Custodian's accountants with respect to the Custodian's internal
systems and controls in the form generally provided by the Custodian to other
investment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising out of, or related to, the
Custodian's performance of its obligations under this Agreement, except for any
such liability, claim, loss and demand arising out of the Custodian's own
negligence, bad faith, or willful misconduct or that of its officers, employees,
or agents.
17. Subject to the foregoing provisions of this Agreement, the Custodian
shall deliver and receive Securities, and receipts with respect to such
Securities, and shall make and receive payments only in accordance with the
customs prevailing from time to time among brokers or dealers in such
Securities and, except as may otherwise be provided by this Agreement or as
may be in accordance with such customs, shall make payment for Securities only
against delivery thereof and deliveries of Securities only against payment
therefor.
18. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XVI
TERMINATION
1. Except as provided in paragraph 3 of this Article, this Agreement
shall continue until terminated by either the Custodian giving to the Fund, or
the Fund giving to the Custodian, a notice in writing specifying the date of
such termination, which date shall be not less than 60 days after the date of
the giving of such notice. In the event such notice or a notice pursuant to
paragraph 3 of this Article is given by the Fund, it shall be accompanied by a
copy of a resolution of the Board of Trustees of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be eligible to serve as a custodian for the securities of a
management investment company under the Investment Company Act of 1940. In the
event such notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the Board
of Trustees
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<PAGE>
of the Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian which shall be a bank or
trust company having not less than $2,000,000 aggregate capital, surplus and
undivided profits. Upon the date set forth in such notice this
Agreement shall terminate, and the Custodian shall upon receipt of a notice
of acceptance by the successor custodian on that date deliver directly to
the successor custodian all Securities and moneys then owned by the Fund and
held by it as Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall then be
entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall
upon the date specified in the notice of termination of this Agreement and
upon the delivery by the Custodian of all Securities (other than Securities
held in the Book-Entry System which cannot be delivered to the Fund)
and moneys then owned by the Fund be deemed to be its own custodian and the
Custodian shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement, other than the duty with respect to Securities
held in the Book Entry System which cannot be delivered to the Fund to
hold such Securities hereunder in accordance with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this Agreement
upon the date specified in a written notice in the event of the "Bankruptcy" of
The Bank of New York. As used in this sub-paragraph, the term "Bankruptcy" shall
mean The Bank of New York's making a general assignment, arrangement or
composition with or for the benefit of its creditors, or instituting or having
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or the entry of a order for relief under any applicable bankruptcy
law or any other relief under any bankruptcy or insolvency law or other similar
law affecting creditors' rights, or if a petition is presented for the winding
up or liquidation of the party or a resolution is passed for its winding up or
liquidation, or it seeks, or becomes subject to, the appointment of an
administrator, receiver, trustee, custodian or other similar official for it or
for all or substantially all of its assets or its taking any action in
furtherance or, or indicating its consent to approval of, or acquiescence in,
any of the foregoing.
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ARTICLE XVII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to
have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to and to receive notices
from the Custodian.
2. The parties hereto shall utilize the Terminal Link only for the
purpose of the Fund providing Certificates to the Custodian and the Custodian
providing notices to the Fund and only after the Fund and the Custodian shall
have established access codes and internal safekeeping procedures to safeguard
and protect the confidentiality and availability of such access codes. Each use
of the Terminal Link by the Fund shall constitute a representation and warranty
that at least two such access codes have been utilized and that such procedures
have been established.
3. Each party shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the other party shall not be
responsible for the reliability or availability of any such equipment or
services, except that the Custodian shall not pay any communications costs of
any line leased by the Fund, even if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made available as part of,
or through the Terminal and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, each Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its control, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
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<PAGE>
6. The Custodian reserves the right to modify the Terminal Link from time
to time without notice to the Fund, except that the Custodian shall give the
Fund notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees not to
modify or attempt to modify the Terminal Link without the Bank's prior written
consent. The Fund acknowledges that the Terminal Link is the property of the
Custodian and, accordingly, the Fund agrees that any modifications to the
Terminal Link, whether by the Fund or the Custodian and whether with or without
the Custodian's consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes
or the Fund utilizes in connection with the Terminal Link makes any warranties
or representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. Each party will, and will cause its officers and employees to, treat
the user and authorization codes, passwords and authentication keys applicable
to Terminal Link with extreme care. Each party hereby irrevocably authorizes the
other to act in accordance with and rely on Certificates and notices received by
it through the Terminal Link. Each party acknowledges that it is its
responsibility to assure that only its authorized persons use the Terminal Link
on its behalf, and that a party shall not be responsible nor liable for use of
the Terminal Link on its behalf of the other party by unauthorized persons
except that the other party shall be liable for such use thereof by unauthorized
persons who have obtained access thereto as a result of the bad faith or willful
misconduct of such party or any of its officers or employees.
