<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 1997
REGISTRATION NOS.: 33-24245
811-5654
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
/X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 10 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 11 /X/
-------------------
DEAN WITTER INTERMEDIATE INCOME SECURITIES
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
-------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of the registration statement
-------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
___ immediately upon filing pursuant to paragraph (b)
_X_ on July 28, 1997, pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of rule 485.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (a)(1) OF RULE 24f-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT FILED THE RULE 24f-2 NOTICE, FOR
ITS FISCAL YEAR ENDED AUGUST 31, 1996, WITH THE SECURITIES AND EXCHANGE
COMMISSION ON SEPTEMBER 27, 1996.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS.
-------------------------------------------------------
-------------------------------------------------------
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- -------------------------------------------------------- -----------------------------------------------------------------------
<S> <C>
PART A PROSPECTUS
1. ................................................... Cover Page
2. ................................................... Prospectus Summary; Summary of Fund Expenses
3. ................................................... Financial Highlights; Performance Information
4. ................................................... Prospectus Summary; Investment Objective and Policies; Risk
Considerations; The Fund and its Management; Cover Page; Investment
Restrictions
5. ................................................... The Fund and Its Management; Back Cover; Investment
Objectives and Policies
6. ................................................... Dividends, Distributions and Taxes; Additional Information
7. ................................................... Shareholder Services
8. ................................................... Purchase of Fund Shares; Redemptions and Repurchases; Shareholder
Services
9. ................................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. ................................................... Cover Page
11. ................................................... Table of Contents
12. ................................................... The Fund and Its Management
13. ................................................... Investment Practices and Policies; Investment Restrictions;
Portfolio Transactions and Brokerage
14. ................................................... Trustees and Officers
15. ................................................... The Fund and Its Management; Trustees and Officers
16. ................................................... The Fund and Its Management; The Distributor; Custodian and Transfer
Agent; Independent Accountants; Shareholder
Services
17. ................................................... Portfolio Transactions and Brokerage
18. ................................................... Description of Shares
19. ................................................... The Distributor; Purchase of Fund Shares; Redemptions and Repurchases;
Financial Statements; Shareholder Services
20. ................................................... Dividends, Distributions and Taxes
21. ................................................... Not applicable
22. ................................................... Performance Information
23. ................................................... 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
JULY 28, 1997
Dean Witter Intermediate Income Securities (the "Fund") is an
open-end, diversified management investment company, whose investment objective
is high current income consistent with safety of principal. The Fund seeks to
achieve its investment objective by investing primarily in intermediate term,
investment grade fixed-income securities. See "Investment Objective and
Policies."
The Fund offers four classes of shares (each, a "Class"), each
with a different combination of sales charges, ongoing fees and other features.
The different distribution arrangements permit an investor to choose the method
of purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. Except as discussed herein, shares of
the Fund held prior to July 28, 1997 have been designated Class B shares. (See
"Purchase of Fund Shares--Alternative Purchase Arrangements.")
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 July 28, 1997, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/4
Financial Highlights/6
The Fund and its Management/7
Investment Objective and Policies/7
Risk Considerations/11
Investment Restrictions/11
Purchase of Fund Shares/12
Shareholder Services/23
Redemptions and Repurchases/26
Dividends, Distributions and Taxes/27
Performance Information/28
Additional Information/28
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Dean Witter
Intermediate Income Securities
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (Toll-Free)
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
Fund open-end, diversified management investment company. The Fund invests primarily in intermediate
term, investment grade fixed-income securities.
- ----------------------------------------------------------------------------------------------------------------------
Shares Shares of beneficial interest with $0.01 par value (see page 28). The Fund offers four Classes of
Offered shares, each with a different combination of sales charges, ongoing fees and other features (see
pages 12-22).
- ----------------------------------------------------------------------------------------------------------------------
Minimum The minimum initial investment for each Class is $1,000 ($100 if the account is opened through
Purchase EasyInvest-SM-). Class D shares are only available to persons investing $5 million or more and to
certain other limited categories of investors. For the purpose of meeting the minimum $5 million
investment for Class D shares, and subject to the $1,000 minimum initial investment for each Class
of the Fund, an investor's existing holdings of Class A shares and shares of funds for which Dean
Witter InterCapital Inc. serves as investment manager ("Dean Witter Funds") that are sold with a
front-end sales charge, and concurrent investments in Class D shares of the Fund and other Dean
Witter Funds that are multiple class funds, will be aggregated. The minimum subsequent investment is
$100 (see page 12).
- ----------------------------------------------------------------------------------------------------------------------
Investment The investment objective of the Fund is high current income consistent with safety of principal.
Objective
- ----------------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its wholly-
Manager owned subsidiary, Dean Witter Services Company Inc., serve in various investment management,
advisory, management and administrative capacities to 100 investment companies and other portfolios
with assets of approximately $96.6 billion at June 30, 1997 (see page 7).
- ----------------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.60% of daily net assets,
Fee scaled down on assets over $500 million (see page 7).
- ----------------------------------------------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution plan pursuant
and to Rule 12b-1 under the Investment Company Act (the "12b-1 Plan") with respect to the distribution
Distribution fees paid by the Class A, Class B and Class C shares of the Fund to the Distributor. The entire
Fee 12b-1 fee payable by Class A and a portion of the 12b-1 fee payable by each of Class B and Class C
equal to 0.20% of the average daily net assets of Class B and 0.25% of the average daily net assets
of Class C are currently each characterized as a service fee within the meaning of the National
Association of Securities Dealers, Inc. guidelines. The remaining portion of the 12b-1 fee, if any,
is characterized as an asset-based sales charge (see pages 12 and 21).
- ----------------------------------------------------------------------------------------------------------------------
Alternative Four classes of shares are offered:
Purchase
Arrangements - Class A shares are offered with a front-end sales charge, starting at 4.25% and reduced for larger
purchases. Investments of $1 million or more (and investments by certain other limited categories of
investors) are not subject to any sales charge at the time of purchase but a contingent deferred
sales charge ("CDSC") of 1.0% may be imposed on redemptions within one year of purchase. The Fund is
authorized to reimburse the Distributor for specific expenses incurred in promoting the distribution
of the Fund's Class A shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan.
Reimbursement may in no event exceed an amount equal to payments at an annual rate of 0.25% of
average daily net assets of the Class (see pages 12, 15 and 21).
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- Class B shares are offered without a front-end sales charge, but will in most cases be subject to
a CDSC (scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate current value of a Class
B account with the Fund falls below the aggregate amount of the investor's purchase payments made
during the six years preceding the redemption. A different CDSC schedule applies to investments by
certain qualified plans. Class B shares are also subject to a 12b-1 fee assessed at the annual rate
of 0.85% of the lesser of: (a) the average daily net sales of the Fund's Class B shares or (b) the
average daily net assets of Class B. All shares of the Fund held prior to July 28, 1997 (other than
the shares held by certain employee benefit plans established by Dean Witter Reynolds Inc. and its
affiliate, SPS Transaction Services, Inc.) have been designated Class B shares. Shares held by those
employee benefit plans prior to July 28, 1997 have been designated Class D shares. Shares held
before May 1, 1997 that have been designated Class B shares will convert to Class A shares in May
2007. In all other instances, Class B shares convert to Class A shares approximately ten years after
the date of the original purchase (see pages 12, 18 and 21).
- Class C shares are offered without a front-end sales charge, but will in most cases be subject to
a CDSC of 1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the
Distributor for specific expenses incurred in promoting the distribution of the Fund's Class C
shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no
event exceed an amount equal to payments at an annual rate of 0.85% of average daily net assets of
the Class (see pages 12, 20 and 21).
- Class D shares are offered only to investors meeting an initial investment minimum of $5 million
and to certain other limited categories of investors. Class D shares are offered without a front-end
sales charge or CDSC and are not subject to any 12b-1 fee (see pages 12, 20 and 21).
- ----------------------------------------------------------------------------------------------------------------------
Dividends Dividends are declared daily, and either paid monthly in additional shares of the Fund or, at the
and shareholder's option, paid monthly in cash. Dividends from net short-term and long-term capital
Capital Gains gains, if any, are distributed at least once each year. The Fund may, however, determine to retain
Distributions all or part of any net long-term capital gains in any year for reinvestment. Dividends and capital
gains distributions paid on shares of a Class are automatically reinvested in additional shares of
the same Class at net asset value unless the shareholder elects to receive cash. Shares acquired by
dividend and distribution reinvestment will not be subject to any sales charge or CDSC (see pages 23
and 27).
- ----------------------------------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A,
Class B or Class C shares. An account may be involuntarily redeemed if the total value of the
account is less than $100 or, if the account was opened through EasyInvest-SM-, if after twelve
months the shareholder has invested less than $1,000 in the account (see page 26).
- ----------------------------------------------------------------------------------------------------------------------
Risk The net asset value of the Fund's shares will fluctuate with changes in the market value of its
Considerations portfolio securities. Interest rate fluctuations will affect the Fund's net asset value but not the
income received by the Fund from its portfolio securities. The Fund may engage in various investment
strategies including reverse repurchase agreements, when-issued and delayed delivery securities and
forward commitments and when, as and if issued securities. The risks associated with these
investments are included in their description (pages 8-10) and in the "Risk Considerations" section
(page 11).
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS
AND THE STATEMENT OF ADDITIONAL INFORMATION.
3
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are based on
the expenses and fees for the fiscal year ended August 31, 1996.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
- ----------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price)............................................... 4.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments.................. None None None None
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds)............... None(2) 5.00%(3) 1.00%(4) None
Redemption Fees................................................. None None None None
Exchange Fee.................................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
- ----------------------------------------------------------------
Management Fees................................................. 0.60% 0.60% 0.60% 0.60%
12b-1 Fees (5) (6).............................................. 0.25% 0.85% 0.85% None
Other Expenses.................................................. 0.17% 0.17% 0.17% 0.17%
Total Fund Operating Expenses (7)............................... 1.02% 1.62% 1.62% 0.77%
</TABLE>
- ------------
(1) REDUCED FOR PURCHASES OF $25,000 AND OVER (SEE "PURCHASE OF FUND
SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES").
(2) INVESTMENTS THAT ARE NOT SUBJECT TO ANY SALES CHARGE AT THE TIME OF PURCHASE
ARE SUBJECT TO A CDSC OF 1.00% THAT WILL BE IMPOSED ON REDEMPTIONS MADE
WITHIN ONE YEAR AFTER PURCHASE, EXCEPT FOR CERTAIN SPECIFIC CIRCUMSTANCES
(SEE "PURCHASE OF FUND SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A
SHARES").
(3) THE CDSC IS SCALED DOWN TO 1.00% DURING THE SIXTH YEAR, REACHING ZERO
THEREAFTER.
(4) ONLY APPLICABLE TO REDEMPTIONS MADE WITHIN ONE YEAR AFTER PURCHASE (SEE
"PURCHASE OF FUND SHARES-- LEVEL LOAD ALTERNATIVE--CLASS C SHARES").