9. Notwithstanding anything else in this Agreement to the contrary,
neither party shall have any liability to the other for any losses, damages,
injuries, claims, costs or expenses arising as a result of a delay, omission or
error in the transmission of a Certificate or notice by use of the Terminal Link
except for money damages for those suffered as the result of the negligence, bad
faith or willful misconduct of such party or its officers, employees or agents
in an amount not exceeding for any incident $100,000, provided, however, that a
party shall have no liability under this Section 9 if the other party fails to
comply with the provisions of Section 11.
10. Without limiting the generality of the foregoing, it is hereby agreed
that in no event shall either party or any manufacturer or supplier of its
computer equipment, software or services relating to the Terminal Link be
responsible for
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<PAGE>
any special, indirect, incidental or consequential damages which the other party
may incur or experience by reason of its use of the Terminal Link even if such
party, manufacturer or supplier has been advised of the possibility of such
damages, nor with respect to the use of the Terminal Link shall either party or
any such manufacturer or supplier be liable for acts of God, or with respect to
the following to the extent beyond such person's reasonable control: machine or
computer breakdown or malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the business day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the Custodian learns
of any errors, omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. Each party shall, as soon as practicable after its receipt of a
Certificate or of any notice transmitted by the Terminal Link, verify to the
other party by use of the Terminal Link its receipt of such Certificate or
notice, and in the absence of such verification a party to whom a Certificate or
notice is sent shall not be liable for any failure to act in accordance with
such Certificate or notice, and the sending party may not claim that such
Certificate or notice was received by the other.
ARTICLE XVIII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be entitled to rely and to
act upon Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in the last delivered Certificate to the extent
provided by this Agreement.
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<PAGE>
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
Officer ceases to be an Officer of the Fund, or in the event that other or
additional Officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be entitled to rely and to act upon the
signatures of the Officers as set forth in the last delivered Certificate to the
extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, other than any Certificate or
Written Instructions, shall be sufficiently given if addressed to the Custodian
and mailed or delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from time to time
designate in writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund,
except that Appendices A and B may be amended unilaterally by the Fund without
such an approving resolution.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian or The Bank of New York without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Trustees. For purposes of this paragraph, no merger,
consolidation, or amalgamation of the Custodian, The Bank of New York, or the
Fund shall be deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
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<PAGE>
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DEAN WITTER/SEARS CALIFORNIA TAX-FREE
DAILY INCOME TRUST
[SEAL] By:_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
_______________________
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<PAGE>
APPENDIX A
I, , President and I, ,
of , a Massachusetts business trust (the
"Fund"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of Trust and
By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund, except that those persons designated as being an "Officer of DWTC" shall
be an Authorized Person only for purposes of Articles XII and XIII. The
signatures set forth opposite their respective names are their true and correct
signatures:
Name Position Signature
_________________ ________________ _________________
<PAGE>
APPENDIX B
I, , President and I, ,
of , a Massachusetts business trust (the
"Fund"), do hereby certify that:
The following individuals for whom a position other than "Officer of DWTC"
is specified serve in the following positions with the Fund and each has been
duly elected or appointed by the Board of Trustees of the Fund to each such
position and qualified therefor in conformity with the Fund's Declaration of
Trust and By-Laws. With respect to the following individuals for whom a position
of "Officer of DWTC" is specified, each such individual has been designated by a
resolution of the Board of Trustees of the Fund to be an Officer for purposes of
the Fund's Custody Agreement with The Bank of New York, but only for purposes of
Articles XII and XIII thereof and a certified copy of such resolution is
attached hereto. The signatures of each individual below set forth opposite
their respective names are their true and correct signatures:
Name Position Signature
____________________ ___________________ _________________
<PAGE>
APPENDIX C
The undersigned, hereby certifies that he or she is
the duly elected and acting of (the "Fund"), further
certifies that the following resolutions were adopted by the Board of
Trustees of the Fund at a meeting duly held on , 1991, at which a
quorum at all times present and that such resolutions have not been modified
or rescinded and are in full force an effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of ,
1991 (the "Custody Agreement") is authorized and instructed on a continuous
and ongoing basis to act in accordance with, and to rely on instructions by
the Fund to the Custodian communicated by a Terminal Link as defined in the
Custody Agreement.