(5) THE 12B-1 FEE IS ACCRUED DAILY AND PAYABLE MONTHLY. THE ENTIRE 12B-1 FEE
PAYABLE BY CLASS A AND A PORTION OF THE 12B-1 FEE PAYABLE BY EACH OF CLASS B
AND CLASS C EQUAL TO 0.20% OF THE AVERAGE DAILY NET ASSETS OF CLASS B AND
0.25% OF THE AVERAGE DAILY NET ASSETS OF CLASS C ARE CURRENTLY EACH
CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. ("NASD") GUIDELINES AND ARE PAYMENTS MADE FOR
PERSONAL SERVICE AND/OR MAINTENANCE OF SHAREHOLDER ACCOUNTS. THE REMAINDER
OF THE 12B-1 FEE, IF ANY, IS AN ASSET-BASED SALES CHARGE, AND IS A
DISTRIBUTION FEE PAID TO THE DISTRIBUTOR TO COMPENSATE IT FOR THE SERVICES
PROVIDED AND THE EXPENSES BORNE BY THE DISTRIBUTOR AND OTHERS IN THE
DISTRIBUTION OF THE FUND'S SHARES (SEE "PURCHASE OF FUND SHARES--PLAN OF
DISTRIBUTION").
(6) UPON CONVERSION OF CLASS B SHARES TO CLASS A SHARES, SUCH SHARES WILL BE
SUBJECT TO THE LOWER 12B-1 FEE APPLICABLE TO CLASS A SHARES. NO SALES CHARGE
IS IMPOSED AT THE TIME OF CONVERSION OF CLASS B SHARES TO CLASS A SHARES.
CLASS C SHARES DO NOT HAVE A CONVERSION FEATURE AND, THEREFORE, ARE SUBJECT
TO AN ONGOING 0.85% DISTRIBUTION FEE (SEE "PURCHASE OF FUND
SHARES--ALTERNATIVE PURCHASE ARRANGEMENTS").
(7) THERE WERE NO OUTSTANDING SHARES OF CLASS A, CLASS C OR CLASS D PRIOR TO THE
DATE OF THIS PROSPECTUS. ACCORDINGLY, "TOTAL FUND OPERATING EXPENSES," AS
SHOWN ABOVE WITH RESPECT TO THOSE CLASSES, ARE BASED UPON THE SUM OF 12B-1
FEES, MANAGEMENT FEES AND ESTIMATED "OTHER EXPENSES."
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS
- ---------------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
Class A....................................................................... $ 52 $ 74 $ 96
Class B....................................................................... $ 66 $ 81 $ 108
Class C....................................................................... $ 26 $ 51 $ 88
Class D....................................................................... $ 8 $ 25 $ 43
You would pay the following expenses on the same $1,000 investment assuming no
redemption at the end of the period:
Class A....................................................................... $ 52 $ 74 $ 96
Class B....................................................................... $ 16 $ 51 $ 88
Class C....................................................................... $ 16 $ 51 $ 88
Class D....................................................................... $ 8 $ 25 $ 43
<CAPTION>
EXAMPLES 10 YEARS
- ---------------------------------------------------------------------------------- -----------
<S> <C>
You would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
Class A....................................................................... $ 162
Class B....................................................................... $ 192
Class C....................................................................... $ 192
Class D....................................................................... $ 95
You would pay the following expenses on the same $1,000 investment assuming no
redemption at the end of the period:
Class A....................................................................... $ 162
Class B....................................................................... $ 192
Class C....................................................................... $ 192
Class D....................................................................... $ 95
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS 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"
and "Redemptions and Repurchases."
Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
5
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each of the periods through August 31, 1996 have been
audited by Price Waterhouse LLP, independent accountants. The information for
the period ended February 28, 1997 is unaudited. The financial highlights should
be read in conjunction with the financial statements, notes thereto, and the
unqualified report of independent accountants, which are contained in the
Statement of Additional Information. Further information about the performance
of the Fund is contained in the Fund's Annual Report to Shareholders, which may
be obtained without charge upon request to the Fund. All shares of the Fund held
prior to July 28, 1997, other than the shares held by certain employee benefit
plans established by Dean Witter Reynolds Inc. and its affiliate, SPS
Transaction Services, Inc., have been designated Class B shares. Shares held by
those employee benefit plans prior to July 28, 1997 have been designated Class D
shares.
<TABLE>
<CAPTION>
FOR THE
PERIOD
MAY 3,
1989*
FOR THE YEAR ENDED AUGUST 31 THROUGH
--------------------------------------------------------------------------- AUGUST
1996 1995 1994 1993 1992 1991 1990 31, 1989
FOR THE --------- --------- --------- --------- --------- --------- --------- ---------
SIX
MONTHS
ENDED
FEBRUARY
28, 1997
---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period........... $9.39 $9.69 $9.51 $10.26 $10.05 $9.59 $9.42 $9.98 $10.00
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net investment
income........... 0.29 0.55 0.59 0.58 0.62 0.70 0.79 0.86 0.28
Net realized and
unrealized gain
(loss)........... 0.16 (0.30) 0.19 (0.73) 0.20 0.46 0.17 (0.55) (0.02)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from
investment
operations....... 0.45 0.25 0.78 (0.15) 0.82 1.16 0.96 0.31 0.26
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Less dividends and
distributions
from:
Net investment
income......... (0.29) (0.55) (0.59) (0.56) (0.61) (0.70) (0.79) (0.86) (0.28)
Net realized
gain........... -0- -0- (0.01) (0.04) -0- -0- -0- (0.01) -0-
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total dividends
and
distributions.... (0.29) (0.55) (0.60) (0.60) (0.61) (0.70) (0.79) (0.87) (0.28)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net asset value,
end of period.... $9.55 $9.39 $9.69 $9.51 $10.26 $10.05 $9.59 $9.42 $9.98
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT
RETURN+............ 4.38%(1) 2.58% 8.56% (1.50)% 8.43% 12.58% 10.78% 3.22% 2.57%(1)
RATIOS TO AVERAGE
NET ASSETS:
Expenses.......... 1.88%(2) 1.62% 1.63% 1.63% 1.62% 1.69% 1.69% 1.75% 1.42%(2)(3)
Net investment
income............. 5.15%(2) 5.69% 6.23% 5.80% 6.12% 7.11% 8.49% 8.78% 8.18%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of
period, in
thousands........ $183,209 $ 208,911 $ 232,752 $ 245,750 $ 254,431 $ 187,285 $ 115,204 $ 114,086 $69,946
Portfolio turnover
rate............. 48%(1) 115% 114% 122% 132% 93% 150% 135% 30%(1)
<FN>
- -----------------
* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL THE EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE EXPENSE AND NET INVESTMENT INCOME RATIOS WOULD
HAVE BEEN 2.15% AND 7.44%, RESPECTIVELY.
</TABLE>
6
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter Intermediate Income Securities (the "Fund") is an open-end,
diversified management investment company. The Fund is a trust of the type
commonly known as a "Massachusetts business trust" and was organized under the
laws of the Commonwealth of Massachusetts on September 1, 1988.
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 Morgan Stanley, Dean Witter, Discover &
Co., a preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses -- securities, asset
management and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 100 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined assets of approximately
$93.1 billion at June 30, 1997. The Investment Manager also manages portfolios
of pension plans, other institutions and individuals which aggregated
approximately $3.5 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
provide the aforementioned administrative services to the Fund. The Fund's
Trustees review the various services provided by or under the direction of the
Investment Manager to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.60% to the Fund's daily net assets up to $500 million, scaled
down at various levels to 0.30% on assets over $1 billion. For the fiscal year
ended August 31, 1996, the Fund accrued total compensation to the Investment
Manager amounting to 0.60% of the Fund's average daily net assets and the Fund's
total expenses amounted to 1.62% of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is high current income consistent with
safety of principal. There is no assurance that the objective will be achieved.
This investment objective is a fundamental policy and may not be changed without
approval of the Fund's shareholders. The Fund seeks to achieve its objective by
investing at least 65% of its total assets in intermediate term, investment
grade fixed-income securities. The Fund will maintain an average weighted
maturity of approximately seven years or less and may not invest in securities
with remaining maturities greater than twelve years. Under normal conditions,
the Fund's average weighted maturity will not be less than three years. (Under
the current interpretation by the staff of the Securities and Exchange
Commission, an intermediate bond fund must have an average weighted maturity
between three and ten years.)
Under normal circumstances, the Fund will invest primarily in corporate debt
securities and preferred stock of investment grade, which consists of securities
which are rated at the time of purchase Baa or better by Moody's Investors
Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Corporation
("Standard & Poor's"), or which, if unrated, are deemed to be of comparable
quality by
7
<PAGE>
the Fund's Trustees. Fixed-income securities rated Baa by Moody's have
speculative characteristics. (A more detailed description of bond ratings is
contained in the Appendix to the Statement of Additional Information.) The Fund
may also purchase U.S. Government securities (securities guaranteed as to
principal and interest by the United States or its agencies or
instrumentalities) and investment grade securities, denominated in U.S. Dollars,
issued by foreign governments or issuers. U.S. Government securities in which
the Fund may invest include zero coupon securities and mortgage-backed
securities, such as securities issued by the Government National Mortgage
Association, the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation. There can be no assurance that the investment objective of
the Fund will be achieved.
The Investment Manager believes that the Fund's policies of purchasing
intermediate term securities will reduce the volatility of the Fund's net asset
value over the long term. Although the values of fixed-income securities
generally increase during periods of declining interest rates and decrease
during periods of increasing interest rates, the extent of these fluctuations
has historically generally been smaller for intermediate term securities than
for securities with longer maturities. Conversely, the yield available on
intermediate term securities has also historically been lower than those
available from long term securities.
Investment by the Fund in U.S. Dollar denominated fixed-income securities
issued by foreign governments and other foreign issuers may involve certain
risks not associated with U.S. issued securities. Those risks include the
political or economic instability of the issuer or of the country of issue, the
difficulty of predicting international trade patterns and the possibility of
imposition of exchange controls. In addition, there may be less publicly
available information about a foreign company than about a domestic company. A
more detailed description of the general risks of foreign issuers is contained
in the Statement of Additional Information. The Fund believes that those risks
are substantially lessened because the foreign securities in which the Fund may
invest are investment grade.
While the Fund will invest primarily in investment grade fixed-income
securities, under ordinary circumstances it also may invest up to 35% of its
total assets in money market instruments, repurchase agreements, as discussed
below, and up to 5% of the Fund's net assets may be invested in lower rated
fixed-income securities.
Lower rated fixed-income securities, which are those rated from Ba to C or
BB to C by Moody's or Standard & Poor's, respectively, are considered to be
speculative investments. Such lower rated securities, while producing higher
yield than investment grade securities, are subject to credit risk to a greater
extent than investment grade securities. The Fund does not have any minimum
quality rating standard with respect to the portion (up to 5%) of its net assets
which may be invested in lower rated securities. See the Statement of Additional
Information for a description of the special risks and characteristics of lower
rated fixed-income securities.