RESOLVED, that the Fund shall establish access codes and grant use of
such access codes only to officers of the Fund as defined in the Custody
Agreement, and shall establish internal safekeeping procedures to safeguard
and protect the confidentiality and availability of such access codes.
RESOLVED, that Officers of the Fund as defined in the Custody Agreement
shall, following the establishment of such access codes and such internal
safekeeping procedures, advise the Custodian that the same have been
established by delivering a Certificate, as defined in the Custody Agreement,
and the Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of , as
of the day of , 1991.
------------------
<PAGE>
APPENDIX D
I, Richard P. Lando, an Assistant Vice President with THE BANK OF NEW YORK
do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be prepared
and maintained by the Custodian and shall be the property of the Fund:
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of , a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1991, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that the Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to deposit in the Book-Entry
System, as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 1991.
-------------------
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of , a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1991, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that the Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in The Depository Trust Company ("DTC"), as a
"Depository" as defined in the Custody Agreement, all securities eligible
for deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilized DTC to the extent possible in
connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 1991.
-------------------
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of , a
Massachusetts business Trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1991, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that the Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Participants Trust Company as a Depository,
as defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Particpants Trust Company to the extent
possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and sales
of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 1991.
-------------------
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of , a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 1991, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that the Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 1991, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary, to accept, utilize and act with respect to Clearing Member
confirmations for Options and transaction in Options, regardless of the
Series to which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 1991.
-------------------
[SEAL]
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995 by and between Dean Witter
InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a Delaware corporation
(herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement") with
certain investment companies as set forth on Schedule A (each such investment
company being herein referred to as a "Fund" and, collectively, as the "Funds")
pursuant to which InterCapital is to perform, or supervise the performance of,
among other services, administrative services for the Funds (and, in the case of
Funds with multiple portfolios, the Series or Portfolios of the Funds (such
Series and Portfolio being herein individually referred to as "a Series" and,
collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice); (ii)
provide the Fund with full administrative services, including the maintenance of
certain books and records, such as journals, ledger accounts and other records
required under the Investment Company Act of 1940, as amended (the "Act"), the
notification to the Fund and InterCapital of available funds for investment, the
reconciliation of account information and balances among the Fund's custodian,
transfer agent and dividend disbursing agent and InterCapital, and the
calculation of the net asset value of the Fund's shares; (iii) provide the Fund
with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary to provide effective
operation of the Fund; (iv) oversee the performance of administrative and
professional services rendered to the Fund by others, including its custodian,
transfer agent and dividend disbursing agent, as well as accounting, auditing
and other services; (v) provide the Fund with adequate general office space and
facilities; (vi) assist in the preparation and the printing of the periodic
updating of the Fund's registration statement and prospectus (and, in the case
of an open-end Fund, the statement of additional information), tax returns,
proxy statements, and reports to its shareholders and the Securities and
Exchange Commission; and (vii) monitor the compliance of the Fund's investment
policies and restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to perform
administrative services hereunder, it shall notify DWS in writing. If DWS is
willing to render such services, it shall notify InterCapital in writing,
whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to time
determine to be necessary or useful to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, the staff and
personnel of DWS shall be deemed to include officers of DWS and persons employed
or otherwise retained by DWS (including officers and employees of InterCapital,
with the consent of InterCapital) to furnish services, statistical and other
factual data, information with respect to technical and scientific developments,
and such other information, advice and assistance as DWS may desire. DWS shall
maintain each Fund's records and books of account (other than those maintained
by the Fund's transfer agent, registrar, custodian and other agencies). All such
books and records so maintained shall be the property of the Fund and, upon
request therefor, DWS shall surrender to InterCapital or to the Fund such of the
books and records so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other information
relating to the business and affairs of the Fund as DWS may reasonably require
in order to discharge its duties and obligations to the Fund under this
Agreement or to comply with any applicable law and regulation or request of the
Board of Directors/Trustees of the Fund.