There may be periods during which, in the opinion of the Investment Manager,
market conditions warrant reduction of some or all of the Fund's securities
holdings. During such periods, the Fund may adopt a temporary "defensive"
posture in which greater than 35% of its total assets are invested in cash or
money market instruments. Money market instruments in which the Fund may invest
are securities issued or guaranteed by the U.S. Government (Treasury bills,
notes and bonds, including zero coupon securities); bank obligations; Eurodollar
certificates of deposit; obligations of savings institutions; fully insured
certificates of deposit; and commercial paper rated within the two highest
grades by Moody's or Standard & Poor's or, if not rated, are issued by a company
having an outstanding debt issue rated at least AA by Standard & Poor's or Aa by
Moody's.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may
8
<PAGE>
be zero coupon securities. Such securities are purchased at a discount from
their face amount, giving the purchaser the right to receive their full value at
maturity. The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant rate
eliminates the risk of receiving lower yields upon reinvestment of interest if
prevailing interest rates decline, the owner of a zero coupon security will be
unable to participate in higher yields upon reinvestment of interest received on
interest-paying securities if prevailing interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, including the risks of default or
bankruptcy of the selling financial institution, the Fund follows procedures
designed to minimize those risks. These procedures include effecting repurchase
transactions only with large, well-capitalized and well established financial
institutions and maintaining adequate collateralization.
REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase
agreements for purposes of meeting redemptions or as part of its investment
strategy. Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. Generally, the effect of such a transaction is
that the Fund can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement, while
it will be able to keep the interest income associated with those portfolio
securities. Such transactions are only advantageous if the interest cost to the
Fund of the reverse repurchase transaction is less than the cost of obtaining
the cash otherwise. Opportunities to achieve this advantage may not always be
available, and the Fund intends to use the reverse repurchase technique only
when it will be to its advantage to do so. The Fund will establish a segregated
account with its custodian bank in which it will maintain cash, U.S. Government
securities or other liquid portfolio securities equal in value to its
obligations in respect of reverse repurchase agreements. Reverse repurchase
agreements are considered borrowings by the Fund. The use of borrowed funds for
other than emergency purposes constitutes leveraging, which is a speculative
technique. Reverse repurchase agreements may not exceed 10% of the Fund's total
assets.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are negotiated,
the price is fixed at the time of the commitment, but delivery and payment can
take place a month or more after the date of the commitment. There is no overall
limit on the percentage of the Fund's assets which may be committed to the
purchase of securities on a when-issued, delayed delivery or forward commitment
basis. An increase
9
<PAGE>
in the percentage of the Fund's assets committed to the purchase of securities
on a when-issued, delayed delivery or forward commitment basis may increase the
volatility of the Fund's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. There is no overall limit on the
percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage of
the Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value.
PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined to be
liquid pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) These securities are generally referred
to as private placements or restricted securities. Limitations on the resale of
such securities may have an adverse effect on their marketability, and may
prevent the Fund from disposing of them promptly at reasonable prices. The Fund
may have to bear the expense of registering such securities for resale and the
risk of substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. If a restricted security is determined to be "liquid," such security will
not be included within the category "illiquid securities," which is limited by
the Fund's investment restrictions to 10% of the Fund's total assets. Investing
in Rule 144A securities could have the effect of increasing the level of Fund
illiquidity to the extent the Fund, at a particular point in time, may be unable
to find qualified institutional buyers interested in purchasing such securities.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to certain notice provisions described in the Statement of
Additional Information), and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are at least equal to the market value, determined daily,
of the loaned securities.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers; the views of Trustees
of the Fund and others regarding economic developments and interest rate trends;
and the Investment Manager's own analysis of factors it deems relevant. The
Fund's portfolio is managed within InterCapital's Taxable Income Group, which
manages twenty-four funds and fund portfolios, with approximately $12.8 billion
in assets as of June 30, 1997. Rochelle G. Siegel, Senior Vice President of
InterCapital and a member of InterCapital's Taxable Group, has been the primary
portfolio manager since the Fund's inception and has been a portfolio manager at
InterCapital since July, 1985.
10
<PAGE>
Orders for transactions in portfolio securities are placed for the Fund with
a number of brokers and dealers, including Dean Witter Reynolds Inc. ("DWR") and
other brokers and dealers that are affiliates of InterCapital. 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 and other
affiliated broker dealers. It is not anticipated that the portfolio trading will
result in the Fund's portfolio turnover rate exceeding 200%. A more extensive
discussion of the Fund's portfolio brokerage policies is set forth in the
Statement of Additional Information. Except as specifically noted, all
investment objectives, policies and practices discussed above are not
fundamental policies of the Fund and, as such, may be changed without
shareholder approval.
RISK CONSIDERATIONS
An increase in prevailing levels of interest rates will generally reduce the
value of securities in the Fund's portfolio, while a decline in rates will
generally increase the value of these securities. As a result, the fluctuations
or changes in interest rates will cause the Fund's net asset value to rise and
fall, in an inverse relationship; however, the income received by the Fund from
its portfolio securities will not be affected. Because yields on debt securities
available for purchase by a Fund vary over time, no specific yield on shares of
the Fund can be assured. In addition, if the bonds in the Fund's portfolio
contain call, prepayment or redemption provisions, during a period of declining
interest rates, these securities are likely to be redeemed, and the Fund will
probably be unable to replace them with securities having an equal yield.
For additional risk disclosure, please refer to the "Investment Objective
and Policies" section of the Prospectus and to the "Investment Practices and
Policies" section in 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 Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the Act. For purposes of the following limitations: (i)
all percentage limitations apply immediately after a purchase or initial
investment, and (ii) any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets does
not require elimination of any security from the portfolio.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities of
any one issuer (other than obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding voting securities or any class
of securities of any one issuer.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities.
4. Invest more than 10% of its total assets in "illiquid securities"
(securities for which market quotations are not readily available) and
repurchase agreements which have a maturity of longer than seven days.
5. Invest more than 5% of the value of its total assets in securities of
issuers having a record,
11
<PAGE>
together with predecessors, of less than three years of continuous operation.
This restriction shall not apply to any obligation issued or guaranteed by the
United States Government, its agencies or instrumentalities.
6. Borrow money, except that the Fund may borrow from banks for temporary or
emergency purposes in an amount up to 5% (taken at the lower of cost or current
value) of its total assets (not including the amount borrowed), and may enter
into reverse repurchase agreements in an amount not exceeding 10% of the Fund's
total assets.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares for sale to the public on a
continuous basis. Pursuant to a Distribution Agreement between the Fund and Dean
Witter Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers who have entered into selected dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
The Fund offers four classes of shares (each, a "Class"). Class A shares are
sold to investors with an initial sales charge that declines to zero for larger
purchases; however, Class A shares sold without an initial sales charge are
subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed
within one year of purchase, except for certain specific circumstances. Class B
shares are sold without an initial sales charge but are subject to a CDSC
(scaled down from 5.0% to 1.0%) payable upon most redemptions within six years
after purchase. (Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a CDSC scaled down from 2.0% to
1.0% if redeemed within three years after purchase.) Class C shares are sold
without an initial sales charge but are subject to a CDSC of 1.0% on most
redemptions made within one year after purchase. Class D shares are sold without
an initial sales charge or CDSC and are available only to investors meeting an
initial investment minimum of $5 million, and to certain other limited
categories of investors. At the discretion of the Board of Trustees of the Fund,
Class A shares may be sold to categories of investors in addition to those set
forth in this prospectus at net asset value without a front-end sales charge,
and Class D shares may be sold to certain other categories of investors, in each
case as may be described in the then current prospectus of the Fund. See
"Alternative Purchase Arrangements--Selecting a Particular Class" for a
discussion of factors to consider in selecting which Class of shares to
purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million or more and to
certain other limited categories of investors. For the purpose of meeting the
minimum $5 million initial investment for Class D shares, and subject to the
$1,000 minimum initial investment for each Class of the Fund, an investor's
existing holdings of Class A shares of the Fund and other Dean Witter Funds that
are multiple class funds ("Dean Witter Multi-Class Funds") and shares of Dean
Witter Funds sold with a front-end sales charge ("FSC Funds") and concurrent
investments in Class D shares of the Fund and other Dean Witter Multi-Class
Funds will be aggregated. Subsequent purchases of $100 or more may be made by
sending a check, payable to Dean Witter Intermediate Income Securities, directly
to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box 1040, Jersey
City, NJ 07303 or by contacting an account
12
<PAGE>
executive of DWR or other Selected Broker-Dealer. When purchasing shares of the
Fund, investors must specify whether the purchase is for Class A, Class B, Class
C or Class D shares. If no Class is specified, the Transfer Agent will not
process the transaction until the proper Class is identified. The minimum
initial purchase in the case of investments through EasyInvest-SM-, an automatic
purchase plan (see "Shareholder Services") , is $100, provided that the schedule
of automatic investments will result in investments totalling at least $1,000
within the first twelve months. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans), the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required if the Fund has reason to believe that
additional investments will increase the investment in all accounts under such
Plans to at least $1,000. Certificates for shares purchased will not be issued
unless a request is made by the shareholder in writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Shares of the
Fund purchased through the Distributor are entitled to dividends beginning on
the next business day following settlement date. Since DWR and other Selected
Broker-Dealers forward investors' funds on settlement date, they will benefit
from the temporary use of the funds where payment is made prior thereto. Shares
purchased through the Transfer Agent are entitled to dividends beginning on the
next business day following receipt of an order. As noted above, orders placed
directly with the Transfer Agent must be accompanied by payment. Investors will
be entitled to receive capital gains distributions if their order is received by
the close of business on the day prior to the record date for such
distributions. Sales personnel of a Selected Broker-Dealer are compensated for
selling shares of the Fund at the time of their sale by the Distributor or any
of its affiliates and/or the Selected Broker-Dealer. In addition, some sales
personnel of the Selected Broker-Dealer will receive various types of non-cash
compensation as special sales incentives, including trips, educational and/or
business seminars and merchandise. The Fund and the Distributor reserve the
right to reject any purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their needs.
The general public is offered three Classes of shares: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales charges
and rate of expenses to which they are subject. A fourth Class of shares, Class
D shares, is offered only to limited categories of investors (see "No Load
Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B and Class C shares which are redeemed subject to a
CDSC bear the expense of the additional incremental distribution costs resulting
from the CDSC applicable to shares of those Classes. The ongoing distribution
fees that are imposed on Class A, Class B and Class C shares will be imposed
directly against those Classes and not against all assets of the Fund and,
accordingly, such charges against one Class will not affect the net asset value
of any other Class or have any impact on investors choosing another sales charge
option. See "Plan of Distribution" and "Redemptions and Repurchases."
13
<PAGE>
Set forth below is a summary of the differences between the Classes and the
factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain other
limited categories of investors) are not subject to any sales charges at the
time of purchase but are subject to a CDSC of 1.0% on redemptions made within
one year after purchase, except for certain specific circumstances. Class A
shares are also subject to a 12b-1 fee of up to 0.25% of the average daily net
assets of the Class. See "Initial Sales Charge Alternative--Class A Shares."
CLASS B SHARES. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified employer-sponsored benefit plans are subject to a CDSC scaled down
from 2.0% to 1.0% if redeemed within three years after purchase.) This CDSC may
be waived for certain redemptions. Class B shares are also subject to an annual
12b-1 fee of 0.85% of the lesser of: (a) the average daily aggregate gross sales
of the Fund's Class B shares since the inception of the Fund (not including
reinvestments of dividends or capital gains distributions), less the average
daily aggregate net asset value of the Fund's Class B shares redeemed since the
Fund's inception upon which a CDSC has been imposed or waived, or (b) the
average daily net assets of Class B. The Class B shares' distribution fee will
cause that Class to have higher expenses and pay lower dividends than Class A or
Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition, a
certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time. See
"Contingent Deferred Sales Charge Alternative--Class B Shares."