1
<PAGE>
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of a
closed-end Fund) by applying the annual rate or rates set forth on Schedule B to
the net assets of each Fund. Except as hereinafter set forth, (i) in the case of
an open-end Fund, compensation under this Agreement shall be calculated by
applying 1/365th of the annual rate or rates to the Fund's or the Series' daily
net assets determined as of the close of business on that day or the last
previous business day and (ii) in the case of a closed-end Fund, compensation
under this Agreement shall be calculated by applying the annual rate or rates to
the Fund's average weekly net assets determined as of the close of the last
business day of each week. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth on
Schedule B. Subject to the provisions of paragraph 5 hereof, payment of DWS'
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund and/or any Series thereof imposed by
state securities laws or regulations thereunder, as such limitations may be
raised or lowered from time to time, or, in the case of InterCapital Income
Securities Inc. or Dean Witter Variable Investment Series or any Series thereof,
the expense limitation specified in the Fund's Investment Management Agreement,
the fee payable hereunder shall be reduced on a pro rata basis in the same
proportion as the fee payable by the Fund under the Investment Management
Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by DWS,
and such clerical help and bookkeeping services as DWS shall reasonably require
in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations hereunder,
DWS shall not be liable to the Fund or any of its investors for any error of
judgment or mistake of law or for any act or omission by DWS or for any losses
sustained by the Fund or its investors. It is understood that, subject to the
terms and conditions of the Investment Management Agreement between each Fund
and InterCapital, InterCapital shall retain ultimate responsibility for all
services to be performed hereunder by DWS. DWS shall indemnify InterCapital and
hold it harmless from any liability that InterCapital may incur arising out of
any act or failure to act by DWS in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person controlling,
controlled by or under common control with DWS, and that DWS and any person
controlling, controlled by or under common control with DWS may have an interest
in the Fund. It is also understood that DWS and any affiliated persons thereof
or any persons controlling, controlled by or under common control with DWS have
and may have advisory, management, administration service or other contracts
with other organizations and persons, and may have other interests and
businesses, and further may purchase, sell or trade any securities or
commodities for their own accounts or for the account of others for whom they
may be acting.
9. This Agreement shall continue until April 30, 1995, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the event that the Investment Management
Agreement between any Fund and InterCapital is terminated, this Agreement will
automatically terminate with respect to such Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
2
<PAGE>
11. This Agreement may be assigned by either party with the written consent
of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By:
. . . . . . . . . . . . . .
Attest:
. . . . . . . . . . . . . . . . . . . . .
DEAN WITTER SERVICES COMPANY INC.
By:
. . . . . . . . . . . . . .
Attest:
. . . . . . . . . . . . . . . . . . . . .
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
at April 17, 1995
Open-End Funds
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter Balanced Growth Fund
7. Dean Witter Balanced Income Fund
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter California Tax-Free Income Fund