CLASS C SHARES. Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They are
subject to an annual 12b-1 fee of up to 0.85% of the average daily net assets of
the Class C shares. The Class C shares' distribution fee may cause that Class to
have higher expenses and pay lower dividends than Class A or Class D shares. See
"Level Load Alternative--Class C Shares."
CLASS D SHARES. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares are
sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
SELECTING A PARTICULAR CLASS. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge
14
<PAGE>
reductions are not available with respect to Class B or Class C shares.
Moreover, Class A shares are subject to lower ongoing expenses than are Class B
or Class C shares over the term of the investment. As an alternative, Class B
and Class C shares are sold without any initial sales charge so the entire
purchase price is immediately invested in the Fund. Any investment return on
these additional investment amounts may partially or wholly offset the higher
annual expenses of these Classes. Because the Fund's future return cannot be
predicted, however, there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly lower
CDSC upon redemptions, they do not, unlike Class B shares, convert into Class A
shares after approximately ten years, and, therefore, are subject to an ongoing
12b-1 fee of 0.85% (rather than the 0.25% fee applicable to Class A shares) for
an indefinite period of time. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks. Other
investors, however, may elect to purchase Class C shares if, for example, they
determine that they do not wish to be subject to a front-end sales charge and
they are uncertain as to the length of time they intend to hold their shares.
For the purpose of meeting the $5 million minimum investment amount for
Class D shares, holdings of Class A shares in all Dean Witter Multi-Class Funds,
shares of FSC Funds and shares of Dean Witter Funds for which such shares have
been exchanged will be included together with the current investment amount.
Sales personnel may receive different compensation for selling each Class of
shares. Investors should understand that the purpose of a CDSC is the same as
that of the initial sales charge in that the sales charges applicable to each
Class provide for the financing of the distribution of shares of that Class.
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
<C> <S> <C> <C>
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
A Maximum 4.25% 0.25% No
initial sales
charge reduced
for purchases
of $25,000 and
over; shares
sold without an
initial sales
charge
generally
subject to a
1.0% CDSC
during first
year.
B Maximum 5.0% 0.85% B shares
CDSC during the convert to A
first year shares
decreasing to 0 automatically
after six years after
approximately
ten years
C 1.0% CDSC 0.85% No
during first
year
D None None No
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees for
each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after
15
<PAGE>
purchase (calculated from the last day of the month in which the shares were
purchased), except for certain specific circumstances. The CDSC will be assessed
on an amount equal to the lesser of the current market value or the cost of the
shares being redeemed. The CDSC will not be imposed (i) in the circumstances set
forth below in the section "Contingent Deferred Sales Charge Alternative--Class
B Shares--CDSC Waivers," except that the references to six years in the first
paragraph of that section shall mean one year in the case of Class A shares, and
(ii) in the circumstances identified in the section "Additional Net Asset Value
Purchase Options" below. Class A shares are also subject to an annual 12b-1 fee
of up to 0.25% of the average daily net assets of the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net Asset
Value" below), plus a sales charge (expressed as a percentage of the offering
price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF AMOUNT
TRANSACTION PRICE INVESTED
- ------------------------- ------------------- ---------------------
<S> <C> <C>
Less than $25,000........ 4.25% 4.44%
$25,000 but less
than $50,000........ 4.00% 4.17%
$50,000 but less
than $100,000....... 3.50% 3.63%
$100,000 but less
than $250,000....... 2.75% 2.83%
$250,000 but less
than $1 million..... 1.75% 1.78%
$1 million and over...... 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the sales
charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or her
spouse and their children under the age of 21 purchasing shares for his, her or
their own accounts; (c) a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account; (d) a pension, profit-sharing
or other employee benefit plan qualified or non-qualified under Section 401 of
the Internal Revenue Code; (e) tax-exempt organizations enumerated in Section
501(c)(3) or (13) of the Internal Revenue Code; (f) employee benefit plans
qualified under Section 401 of the Internal Revenue Code of a single employer or
of employers who are "affiliated persons" of each other within the meaning of
Section 2(a)(3)(c) of the Act; and for investments in Individual Retirement
Accounts of employees of a single employer through Systematic Payroll Deduction
plans; or (g) any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six months and has
some purpose other than the purchase of redeemable securities of a registered
investment company at a discount.
COMBINED PURCHASE PRIVILEGE. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class A
shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The sales
charge payable on the purchase of the Class A shares of the Fund, the Class A
shares of the other Dean Witter Multi-Class Funds and the shares of the FSC
Funds will be at their respective rates applicable to the total amount of the
combined concurrent purchases of such shares.
RIGHT OF ACCUMULATION. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other Dean Witter Funds previously
purchased at a price including a
16
<PAGE>
front-end sales charge (including shares of the Fund and other Dean Witter Funds
acquired in exchange for those shares, and including in each case shares
acquired through reinvestment of dividends and distributions), which are held at
the time of such transaction, amounts to $25,000 or more. If such investor has a
cumulative net asset value of shares of FSC Funds and Class A and Class D shares
equal to at least $5 million, such investor is eligible to purchase Class D
shares subject to the $1,000 minimum initial investment requirement of that
Class of the Fund. See "No Load Alternative-- Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the dealer or shareholder when such an order is
placed by mail. The reduced sales charge will not be granted if: (a) such
notification is not furnished at the time of the order; or (b) a review of the
records of the Selected Broker-Dealer or the Transfer Agent fails to confirm the
investor's represented holdings.
LETTER OF INTENT. The foregoing schedule of reduced sales charges will also
be available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of Class A shares of the Fund
from DWR or other Selected Broker-Dealers. The cost of Class A shares of the
Fund or shares of other Dean Witter Funds which were previously purchased at a
price including a front-end sales charge during the 90-day period prior to the
date of receipt by the Distributor of the Letter of Intent, or of Class A shares
of the Fund or shares of other Dean Witter Funds acquired in exchange for shares
of such funds purchased during such period at a price including a front-end
sales charge, which are still owned by the shareholder, may also be included in
determining the applicable reduction.
ADDITIONAL NET ASSET VALUE PURCHASE OPTIONS. In addition to investments of
$1 million or more, Class A shares also may be purchased at net asset value by
the following:
(1) trusts for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust
FSB ("DWTFSB") (each of which is an affiliate of the Investment Manager)
provides discretionary trustee services;
(2) persons participating in a fee-based program approved by the Distributor,
pursuant to which such persons pay an asset based fee for services in the nature
of investment advisory or administrative services (such investments are subject
to all of the terms and conditions of such programs, which may include
termination fees and restrictions on transferability of Fund shares);
(3) retirement plans qualified under Section 401(k) of the Internal Revenue
Code ("401(k) plans") and other employer-sponsored plans qualified under Section
401(a) of the Internal Revenue Code with at least 200 eligible employees and for
which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services Group of
DWR serves as recordkeeper;
(4) 401(k) plans and other employer-sponsored plans qualified under Section
401(a) of the Internal Revenue Code for which DWTC or DWTFSB serves as Trustee
or the 401(k) Support Services Group of DWR serves as recordkeeper whose Class B
shares have converted to Class A shares, regardless of the plan's asset size or
number of eligible employees;
(5) investors who are clients of a Dean Witter account executive who joined
Dean Witter from another investment firm within six months prior to the date of
purchase of Fund shares by such investors, if the shares are being purchased
with the proceeds from a redemption of shares of an open-end proprietary mutual
fund of the account executive's previous firm which imposed either a front-end
or deferred sales charge, provided such purchase was made within sixty days
after the redemption and the
17
<PAGE>
proceeds of the redemption had been maintained in the interim in cash or a money
market fund; and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE-- CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, will be imposed on
most Class B shares redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments for Class B shares made during the
six years (or, in the case of shares held by certain employer-sponsored benefit
plans, three years) preceding the redemption. In addition, Class B shares are
subject to an annual 12b-1 fee of 0.85% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's Class B shares since the inception of the
Fund (not including reinvestments of dividends or capital gains distributions),
less the average daily aggregate net asset value of the Fund's Class B shares
redeemed since the Fund's inception upon which a CDSC has been imposed or
waived, or (b) the average daily net assets of Class B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any CDSC upon redemption.
Shares redeemed earlier than six years after purchase may, however, be subject
to a CDSC which will be a percentage of the dollar amount of shares redeemed and
will be assessed on an amount equal to the lesser of the current market value or
the cost of the shares being redeemed. The size of this percentage will depend
upon how long the shares have been held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE CDSC AS A
PURCHASE PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- --------------------------------- -----------------------
<S> <C>
First............................ 5.0%
Second........................... 4.0%
Third............................ 3.0%
Fourth........................... 2.0%
Fifth............................ 2.0%
Sixth............................ 1.0%
Seventh and thereafter........... None
</TABLE>
In the case of Class B shares of the Fund held by 401 (k) plans or other
employer-sponsored plans qualified under Section 401(a) of the Internal Revenue
Code for which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services
Group of DWR serves as recordkeeper and whose accounts are opened on or after
July 28, 1997, shares held for three years or more after purchase (calculated as
described in the paragraph above) will not be subject to any CDSC upon
redemption. However, shares redeemed earlier than three years after purchase may
be subject to a CDSC (calculated as described in the paragraph above), the
percentage of which will depend on how long the shares have been held, as set
forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- --------------------------------- -----------------------
<S> <C>
First............................ 2.0%
Second........................... 2.0%
Third............................ 1.0%
Fourth and thereafter............ None
</TABLE>
CDSC WAIVERS. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or, in
the case of shares held by certain employer-sponsored benefit plans, three
years) preceding the
18
<PAGE>
redemption; (ii) the current net asset value of shares purchased more than six
years (or, in the case of shares held by certain employer-sponsored benefit
plans, three years) prior to the redemption; and (iii) the current net asset
value of shares purchased through reinvestment of dividends or distributions
and/or shares acquired in exchange for shares of FSC Funds or of other Dean
Witter Funds acquired in exchange for such shares. Moreover, in determining
whether a CDSC is applicable it will be assumed that amounts described in (i),
(ii) and (iii) above (in that order) are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age 59 1/2); (B)
distributions from an IRA or 403(b) Custodial
Account following attainment of age 59 1/2; or (C) a tax-free return of an
excess contribution to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
401(k) plan or other employer-sponsored plan qualified under Section 401(a) of
the Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which DWTC or DWTFSB serves as
Trustee or the 401(k) Support Services Group of DWR serves as recordkeeper
("Eligible Plan"), provided that either: (a) the plan continues to be an
Eligible Plan after the redemption; or (b) the redemption is in connection with
the complete termination of the plan involving the distribution of all plan
assets to participants.
With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder's
entitlement.