10. Dean Witter Capital Growth Securities
11. Dean Witter Convertible Securities Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter Diversified Income Trust
14. Dean Witter Dividend Growth Securities Inc.
15. Dean Witter European Growth Fund Inc.
16. Dean Witter Federal Securities Trust
17. Dean Witter Global Asset Allocation Fund
18. Dean Witter Global Dividend Growth Securities
19. Dean Witter Global Short-Term Income Fund Inc.
20. Dean Witter Global Utilities Fund
21. Dean Witter Health Sciences Trust
22. Dean Witter High Income Securities
23. Dean Witter High Yield Securities Inc.
24. Dean Witter Intermediate Income Securities
25. Dean Witter International Small Cap Fund
26. Dean Witter Limited Term Municipal Trust
27. Dean Witter Liquid Asset Fund Inc.
28. Dean Witter Managed Assets Trust
29. Dean Witter Mid-Cap Growth Fund
30. Dean Witter Multi-State Municipal Series Trust
31. Dean Witter National Municipal Trust
32. Dean Witter Natural Resource Development Securities Inc.
33. Dean Witter New York Municipal Money Market Trust
34. Dean Witter New York Tax-Free Income Fund
35. Dean Witter Pacific Growth Fund Inc.
36. Dean Witter Precious Metals and Minerals Trust
37. Dean Witter Premier Income Trust
38. Dean Witter Retirement Series
39. Dean Witter Select Dimensions Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Short-Term Bond Fund
42. Dean Witter Short-Term U.S. Treasury Trust
43. Dean Witter Strategist Fund
44. Dean Witter Tax-Exempt Securities Trust
45. Dean Witter Tax-Free Daily Income Trust
46. Dean Witter U.S. Government Money Market Trust
47. Dean Witter U.S. Government Securities Trust
48. Dean Witter Utilities Fund
49. Dean Witter Value-Added Market Series
50. Dean Witter Variable Investment Series
51. Dean Witter World Wide Income Trust
52. Dean Witter World Wide Investment Trust
Closed-End Funds
53. High Income Advantage Trust
54. High Income Advantage Trust II
55. High Income Advantage Trust III
56. InterCapital Income Securities Inc.
57. Dean Witter Government Income Trust
58. InterCapital Insured Municipal Bond Trust
59. InterCapital Insured Municipal Trust
60. InterCapital Insured Municipal Income Trust
61. InterCapital California Insured Municipal Income Trust
62. InterCapital Insured Municipal Securities
63. InterCapital Insured California Municipal Securities
64. InterCapital Quality Municipal Investment Trust
65. InterCapital Quality Municipal Income Trust
66. InterCapital Quality Municipal Securities
67. InterCapital California Quality Municipal Securities
68. InterCapital New York Quality Municipal Securities
4
<PAGE>
SCHEDULE B
DEAN WITTER SERVICES COMPANY INC.
Schedule of Administrative Fees--April 17, 1995
Monthly compensation calculated daily by applying the following annual
rates to a fund's net assets:
FIXED INCOME FUNDS
Dean Witter Balanced Income Fund 0.60% to the net assets.
Dean Witter California Tax-Free 0.055% of the portion of daily net assets not
Income Fund exceeding $500 million; 0.0525% of the
portion exceeding $500 million but not
exceeding $750 million; 0.050% of the portion
exceeding $750 million but not exceeding $1
billion; and 0.0475% of the portion of the
daily net assets exceeding $1 billion.
Dean Witter Convertible 0.060% of the portion of the daily net
Securities Securities Trust assets not exceeding $750 million; .055% of
the portion of the daily net assets exceeding
$750 million but not exceeding $1 billion;
0.050% of the portion of the daily net assets
of the exceeding $1 billion but not exceeding
$1.5 billion; 0.0475% of the portion of the
daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.045% of the
portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and
0.0425% of the portion of the daily net
assets exceeding $3 billion.
Dean Witter Diversified 0.040% of the net assets.
Income Trust
Dean Witter Federal Securities 0.055% of the portion of the daily net assets
Trust not exceeding $1 billion; 0.0525% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.5 billion;
0.050% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2
billion; 0.0475% of the portion of the daily
net assets exceeding $2 billion but not
exceeding $2.5 billion; 0.045% of the portion
of daily net assets exceeding $2.5 billion
but not exceeding $5 billion; 0.0425% of the
portion of the daily net assets exceeding $5
billion but not exceeding $7.5 billion;
0.040% of the portion of the daily net assets
exceeding $7.5 billion but not exceeding $10
billion; 0.0375% of the portion of the daily
net assets exceeding $10 billion but not
exceeding $12.5 billion; and 0.035% of the
portion of the daily net assets exceeding
$12.5 billion.
Dean Witter Global Short-Term 0.055% of the portion of the daily net
Income Fund assets not exceeding $500 million; and 0.050%
of the portion of the daily net assets
exceeding $500 million.
Dean Witter High Income 0.050% to the net assets.
Securities
Dean Witter High Yield 0.050% of the portion of the daily net
Securities Inc. assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of
B-1
<PAGE>
the daily net assets exceeding $1 billion but
not exceeding $2 billion; 0.0325% of the
portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and
0.030% of the portion of daily net assets
exceeding $3 billion.
Dean Witter Intermediate 0.060% of the portion of the daily net
Income Securities assets not exceeding $500 million; 0.050% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.040% of the portion of the daily net assets
exceeding $750 million but not exceeding $1
billion; and 0.030% of the portion of the
daily net assets exceeding $1 billion.
Dean Witter Limited Term 0.050% to the net assets.
Municipal Trust
Dean Witter Multi-State 0.035% to the net assets.
Municipal Series Trust (10)
Dean Witter National 0.035% to the net assets.
Municipal Trust
Dean Witter New York Tax-Free 0.055% to the net assets not exceeding
Income Fund $500 million and 0.0525% of the net assets
exceeding $500 million.
Dean Witter Premier 0.050% to the net assets.
Income Trust
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities
Trust
Dean Witter Select Dimensions 0.65% to the net assets.
Series-North American
Government Securities
Portfolio
Dean Witter Short-Term 0.070% to the net assets.