CONVERSION TO CLASS A SHARES. All shares of the Fund held prior to July 28,
1997 (other than shares held by certain employee benefit plans established by
DWR and its affiliate, SPS Transaction Services, Inc.) have been designated
Class B shares. Shares held before May 1, 1997 that have been designated Class B
shares will convert to Class A shares in May, 2007. In all other instances Class
B shares will convert automatically to Class A shares, based on the relative net
asset values of the shares of the two Classes on the conversion date, which will
be approximately ten (10) years after the date of the original purchase. The ten
year period is calculated from the last day of the month in which the shares
were purchased or, in the case of Class B shares acquired through an exchange or
a series of exchanges, from the last day of the month in which the original
Class B shares were purchased, provided that shares originally purchased before
May 1, 1997 will convert to Class A shares in May, 2007. The conversion of
shares purchased on or after May 1, 1997 will take place in the month following
the tenth anniversary of the purchase. There will also be converted at that time
such proportion of
19
<PAGE>
Class B shares acquired through automatic reinvestment of dividends and
distributions owned by the shareholder as the total number of his or her Class B
shares converting at the time bears to the total number of outstanding Class B
shares purchased and owned by the shareholder. In the case of Class B shares
held by a 401(k) plan or other employer-sponsored plan qualified under Section
401(a) of the Internal Revenue Code and for which DWTC or DWTFSB serves as
Trustee or the 401(k) Support Services Group of DWR serves as recordkeeper, the
plan is treated as a single investor and all Class B shares will convert to
Class A shares on the conversion date of the first shares of a Dean Witter
Multi-Class Fund purchased by that plan. In the case of Class B shares
previously exchanged for shares of an "Exchange Fund" (see "Shareholder
Services--Exchange Privilege"), the period of time the shares were held in the
Exchange Fund (calculated from the last day of the month in which the Exchange
Fund shares were acquired) is excluded from the holding period for conversion.
If those shares are subsequently re-exchanged for Class B shares of a Dean
Witter Multi-Class Fund, the holding period resumes on the last day of the month
in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to
the date for conversion. Class B shares evidenced by share certificates that are
not received by the Transfer Agent at least one week prior to any conversion
date will be converted into Class A shares on the next scheduled conversion date
after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion, and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The conversion feature may be suspended if the ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B 12b-1 fees.
Class B shares purchased before July 28, 1997 by trusts for which DWTC or
DWTFSB provides discretionary trustee services will convert to Class A shares on
or about August 29, 1997. The CDSC will not be applicable to such shares.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased). The CDSC will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The CDSC will not be imposed in the circumstances set forth above in
the section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC
Waivers," except that the references to six years in the first paragraph of that
section shall mean one year in the case of Class C shares. Class C shares are
subject to an annual 12b-1 fee of up to 0.85% of the average daily net assets of
the Class. Unlike Class B shares, Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject to 12b-1
fees applicable to Class C shares for an indefinite period subject to annual
approval by the Fund's Board of Trustees and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million and the following
categories of investors: (i) investors participating in the InterCapital mutual
fund asset allocation program pursuant to which such persons pay an asset based
fee; (ii) persons participating in a fee-
20
<PAGE>
based program approved by the Distributor, pursuant to which such persons pay an
asset based fee for services in the nature of investment advisory or
administrative services (subject to all of the terms and conditions of such
programs, which may include termination fees and restrictions on transferability
of Fund shares); (iii) 401(k) plans established by DWR and SPS Transaction
Services, Inc. (an affiliate of DWR) for their employees; (iv) certain Unit
Investment Trusts sponsored by DWR; (v) certain other open-end investment
companies whose shares are distributed by the Distributor; and (vi) other
categories of investors, at the discretion of the Board, as disclosed in the
then current prospectus of the Fund. Shares of the Fund held by the employee
benefit plans referred to in clause (iii) above prior to July 28, 1997 have been
designated Class D shares. Investors who require a $5 million minimum initial
investment to qualify to purchase Class D shares may satisfy that requirement by
investing that amount in a single transaction in Class D shares of the Fund and
other Dean Witter Multi-Class Funds, subject to the $1,000 minimum initial
investment required for that Class of the Fund. In addition, for the purpose of
meeting the $5 million minimum investment amount, holdings of Class A shares in
all Dean Witter Multi-Class Funds, shares of FSC Funds and shares of Dean Witter
Funds for which such shares have been exchanged will be included together with
the current investment amount. If a shareholder redeems Class A shares and
purchases Class D shares, such redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act with respect to the distribution of Class A, Class B and Class C shares of
the Fund. In the case of Class A and Class C shares, the Plan provides that the
Fund will reimburse the Distributor and others for the expenses of certain
activities and services incurred by them specifically on behalf of those shares.
Reimbursements for these expenses will be made in monthly payments by the Fund
to the Distributor, which will in no event exceed amounts equal to payments at
the annual rates of 0.25% and 0.85% of the average daily net assets of Class A
and Class C, respectively. In the case of Class B shares, the Plan provides that
the Fund will pay the Distributor a fee, which is accrued daily and paid
monthly, at the annual rate of 0.85% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's Class B shares since the inception of the
Fund (not including reinvestments of dividends or capital gains distributions),
less the average daily aggregate net asset value of the Fund's Class B shares
redeemed since the Fund's inception upon which a CDSC has been imposed or
waived, or (b) the average daily net assets of Class B. The fee is treated by
the Fund as an expense in the year it is accrued. In the case of Class A shares,
the entire amount of the fee currently represents a service fee within the
meaning of the NASD guidelines. In the case of Class B and Class C shares, a
portion of the fee payable pursuant to the Plan, equal to 0.20% and 0.25% of the
average daily net assets of each of these Classes, respectively, is currently
characterized as a service fee. A service fee is a payment made for personal
service and/or the maintenance of shareholder accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne
by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of DWR's account executives
and others who engage in or support distribution of shares or who service
shareholder accounts, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders; and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan in the case of Class B
shares to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation
21
<PAGE>
would be in the form of a carrying charge on any unreimbursed expenses.
For the fiscal year ended August 31, 1996, Class B shares of the Fund
accrued payments under the Plan amounting to $1,894,592, which amount is equal
to 0.85% of the Fund's average daily net assets for the fiscal year. The
payments accrued under the Plan were calculated pursuant to clause (b) of the
compensation formula under the Plan. All shares held prior to July 28, 1997
(other than shares held by certain employee benefit plans established by DWR and
its affiliate, SPS Transaction Services, Inc.) have been designated Class B
shares.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i) the
payments made by the Fund pursuant to the Plan, and (ii) the proceeds of CDSCs
paid by investors upon the redemption of Class B shares. For example, if $1
million in expenses in distributing Class B shares of the Fund had been incurred
and $750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that such
excess amounts, including the carrying charge described above, totalled
$6,167,490 at August 31, 1996, which was equal to 2.95% of the net assets of the
Fund on such date. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses or any requirement that
the Plan be continued from year to year, such excess amount does not constitute
a liability of the Fund. Although there is no legal obligation for the Fund to
pay expenses incurred in excess of payments made to the Distributor under the
Plan, and the proceeds of CDSCs paid by investors upon redemption of shares, if
for any reason the Plan is terminated the Trustees will consider at that time
the manner in which to treat such expenses. Any cumulative expenses incurred,
but not yet recovered through distribution fees or CDSCs, may or may not be
recovered through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 0.85% of the average daily net
assets of Class A or Class C, respectively, will not be reimbursed by the Fund
through payments in any subsequent year, except that expenses representing a
gross sales commission credited to account executives at the time of sale may be
reimbursed in the subsequent calendar year. No interest or other financing
charges will be incurred on any Class A or Class C distribution expenses
incurred by the Distributor under the Plan or on any unreimbursed expenses due
to the Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined once daily at 4:00 p.m., New
York time (or, on days when the New York Stock Exchange closes prior to 4:00
p.m., at such earlier time), on each day that the New York Stock Exchange is
open by taking the net assets of the Fund, dividing by the number of shares
outstanding and adjusting to the nearest cent. The assets belonging to the Class
A, Class B, Class C and Class D shares will be invested together in a single
portfolio. The net asset value of each Class, however, will be determined
separately by subtracting each Class's accrued expenses and liabilities. The net
asset value per share will not be determined on Good Friday and on such other
federal and non-federal holidays as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign exchange is valued at its latest sale price on that exchange
prior to the time assets are valued; if there were no sales that day, the
security is valued at the latest bid price (in cases where a security is traded
on more than one exchange, the security is valued on the exchange designated as
the primary market pursuant to procedures adopted by the Trustees); and (2) all
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price. When market quotations are not
readily available, including
22
<PAGE>
circumstances under which it is determined by the Investment Manager that sale
and bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Board of
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations, in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service. (See "Determination of Net Asset Value" in the Statement of Additional
Information.)
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the shareholder,
in shares of any other open-end Dean Witter Fund), unless the shareholder
requests that they be paid in cash. Shares so acquired are acquired at net asset
value and are not subject to the imposition of a front-end sales charge or a
CDSC (see "Redemptions and Repurchases"). Such dividends and distributions will
be paid, at the net asset value per share (without sales charge), in shares of
the applicable Class of the Fund (or in cash if the shareholder so requests) on
the monthly payment date, which will be no later than the last business day of
the month for which the dividend or distribution is payable. Processing of
dividend checks begins immediately following the monthly payment date.
Shareholders who have requested to receive dividends in cash will normally
receive their monthly dividend check during the first ten days of the following
month.
EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Fund's Transfer Agent for investment in
shares of the Fund (see "Purchases of Fund Shares" and "Redemptions and
Repurchases--Involuntary Redemption").
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution in shares of the
applicable Class at the net asset value per share next determined after receipt
by the Transfer Agent, by returning the check or the proceeds to the Transfer
Agent within thirty days after the payment date. Shares so acquired are acquired
at net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Redemptions and Repurchases").
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25 or in any whole
percentage of the account balance, on an annualized basis. Any applicable CDSC
will be imposed on shares redeemed under the Withdrawal Plan (see "Purchase of
Fund Shares"). Therefore, any shareholder participating in the Withdrawal Plan
will have sufficient shares redeemed from his or her account so that the
proceeds (net of any applicable CDSC) to the shareholder will be the designated
monthly or quarterly amount. Withdrawal plan payments should not be considered
as dividends, yields or income. If periodic withdrawal plan payments
continuously exceed net investment income and net capital gains, the
shareholder's original investment
23
<PAGE>
will be correspondingly reduced and ultimately exhausted. Each withdrawal
constitutes a redemption of shares and any gain or loss realized must be
recognized for federal income tax purposes.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, eligible Individual Retirement Accounts and
Custodial Accounts under Section 403(b)(7) of the Internal Revenue Code.
Adoption of such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected Broker-
Dealer account executive or the Transfer Agent.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any
other Dean Witter Multi-Class Fund without the imposition of any exchange fee.
Shares may also be exchanged for shares of the following funds: Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust
and five Dean Witter funds which are money market funds (the "Exchange Funds").
Class A shares may also be exchanged for shares of Dean Witter Multi-State
Municipal Series Trust and Dean Witter Hawaii Municipal Trust, which are Dean
Witter Funds sold with a front-end sales charge ("FSC Funds"). Class B shares
may also be exchanged for shares of Dean Witter Global Short-Term Income Fund
Inc., Dean Witter High Income Securities and Dean Witter National Municipal
Trust, which are Dean Witter Funds offered with a CDSC ("CDSC Funds"). Exchanges
may be made after the shares of the Fund acquired by purchase (not by exchange
or dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another Dean Witter Multi-Class Fund, any FSC Fund, any CDSC
Fund or any Exchange Fund that is not a money market fund is on the basis of the
next calculated net asset value per share of each fund after the exchange order
is received. When exchanging into a money market fund from the Fund, shares of
the Fund are redeemed out of the Fund at their next calculated net asset value
and the proceeds of the redemption are used to purchase shares of the money
market fund at their net asset value determined the following business day.
Subsequent exchanges between any of the Dean Witter Multi-Class Funds, FSC Funds
or CDSC Funds or any Exchange Fund that is not a money market fund can be
effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in an Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If those
shares are subsequently re-exchanged for shares of a Dean Witter Multi-Class
Fund or 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 Dean Witter Multi-Class Fund or shares of a CDSC Fund are reacquired. Thus,
the CDSC is based upon the time (calculated as described above) the shareholder
was invested in shares of a Dean Witter Multi-Class Fund or in shares of a CDSC
Fund (see "Purchase of Fund Shares"). In the case of exchanges of Class A shares
which are subject to a CDSC, the holding period also includes the time
(calculated as described above) the shareholder was invested in shares of a FSC
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
24
<PAGE>
given in an amount equal to the Exchange Fund 12b-1 distribution fees incurred
on or after that date which are attributable to those shares. (Exchange Fund
12b-1 distribution fees are described in the prospectuses for those funds.)
Class B shares of the Fund acquired in exchange for Class B shares of another
Dean Witter Multi-Class Fund or shares of a CDSC Fund having a different CDSC
schedule than that of this Fund will be subject to the higher CDSC schedule,
even if such shares are subsequently re-exchanged for shares of the fund with
the lower CDSC schedule.
ADDITIONAL INFORMATION REGARDING EXCHANGES. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Investment Manager to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Investment Manager's
discretion, may be limited by the Fund's refusal to accept additional purchases
and/ or exchanges from the investor. Although the Fund does not have any
specific definition of what constitutes a pattern of frequent exchanges, and
will consider all relevant factors in determining whether a particular situation
is abusive and contrary to the best interests of the Fund and its other
shareholders, investors should be aware that the Fund and each of the other Dean
Witter Funds may in their discretion limit or otherwise restrict the number of
times this Exchange Privilege may be exercised by any investor. Any such
restriction will be made by the Fund on a prospective basis only, upon notice of
the shareholder not later than ten days following such shareholder's most recent
exchange. Also, the Exchange Privilege may be terminated or revised at any time
by the Fund and/or any of such Dean Witter Funds for which shares of the Fund
have been exchanged, upon such notice as may be required by applicable
regulatory agencies. Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective and
policies, and shareholders should obtain a copy and examine it carefully before
investing. Exchanges are subject to the minimum investment requirement of each
Class of shares and any other conditions imposed by each fund. In the case of a
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 may realize a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in situations
where there is an exchange of shares within ninety days after the shares are
purchased. The Exchange Privilege is only available in states where an exchange
may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or other Selected Broker-Dealers 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
25
<PAGE>
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 with the Dean
Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of any
applicable CDSC in the case of Class A, Class B or Class C shares (see "Purchase
of Fund Shares"). If shares are held in a shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder, the shares may be redeemed by surrendering the certificates with a
written request for redemption along with any additional documentation required
by the Transfer Agent.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic or telegraphic request of the shareholder. The repurchase
price is the net asset value next computed (see "Purchase of Fund Shares") after
such repurchase order is received by DWR and other Selected Broker-Dealers,
reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund or the
Distributor. The offer by DWR and other Selected Broker-Dealers to repurchase
shares may be suspended without notice by them at any time. In that event,
shareholders may redeem their shares through the Fund's Transfer Agent as set
forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances, e.g., when normal trading is not taking place on the New
York Stock Exchange. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or
26
<PAGE>
repurchase in shares of the Fund in the same Class from which such shares were
redeemed or repurchased, at their net asset value next determined after a
reinstatement request, together with the proceeds, is received by the Transfer
Agent and receive a pro rata credit for any CDSC paid in connection with such
redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, on sixty
days' notice and at net asset value, the shares (other than shares held in an
Individual Retirement Account or Custodial Account under Section 403(b)(7) of
the Internal Revenue Code) of any shareholder whose shares, due to redemptions
by the shareholder, have a value of less than $100 or such lesser amount as may
be fixed by the Trustees or, in the case of an account opened through
EasyInvest-SM-, if after twelve months the shareholder has invested less than
$1,000 in the account. However, before the Fund redeems such shares and sends
the proceeds to the shareholder it will notify the shareholder that the value of
the shares is less than the applicable amount and allow the shareholder sixty
days to make an additional investment in an amount which will increase the value
of the account to at least the applicable amount before the redemption is
processed. No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends separately for
each Class of shares and intends to declare dividends from net investment income
on each day the New York Stock Exchange is open for business (see "Purchase of
Fund Shares"). The amount of the dividend declared may fluctuate from day to
day. Dividends are declared daily and paid monthly in additional shares of the
Fund. The Fund intends to distribute dividends from net short-term and long-term
capital gains, if any, at least once each year. The Fund may, however, elect to
retain all or a portion of any net long-term capital gains in any year.
All dividends and any capital gains distributions will be paid in additional
shares of the same Class and automatically credited to the shareholder's account
without issuance of a share certificate unless the shareholder requests in
writing that all dividends or all dividends and distributions be paid in cash.
Shares acquired by dividend and distribution reinvestments will not be subject
to any front-end sales charge or CDSC. Class B shares acquired through dividend
and distribution reinvestments will become eligible for conversion to Class A
shares on a pro rata basis. Distributions paid on Class A and Class D shares
will be higher than for Class B and Class C shares because distribution fees
paid by Class B and Class C shares are higher. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment
income and capital gains to shareholders and otherwise continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code, it
is not expected that the Fund will be required to pay any federal income tax.
Shareholders who are required to pay taxes on their income will normally have to
pay federal income taxes, and any state income taxes, on the dividends and
distributions they receive from the Fund. Such dividends and distributions, to
the extent that they are derived from net investment income or net short-term
capital gains, are taxable to the shareholder as ordinary dividend income
regardless of whether the shareholder receives such payments in additional
shares or in cash. Any dividends declared in the last quarter of any calendar
year which are paid to shareholders of record in such period in the following
year prior to February 1 will be deemed, for tax purposes, to have been received
by the shareholder in the prior year.
Long-term and short-term capital gains may be generated by the sale of
portfolio securities by the Fund. Distributions of net long-term capital gains,
if any, are taxable to shareholders as long-term
27
<PAGE>
capital gains regardless of how long a shareholder has held the Fund's shares
and regardless of whether the distribution is received in additional shares or
in cash. After the end of the calendar year, shareholders will receive full
information on their dividends and capital gains distributions for tax purposes,
including information as to the portion taxable as ordinary income and the
portion taxable as long-term capital gains.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources would, in effect, represent a return
of a portion of each shareholder's investment. All, or a portion, of such
payments would not be taxable to shareholders.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to accuracy. The foregoing discussion relates solely to the federal
income tax consequences of an investment in the Fund. Distributions may also be
subject to state and local taxes; therefore, each shareholder is advised to
consult his or her own tax adviser.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. These figures are computed separately
for Class A, Class B, Class C and Class D shares. Both the yield and the total
return of the Fund are based on historical earnings and are not intended to
indicate future performance. The yield of each Class of the Fund is computed by
dividing the Class's net investment income over a 30-day period by an average
value (using the average number of shares entitled to receive dividends and the
maximum offering price per share at the end of the period), all in accordance
with applicable regulatory requirements. Such amount is compounded for six
months and then annualized for a twelve-month period to derive the Fund's yield
for each Class.
The "average annual total return" of the Fund refers to a figure reflecting
the average annualized percentage increase (or decrease) in the value of an
initial investment in a Class of the Fund of $1,000 over periods of one, five
and ten years, or over the life of the Fund, if less than any of the foregoing.
Average annual total return reflects all income earned by the Fund, any
appreciation or depreciation of the Fund's assets, all expenses incurred by the
applicable Class and all sales charges incurred by shareholders, for the stated
periods. It also assumes reinvestment of all dividends and distributions paid by
the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. The Fund may also advertise
the growth of hypothetical investments of $10,000, $50,000 and $100,000 in each
Class of shares of the Fund. Such calculations may or may not reflect the
deduction of any sales charge which, if reflected, would reduce the performance
quoted. The Fund from time to time may also advertise its performance relative
to certain performance rankings and indexes compiled by independent
organizations, such as mutual fund performance rankings of Lipper Analytical
Services, Inc.
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 except that
each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other matter
in which the interests of one Class differ from the interests of any other
Class. In addition, Class B
28
<PAGE>
shareholders will have the right to vote on any proposed material increase in
Class A's expenses, if such proposal is submitted separately to Class A
shareholders. Also, as discussed herein, Class A, Class B and Class C bear the
expenses related to the distribution of their respective shares.
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 Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification 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
investment company managed or advised by InterCapital ("Dean Witter Fund") is
engaged at the same time in a purchase or sale of the same security. The Code of
Ethics bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within sixty days of a sale or a sale
within sixty days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account within
thirty days before or after any transaction in any Dean Witter Fund managed by
them. Any violations of the Code of Ethics are subject to sanctions, including
reprimand, demotion or suspension or termination of employment. The Code of
Ethics comports with regulatory requirements and the recommendations in the 1994
report by the Investment Company Institute Advisory Group on Personal Investing.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve
its investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objective and policies and substantially the same investment restrictions as
those applicable to the Fund.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
29
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS DEAN WITTER RETIREMENT SERIES
Dean Witter Liquid Asset Fund Inc. Liquid Asset Series
Dean Witter U.S. Government Money U.S. Government Money Market Series
Market Trust U.S. Government Securities Series
Dean Witter Tax-Free Daily Income Trust Intermediate Income Securities Series
Dean Witter California Tax-Free Daily American Value Series
Income Trust Capital Growth Series
Dean Witter New York Municipal Money Dividend Growth Series
Market Trust Strategist Series
EQUITY FUNDS Utilities Series
Dean Witter American Value Fund Value-Added Market Series
Dean Witter Natural Resource Global Equity Series
Development Securities Inc. ASSET ALLOCATION FUNDS
Dean Witter Dividend Growth Securities Dean Witter Strategist Fund
Inc. Dean Witter Global Asset Allocation
Dean Witter Developing Growth Fund
Securities Trust ACTIVE ASSETS ACCOUNT PROGRAM
Dean Witter World Wide Investment Trust Active Assets Money Trust
Dean Witter Value-Added Market Series Active Assets Tax-Free Trust
Dean Witter Utilities Fund Active Assets California Tax-Free Trust
Dean Witter Capital Growth Securities Active Assets Government Securities
Dean Witter European Growth Fund Inc. Trust
Dean Witter Precious Metals and
Minerals Trust
Dean Witter Pacific Growth Fund Inc.
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth
Securities
Dean Witter Global Utilities Fund
Dean Witter International SmallCap Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
Dean Witter Japan Fund
Dean Witter Income Builder Fund
Dean Witter Special Value Fund
Dean Witter Financial Services Trust
Dean Witter Market Leader Trust
FIXED INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities
Trust
Dean Witter Intermediate Term U.S.
Treasury 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 Short-Term U.S. Treasury
Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal
Trust
Dean Witter Short-Term Bond Fund
Dean Witter National Municipal Trust
Dean Witter High Income Securities
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
Dean Witter Intermediate Term U.S.