Bond Fund
Dean Witter Short-Term U.S. 0.035% to the net assets.
Treasury Trust
Dean Witter Tax-Exempt 0.050% of the portion of the daily net assets
Securities Trust not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; and 0.035% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.25 billion;
.0325% of the portion of the daily net assets
exceeding $1.25 billion.
Dean Witter U.S. Government 0.050% of the portion of such daily net
Securities Trust assets not exceeding $1 billion; 0.0475% of
the portion of such daily net assets
exceeding $1 billion but not exceeding $1.5
billion; 0.045% of the portion of such daily
net assets exceeding $1.5 billion but not
exceeding $2 billion; 0.0425% of the portion
of such daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.040% of
that portion of such daily net assets
exceeding $2.5 billion but not exceeding $5
billion; 0.0375% of that portion
B-2
<PAGE>
of such daily net assets exceeding $5 billion
but not exceeding $7.5 billion; 0.035% of
that portion of such daily net assets
exceeding $7.5 billion but not exceeding $10
billion; 0.0325% of that portion of such
daily net assets exceeding $10 billion but
not exceeding $12.5 billion; and 0.030% of
that portion of such daily net assets
exceeding $12.5 billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-High Yield
Dean Witter Variable Investment 0.050% to the net assets.
Series-Quality Income
Dean Witter World Wide Income 0.075% of the daily net assets up to
Trust $250 million; 0.060% of the portion of the
daily net assets exceeding $250 million but
not exceeding $500 million; 0.050% of the
portion of the daily net assets of the
exceeding $500 million but not exceeding $750
milliion; 0.040% of the portion of the daily
net assets exceeding $750 million but not
exceeding $1 billion; and 0.030% of the daily
net assets exceeding $1 billion.
Dean Witter Select Municipal 0.050% to the net assets.
Reinvestment Fund
EQUITY FUNDS
Dean Witter American Value 0.0625% of the portion of the daily net
Fund assets not exceeding $250 million and 0.050%
of the portion of the daily net assets
exceeding $250 million.
Dean Witter Balanced Growth 0.60% to the net assets.
Fund
Dean Witter Capital Growth 0.065% to the portion of daily net assets
Securities not exceeding $500 million; 0.055% of the
portion exceeding $500 million but not
exceeding $1 billion; 0.050% of the portion
exceeding $1 billion but not exceeding $1.5
billion; and 0.0475% of the net assets
exceeding $1.5 billion.
Dean Witter Developing Growth 0.050 of the portion of daily net
Securities Trust assets not exceeding $500 million; and
0.0475% of the portion of daily net assets
exceeding $500 million.
Dean Witter Dividend Growth 0.0625% of the portion of the daily net
Securities Inc. assets not exceeding $250 million; 0.050% of
the portion exceeding $250 million but not
exceeding $1 billion; 0.0475% of the portion
of daily net assets exceeding $1 billion but
not exceeding $2 billion; 0.045% of the
portion of daily net assets exceeding $2
billion but not exceeding $3 billion; 0.0425%
of the portion of daily net assets exceeding
$3 billion but not exceeding $4 billion;
0.040% of the portion of daily net assets
exceeding $4 billion but not exceeding $5
billion; 0.0375% of the portion of the daily
net assets exceeding $5 billion but not
exceeding $6 billion; 0.035% of the portion
of the daily net assets exceeding $6 billion
but not exceeding $8 billion; and 0.0325% of
the portion of the daily net assets exceeding
$8 billion.
B-3
<PAGE>
Dean Witter European Growth 0.060% of the portion of daily net
Fund Inc. assets not exceeding $500 million; and 0.057%
of the portion of daily net assets exceeding
$500 million.
Dean Witter Global Asset 1.0% to the net assets.
Allocation Fund
Dean Witter Global Dividend 0.075% to the net assets.
Growth Securities
Dean Witter Global Utilities 0.065% to the net assets.
Fund
Dean Witter Health Sciences Trust 0.10% to the net assets.
Dean Witter International 0.075% to the net assets.
Small Cap Fund
Dean Witter Managed Assets Trust 0.060% to the daily net assets not exceeding
$500 million and 0.055% to the daily net
assets exceeding $500 million.
Dean Witter Mid-Cap Growth Fund 0.75% to the net assets.
Dean Witter Natural Resource 0.0625% of the portion of the daily net
Development Securities Inc. assets not exceeding $250 million and 0.050%
of the portion of the daily net assets
exceeding $250 million.
Dean Witter Pacific Growth 0.060% of the portion of daily net assets
Fund Inc. not exceeding $1 billion; and 0.057% of the
portion of daily net assets exceeding $1
billion.
Dean Witter Precious Metals 0.080% to the net assets.
and Minerals Trust
Dean Witter Retirement Series 0.085% to the net assets.
American Value
Dean Witter Retirement Series 0.085% to the net assets.
Capital Growth
Dean Witter Retirement Series 0.075% to the net assets.
Dividend Growth
Dean Witter Retirement Series 0.10% to the net assets.
Global Equity
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income Securities
Dean Witter Retirement Series 0.050% to the net assets.
Liquid Asset
Dean Witter Retirement Series 0.085% to the net assets.
Strategist
Dean Witter Retirement Series 0.050% to the net assets.
U.S. Government Money Market
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities
Dean Witter Retirement Series 0.075% to the net assets.
Utilities
B-4
<PAGE>
Dean Witter Retirement Series 0.050% to the net assets.
Value Added
Dean Witter Select Dimensions
Series-
American Value 0.625% to the net assets.
Portfolio Balanced Portfolio 0.75% to the net assets.
Core Equity Portfolio 0.85% to the net assets.
Developing Growth Portfolio 0.50% to the net assets.
Diversified Income Portfolio 0.40% to the net assets.
Dividend Growth Portfolio 0.625% to the net assets.
Emerging Markets Portfolio 1.25% to the net assets.
Global Equity Portfolio 1.0% to the net assets.
Utilities Portfolio 0.65% to the net assets.
Value-Added Market Portfolio 0.50% to the net assets.
Dean Witter Strategist Fund 0.060% of the portion of daily net assets not
exceeding $500 million; 0.055% of the portion
of the daily net assets exceeding $500
million but not exceeding $1 billion; and
0.050% of the portion of the daily net assets
exceeding $1 billion.
Dean Witter Utilities Fund 0.065% of the portion of daily net assets not
exceeding $500 million; 0.055% of the portion
exceeding $500 million but not exceeding $1
billion; 0.0525% of the portion exceeding $1
billion but not exceeding $1.5 billion;
0.050% of the portion exceeding $1.5 billion
but not exceeding $2.5 billion; 0.0475% of
the portion exceeding $2.5 billion but not
exceeding $3.5 billion; 0.045% of the portion
of the daily net assets exceeding $3.5 but
not exceeding $5 billion; and 0.0425% of the
portion of daily net assets exceeding $5
billion.
Dean Witter Value-Added Market 0.050% of the portion of daily net assets
Series not exceeding $500 million; and 0.45% of the
portion of daily net assets exceeding $500
million.
Dean Witter Variable Investment 0.065% to the net assets.
Series-Capital Growth
Dean Witter Variable Investment 0.0625% of the portion of daily net
Series-Dividend Growth assets not exceeding $500 million; and 0.050%
of the portion of daily net assets exceeding
$500 million.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Equity
Dean Witter Variable Investment 0.060% to the net assets.
Series-European Growth
Dean Witter Variable Investment 0.050% to the net assets.
Series-Managed
Dean Witter Variable Investment 0.065% of the portion of daily net assets
Series-Utilities exceeding $500 million and 0.055% of the
portion of daily net assets exceeding $500
million.
Dean Witter World Wide 0.055% of the portion of daily net assets
Investment Trust not exceeding $500 million; and 0.05225% of
the portion of daily net assets exceeding
$500 million.
B-5
<PAGE>
MONEY MARKET FUNDS
Active Assets Account (4) 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter California Tax-Free 0.050% of the portion of the daily net
Daily Income Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter Liquid Asset 0.050% of the portion of the daily net
Fund Inc. assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.35 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.35 billion but not exceeding $1.75
billion; 0.030% of the portion of the daily
net assets exceeding $1.75 billion but not
exceeding $2.15 billion; 0.0275% of the
portion of the daily net assets exceeding
$2.15 billion but not exceeding $2.5 billion;
0.025% of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $15
billion; 0.0249% of the portion of the daily
net assets exceeding $15 billion but not
exceeding $17.5 billion; and 0.0248% of the
portion of the daily net assets exceeding
$17.5 billion.
Dean Witter New York Municipal 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 bil-
B-6
<PAGE>
lion but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3
billion; and 0.025% of the portion of the
daily net assets exceeding $3 billion.