Treasury Trust
<PAGE>
Dean Witter
Intermediate Income Securities
Dean Witter
Two World Trade Center
New York, New York 10048
TRUSTEES Intermediate
Michael Bozic Income
Charles A. Fiumefreddo Securities
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Barry Fink
Vice President, Secretary and
General Counsel
Rochelle G. Siegel
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 -- JULY 28, 1997
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DEAN WITTER
INTERMEDIATE INCOME
SECURITIES
JULY 28, 1997
- --------------------------------------------------------------------------------
Dean Witter Intermediate Income Securities (the "Fund") is an open-end,
diversified management investment company whose investment objective is high
current income consistent with the safety of principal. The Fund seeks to
achieve its investment objective by investing primarily in intermediate term,
investment grade fixed-income securities. See "Investment Objective and
Policies."
A Prospectus for the Fund dated July 28, 1997, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed below,
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Dean Witter
Intermediate Income Securities
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (Toll-Free)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............. 3
Trustees and Officers................... 6
Investment Practices and Policies....... 12
Investment Restrictions................. 16
Portfolio Transactions and Brokerage.... 17
The Distributor......................... 18
Determination of Net Asset Value........ 23
Purchase of Fund Shares................. 23
Shareholder Services.................... 26
Redemptions and Repurchases............. 30
Dividends, Distributions and Taxes...... 32
Performance Information................. 33
Description of Shares................... 34
Custodian and Transfer Agent............ 35
Independent Accountants................. 35
Reports to Shareholders................. 35
Legal Counsel........................... 35
Experts................................. 35
Registration Statement.................. 36
Report of Independent Accountants....... 37
Financial Statements--August 31, 1996... 38
Financial Statements--February 28, 1997
(unaudited)............................. 51
Appendix................................ 62
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts on
September 1, 1988.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware Corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), a Delaware
corporation. In an internal reorganization which took place in January, 1993,
InterCapital assumed the investment advisory, administrative and management
activities previously performed by the InterCapital Division of Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital. (As
hereinafter used in this Statement of Additional Information, the terms
"InterCapital" and "Investment Manager" refer to DWR's InterCapital Division
prior to the internal reorganization and to Dean Witter InterCapital Inc.
thereafter.) The daily management of the Fund and research relating to the
Fund's portfolio are conducted by or under the direction of officers of the Fund
and of the Investment Manager, subject to review by the Fund's Board of
Trustees. In addition, Trustees of the Fund provide guidance on economic factors
and interest rate trends. Information as to these Trustees and Officers is
contained under the caption "Trustees and Officers."
InterCapital is also the investment manager or investment adviser of the
following management investment companies: Active Assets Money Trust, Active
Assets Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, Dean Witter Liquid Asset Fund Inc., InterCapital
Income Securities Inc., InterCapital Insured Municipal Bond Trust, InterCapital
Insured Municipal Trust, InterCapital Insured Municipal Income Trust,
InterCapital California Insured Municipal Income Trust, InterCapital Insured
Municipal Securities, InterCapital Insured California Municipal Securities,
InterCapital Quality Municipal Investment Trust, InterCapital Quality Municipal
Income Trust, InterCapital Quality Municipal Securities, InterCapital California
Quality Municipal Securities, InterCapital New York Quality Municipal
Securities, High Income Advantage Trust, High Income Advantage Trust II, High
Income Advantage Trust III, Dean Witter Government Income Trust, Dean Witter
High Yield Securities Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter
Developing Growth Securities Trust, Dean Witter Tax-Exempt Securities Trust,
Dean Witter Natural Resource Development Securities Inc., Dean Witter Dividend
Growth Securities Inc., Dean Witter Capital Appreciation Fund, Dean Witter
Information Fund, Dean Witter American Value Fund, Dean Witter U.S. Government
Money Market Trust, Dean Witter Intermediate Term U.S. Treasury Trust, Dean
Witter Variable Investment Series, Dean Witter World Wide Investment Trust, Dean
Witter Select Municipal Reinvestment Fund, Dean Witter U.S. Government
Securities Trust, Dean Witter California Tax-Free Income Fund, Dean Witter New
York Tax-Free Income Fund, Dean Witter Convertible Securities Trust, Dean Witter
Federal Securities Trust, Dean Witter Value-Added Market Series, Dean Witter
Utilities Fund, Dean Witter California Tax-Free Daily Income Trust, Dean Witter
World Wide Income Trust, Dean Witter Intermediate Income Securities, Dean Witter
Capital Growth Securities, Dean Witter European Growth Fund Inc., Dean Witter
Precious Metals and Minerals Trust, Dean Witter New York Municipal Money Market
Trust, Dean Witter Global Short-Term Income Fund, Inc., Dean Witter Pacific
Growth Fund Inc., Dean Witter Multi-State Municipal Series Trust, Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Diversified Income Trust, Dean
Witter Health Sciences Trust, Dean Witter Retirement Series, Dean Witter Global
Dividend Growth Securities, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter
National Municipal Trust, Dean Witter High Income Securities, Dean Witter
International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter Select
Dimensions Investment Series, Dean Witter Balanced Growth Fund, Dean Witter
Balanced Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter Japan
Fund, Dean Witter Income Builder Fund, Dean Witter Special Value Fund, Dean
Witter Financial Services Trust, Dean Witter Market Leader Trust, Dean Witter
Intermediate Term U.S. Treasury Trust, Municipal Income Trust, Municipal Income
Trust II, Municipal Income Trust III, Municipal
3
<PAGE>
Income Opportunities Trust, Municipal Income Opportunities Trust II, Municipal
Income Opportunities Trust III, Prime Income Trust and Municipal Premium Income
Trust. The foregoing investment companies, together with the Fund, are
collectively referred to as the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser: TCW/DW
Core Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Balanced Fund, TCW/DW Mid-Cap Equity Trust, TCW/DW Global Telecom
Trust, TCW/DW Strategic Income Trust, TCW/DW Total Return Trust, TCW/DW Emerging
Markets Opportunities Trust, TCW/DW Term Trust 2000, TCW/DW Term Trust 2002 and
TCW/DW Term Trust 2003 (the "TCW/DW Funds"). InterCapital also serves as: (i)
administrator of The BlackRock Strategic Term Trust Inc., a closed-end
investment company; and (ii) 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 and 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 Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Dean Witter Distributors Inc. ("The
Distributor" or "Distributors") will be paid by the Fund. These expenses will be
allocated among the four classes of shares of the Fund (each, a "Class") pro
rata based on the net assets of the Fund attributable to each Class, except as
described below. The expenses borne by the Fund include, but are not limited to:
expenses of the Plan of Distribution pursuant to Rule 12b-1 (the "12b-1 fee")
(see "The Distributor"), charges and expenses of any registrar, custodian, stock
transfer and dividend disbursing agent; brokerage commissions; taxes; engraving
and printing of share certificates; registration costs of the Fund and its
shares under federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing Prospectuses and Statements of
Additional Information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and trustees' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of trustees or members of any advisory board or
committee who are not employees of the Investment Manager or any
4
<PAGE>
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. The 12b-1 fees relating to a particular Class will be
allocated directly to that Class. In addition, other expenses associated with a
particular Class (except advisory or custodial fees) may be allocated directly
to that Class, provided that such expenses are reasonably identified as
specifically attributable to that Class and the direct allocation to that Class
is approved by the Trustees.
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 every business day: 0.60% of the portion of the daily net assets
not exceeding $500 million; 0.50% of the portion of daily net assets exceeding
$500 million but not exceeding $750 million; 0.40% of the portion of the daily
net assets exceeding $750 million but not exceeding $1 billion; and 0.30% of the
portion of the daily net assets exceeding $1 billion. Total compensation accrued
to the Investment Manager under the Agreement for the fiscal years ended August
31, 1994, 1995 and 1996 was $1,522,447, $1,390,467 and $1,337,360, respectively.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder, the
Investment Manager is not liable to the Fund or any of its investors for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors. The Agreement 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 February 21, 1997
and by the shareholders of the Fund at a Special Meeting of Shareholders held on
May 21, 1997. The Agreement is substantially identical to a prior investment
management agreement which was initially approved by the Board of Trustees on
October 30, 1992 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on January 12, 1993. The Agreement took effect on May 31, 1997
upon the consummation of the merger of Dean Witter, Discover & Co. with Morgan
Stanley Group Inc. The Agreement may be terminated at any time, without penalty,
on thirty days' notice by the Board of Trustees of the Fund, by the holders of a
majority, as defined in the Investment Company Act of 1940 (the "Act"), of the
outstanding shares of the Fund, or by the Investment Manager. The Agreement will
automatically terminate in the event of its assignment (as defined in the Act).
Under its terms, the Agreement has an initial term ending April 30, 1999,
and provides that it will continue in effect from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the vote
of the holders of a majority, as defined in the Act, of the outstanding shares
of the Fund, or by the Trustees of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Trustees of
the Fund who are not parties to the Agreement or "interested persons" (as
defined in the Act) of any such party (the "Independent Trustees"), which vote
must be cast in person at a meeting called for the purpose of voting on such
approval.
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 investment management contract between InterCapital and the Fund
is terminated, or if the affiliation between the Investment Manager 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.
5
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 83 Dean Witter Funds and the 14 TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Michael Bozic (56) ................................... Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief
6111 Broken Sound Parkway, N.W. Executive Officer of Hills Department Stores (May,
Boca Raton, Florida 1991-July 1995); formerly variously Chairman, Chief
Executive Officer, President and Chief Operating Officer
(1987-1991) of the Sears Merchandise Group of Sears,
Roebuck and Co.; Director of Eaglemark Financial Services,
Inc., the United Negro College Fund and Weirton Steel
Corporation.
Charles A. Fiumefreddo* (64) ......................... Chairman and Chief Executive Officer and Director of
Chairman of the Board, InterCapital, Distributors and DWSC; Executive Vice
President and Chief Executive President and Director of DWR; Chairman, Director or
Officer and Trustee Trustee, President and Chief Executive Officer of the Dean
Two World Trade Center Witter Funds; Chairman, Chief Executive Officer and
New York, New York Trustee of the TCW/DW Funds; Chairman and Director of Dean
Witter Trust Company ("DWTC"); Director and/or officer of
various MSDWD subsidiaries; formerly Executive Vice
President and Director of Dean Witter, Discover & Co.
(until February, 1993).
Edwin J. Garn (64) ................................... Director or Trustee of the Dean Witter Funds; formerly
Trustee United States Senator (R-Utah) (1974-1992) and Chairman,
c/o Huntsman Corporation Senate Banking Committee (1980-1986); formerly Mayor of
500 Huntsman Way Salt Lake City, Utah (1971-1974); formerly Astronaut,
Salt Lake City, Utah Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Corporation (since January, 1993);
Director of Franklin Quest (time management systems) and
John Alden Financial Corp. (health insurance); member of
the board of various civic and charitable organizations.
John R. Haire (72) ................................... Chairman of the Audit Committee and Chairman of the
Trustee Committee of the Independent Directors or Trustees and
Two World Trade Center Director or Trustee of the Dean Witter Funds; Chairman of
New York, New York the Audit Committee and Chairman of the Committee of the
Independent Trustees and Trustee of the TCW/DW Funds;
formerly President, Council for Aid to Education
(1978-1989) and Chairman and Chief Executive Officer of
Anchor Corporation, an Investment Adviser (1964-1978);
Director of Washington National Corporation (insurance).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Wayne E. Hedien** (63) ............................... Retired; Director or Trustee of the Dean Witter Funds
Trustee (commencing on September 1, 1997); Director of The PMI
c/o Gordon Altman Butowsky Group, Inc. (private mortgage insurance); Trustee and Vice
Weitzen Shalov & Wein Chairman of The Field Museum of Natural History; formerly
Counsel to the Independent Trustees associated with the Allstate Companies (1966-1994), most
114 West 47th Street recently as Chairman of The Allstate Corporation (March,
New York, New York 1993-December, 1994) and Chairman and Chief Executive
Officer of its wholly-owned subsidiary, Allstate Insurance
Company (July, 1989-December, 1994); director of various
other business and charitable organizations.