Dean Witter Retirement Series 0.050% of the net assets.
Liquid Assets
Dean Witter Retirement Series 0.050% of the net assets.
U.S. Government Money Market
Dean Witter Select Dimensions 0.50% to the net assets.
Series-
Money Market Portfolio
Dean Witter Tax-Free Daily 0.050% of the portion of the daily net
Income Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter U.S. Government 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Money Market
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
CLOSED-END FUNDS
Dean Witter Government Income 0.060% to the average weekly net assets.
Trust
High Income Advantage Trust 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of average weekly net assets
exceeding
B-7
<PAGE>
$750 million and not exceeding $1 billion;
and 0.030% of the portion of average weekly
net assets exceeding $1 billion.
High Income Advantage Trust II 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of average weekly net assets
exceeding $750 million and not exceeding $1
billion; and 0.030% of the portion of average
weekly net assets exceeding $1 billion.
High Income Advantage Trust III 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of the average weekly net assets
exceeding $750 million and not exceeding $1
billion; and 0.030% of the portion of average
weekly net assets exceeding $1 billion.
InterCapital Income Securities 0.050% to the average weekly net assets.
Inc.
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Bond Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital California Insured 0.035% to the average weekly net assets.
Municipal Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Investment Trust
InterCapital New York Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Securities
InterCapital California Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Securities
InterCapital Insured California 0.035% to the average weekly net assets.
Municipal Securities
B-8
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 8 to the registration statement on Form N-1A
(the "Registration Statement") of our report dated February 7, 1996, relating
to the financial statements and financial highlights of Dean Witter California
Tax-Free Daily Income Trust, which appears in such Prospectus, and to the
incorporation by reference of our report into the Statement of Additional
Information which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Financial Highlights"
in such Prospectus and to the references to us under the headings "Experts"
and "Independent Accountants" in such Statement of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 23, 1996
<PAGE>
DEAN WITTER CALIFORNIA TAX-FREE DAILY INCOME TRUST
Exhibit 16: Schedule for computation of each performance
quotation provided in the Statement of Additional Information.
(16) The Trust's current yield for the seven days ending
December 31, 1995
(A-B) x 365/N
(1.000681 -1) x 365/7 = 3.55%
The Trust's effective annualized yield for the seven days ending
December 31, 1995
365/N
A - 1
365/7
1.000681 - 1 = 3.61%
A = Value of a share of the Trust at end of period.
B = Value of a share of the Trust at beginning of period.
N = Number of days in the period.
CALCULATION Tax equivalent Yield = 6.72% Based on a tax
= bracket of 46.244%
(1.000681 -1) x 365/7
= 3.55%
((1.000681) x 52.1428714-1)
= 3.61%
TAX BRACKET : 46.244%
FORMULA (CURRENT 7 DAY YIELD / 1-46.244)
CURRENT 7 DAY YIELD : 3.55
3.61/53.756
= 6.60%
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER CALIFORNIA TAX FREE DAILY INCOME TRUST
(A) GROWTH OF $10,000
(B) GROWTH OF $50,000
(C) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
INVESTED - P TOTAL
$10,000, $50,000 & RETURN - TR (A) GROWTH OF (B) GROWTH OF (C) GROWTH OF
$100,000 31-Dec-95 $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ----------- ----------- --------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
31-Jul-88 29.46 $12,946 $64,730 $129,460
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 254,409,570
<INVESTMENTS-AT-VALUE> 254,409,570
<RECEIVABLES> 1,364,636
<ASSETS-OTHER> 93,480
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 255,867,686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,491,335
<TOTAL-LIABILITIES> 1,491,335
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 254,377,102
<SHARES-COMMON-STOCK> 254,377,102
<SHARES-COMMON-PRIOR> 217,079,663
<ACCUMULATED-NII-CURRENT> 182
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (933)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 254,376,351
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,624,290
<OTHER-INCOME> 0
<EXPENSES-NET> 1,705,520
<NET-INVESTMENT-INCOME> 6,918,770
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6,918,770
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,918,924
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 483,320,990
<NUMBER-OF-SHARES-REDEEMED> (452,941,803)
<SHARES-REINVESTED> 6,918,252
<NET-CHANGE-IN-ASSETS> 37,297,285
<ACCUMULATED-NII-PRIOR> 336
<ACCUMULATED-GAINS-PRIOR> (933)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,153,594
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,719,374
<AVERAGE-NET-ASSETS> 231,352,753
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.030
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.030)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