Dr. Manuel H. Johnson (48) ........................... Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Co-Chairman and a founder of the Group of
c/o Johnson Smick International, Inc. Seven Council (G7C), an international economic commission;
1133 Connecticut Avenue, N.W. Director or Trustee of the Dean Witter Funds; Trustee of
Washington, DC the TCW/DW Funds; Director of NASDAQ (since June, 1995);
Trustee of the Financial Accounting Foundation (oversight
organisation for the Financial Accounting Standards
Board); formerly Vice Chairman of the Board of Governors
of the Federal Reserve System (1986-1990) and Assistant
Secretary of the U.S. Treasury.
Michael E. Nugent (61) ............................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Director or Trustee of the Dean
c/o Triumph Capital, L.P. Witter Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital
New York, New York Corporation (1984-1988); director of various business
organizations.
Philip J. Purcell* (53) .............................. Chairman of the Board of Directors and Chief Executive
Trustee Officer of MSDWD, DWR and Novus Credit Services Inc.;
1585 Broadway Director of InterCapital, DWSC and Distributors; Director
New York, New York or Trustee of the Dean Witter Funds; Director and/or
officer of various MSDWD subsidiaries.
John L. Schroeder (66) ............................... Retired; Director or Trustee of the Dean Witter Funds;
Trustee Trustee of the TCW/DW Funds; Director of Citizens
c/o Gordon Altman Butowsky Utilities Company; formerly Executive Vice President and
Weitzen Shalov & Wein Chief Investment Officer of the Home Insurance Company
Counsel to the Independent Trustees (August, 1991-September, 1995).
114 West 47th Street
New York, New York
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Barry Fink (42) ...................................... Senior Vice President (since March, 1997) and Secretary
Vice President, Secretary and General Counsel (since February, 1997) of InterCapital
and General Counsel and DWSC; Senior Vice President (since March, 1997) and
Two World Trade Center Assistant Secretary and Assistant General Counsel (since
New York, New York February, 1997) of Distributors; Assistant Secretary of
DWR (since August, 1996); Vice President, Secretary and
General Counsel of the Dean Witter Funds and the TCW/DW
Funds (since February, 1997); previously First Vice
President (June, 1993-February, 1997), Vice President
(until June, 1993) and Assistant Secretary and Assistant
General Counsel of InterCapital and DWSC and Assistant
Secretary of the Dean Witter Funds and the TCW/DW Funds.
Rochelle G. Siegel (48) .............................. Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (50) ................................ First Vice President and Assistant Treasurer of
Treasurer InterCapital and DWSC; Treasurer of the Dean Witter Funds
Two World Trade Center and the TCW/DW Funds.
New York, New York
</TABLE>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in the
Act.
** Mr. Hedien's term as Trustee will commence on September 1, 1997.
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, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC. Executive Vice President of Distributors and DWTC and
Director of DWTC, Executive Vice President and Director of DWR, and Director of
SPS Transaction Services, Inc. and various other MSDWD subsidiaries. Robert S.
Giambrone, Senior Vice President of InterCapital, DWSC, Distributors and DWTC
and Director of DWTC, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of InterCapital and Director of DWTC and Kevin Hurley, James
F. Willison, Peter M. Avelar, and Jonathan R. Page, Senior Vice Presidents of
InterCapital, are Vice Presidents of the Fund. Marilyn K. Cranney, First Vice
President and Assistant General Counsel of InterCapital and DWSC, Lou Anne D.
McInnis, Ruth Rossi and Carsten Otto, Vice Presidents and Assistant General
Counsels of InterCapital and DWSC, and Frank Bruttomesso, 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 currently consists of eight (8) trustees; as noted
above, Mr. Hedien's term will commence on September 1, 1997. 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 83 Dean Witter Funds,
comprised of 126 portfolios. As of June 30, 1997, the Dean Witter Funds had
total net assets of approximately $87.9 billion and more than six million
shareholders.
Six Trustees and Mr. Hedien (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,
MSDWD. These are the "disinterested" or "independent" Trustees. The
8
<PAGE>
other two Trustees (the "management Trustees") are affiliated with InterCapital.
Four of the six independent Trustees are also Independent Trustees of the TCW/DW
Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Trustees. The Dean Witter Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the current Independent Trustees serve as members of the Audit
Committee and the Committee of the Independent Trustees. Three of them also
serve as members of the Derivatives Committee. During the calendar year ended
December 31, 1996, the three Committees held a combined total of sixteen
meetings. The Committees hold some meetings at InterCapital's offices and some
outside InterCapital. Management Trustees or officers do not attend these
meetings unless they are invited for purposes of furnishing information or
making a report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to time.
The Independent Trustees are required to select and nominate individuals to fill
any Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1
plan of distribution. Most of the Dean Witter Funds have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and the
Funds' operations and management. He screens and/or prepares written materials
and identifies critical issues for the Independent Trustees to consider,
develops agendas for Committee meetings, determines the type and amount of
information that the Committees will need to form a judgment on various issues,
and arranges to have that information furnished to Committee members. He also
arranges for the services of independent experts and consults with them in
advance of meetings to help refine reports and to focus on critical issues.
Members of the Committees believe that the person who serves as Chairman of both
Committees and guides their efforts is pivotal to the effective functioning of
the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
9
<PAGE>
negotiations with the Investment Manager and other service providers. In effect,
the Chairman of the Committees serves as a combination of chief executive and
support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and, since July
1, 1996, as Chairman of the Committee of the Independent Trustees and the Audit
Committee of the TCW/DW Funds. The current Committee Chairman has had more than
35 years experience as a senior executive in the investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Trustees arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Trustees serve on all Fund Boards
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of Independent Trustees, and a Chairman of their Committees,
of the caliber, experience and business acumen of the individuals who serve as
Independent Trustees of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Trustees an additional annual fee of $1,200). The Fund also
reimburses such Trustees for travel and other out-of-pocket expenses incurred by
them in connection with attending such meetings. Trustees and officers of the
Fund who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended August 31, 1996.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Michael Bozic..................................................................................... $ 1,750
Edwin J. Garn..................................................................................... 1,850
John R. Haire..................................................................................... 3,963
Dr. Manuel H. Johnson............................................................................. 1,800
Michael E. Nugent................................................................................. 1,750
John L. Schroeder................................................................................. 1,800
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1996 for services
to the 82 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 14 TCW/DW Funds that were in operation at December 31, 1996.
With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the TCW/DW Funds
are included solely because of a limited exchange privilege between those Funds
and five Dean Witter Money Market Funds.
10
<PAGE>
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS FOR SERVICE TOTAL CASH
CHAIRMAN OF AS COMPENSATION
COMMITTEES OF CHAIRMAN OF PAID
FOR SERVICE INDEPENDENT COMMITTEES OF FOR SERVICES
AS DIRECTOR OR DIRECTORS/ INDEPENDENT TO
TRUSTEE AND FOR SERVICE AS TRUSTEES AND TRUSTEES AND 82 DEAN
COMMITTEE MEMBER TRUSTEE AND AUDIT AUDIT WITTER
OF 82 DEAN COMMITTEE MEMBER COMMITTEES OF COMMITTEES OF FUNDS AND
NAME OF WITTER OF 14 TCW/DW 82 DEAN WITTER 14 TCW/DW 14 TCW/DW
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Michael Bozic.............. $138,850 -- -- -- $138,850
Edwin J. Garn.............. 140,900 -- -- -- 140,900
John R. Haire.............. 106,400 $64,283 $195,450 $ 12,187 378,320
Dr. Manuel H. Johnson...... 137,100 66,483 -- -- 203,583
Michael E. Nugent.......... 138,850 64,283 -- -- 203,133
John L. Schroeder.......... 137,150 69,083 -- -- 206,233
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, including the Fund, have adopted a retirement program under which
an Independent Trustee who retires after serving for at least five years (or
such lesser period as may be determined by the Board) as an Independent Director
or Trustee of any Dean Witter Fund that has adopted the retirement program (each
such Fund referred to as an "Adopting Fund" and each such Trustee referred to as
an "Eligible Trustee") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Trustee
is entitled to receive from the Adopting Fund, commencing as of his or her
retirement date and continuing for the remainder of his or her life, an annual
retirement benefit (the "Regular Benefit") equal to 25.0% of his or her Eligible
Compensation plus 0.4166666% of such Eligible Compensation for each full month
of service as an Independent Director or Trustee of any Adopting Fund in excess
of five years up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(1) "Eligible Compensation" is one-fifth
of the total compensation earned by such Eligible Trustee for service to the
Adopting Fund in the five year period prior to the date of the Eligible
Trustee's retirement. Benefits under the retirement program are not secured or
funded by the Adopting Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended August 31,
1996 and by the 57 Dean Witter Funds (including the Fund) for the year ended
December 31, 1996, and the estimated retirement benefits for the Fund's
Independent Trustees, to commence upon their retirement, from the Fund as of
August 31, 1996 and from the 57 Dean Witter Funds as of December 31, 1996.
- ------------
(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.
11
<PAGE>
RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS RETIREMENT BENEFITS ESTIMATED ANNUAL
-------------------------------------- ACCRUED AS EXPENSES BENEFITS
ESTIMATED UPON RETIREMENT(2)
CREDITED YEARS ESTIMATED ---------------------- ----------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- -------------------------------- ------------------- ----------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic................... 10 50.0% $ $ 20,147 $ $ 51,325
Edwin J. Garn................... 10 50.0 27,772 51,325
John R. Haire................... 10 50.0 46,952 129,550
Dr. Manuel H. Johnson........... 10 50.0 10,926 51,325
Michael E. Nugent............... 10 50.0 19,217 51,325
John L. Schroeder............... 8 41.7 38,700 42,771
</TABLE>
- ------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) above.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
SPECIAL INVESTMENT CONSIDERATIONS
As stated in the Prospectus, the Fund may invest up to 5% of its net assets
in lower rated fixed-income securities, sometimes referred to as high yield
securities. Because of the special nature of high yield securities, the
Investment Manager must take account certain special considerations in assessing
the risks associated with such investments. Although the growth of the high
yield securities market in the 1980s had paralleled a long economic expansion,
recently many issuers have been affected by adverse economic and market
conditions. It should be recognized that an economic downturn or increase in
interest rates is likely to have a negative effect on the high yield bond market
and on the value of the high yield securities held by the Fund, as well as on
the ability of the securities' issuers to repay principal and interest on their
borrowings.
The prices of high yield securities have been found to be less sensitive to
changes in prevailing interest rates than higher-rated investments, but are
likely to be more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations, to meet their projected business goals or to obtain
additional financing. If the issuer of a fixed-income security owned by the Fund
defaults, the Fund may incur additional expenses to seek recovery. In addition,
periods of economic uncertainty and change can be expected to result in an
increased volatility of market prices of high yield securities and a concomitant
volatility in the net asset value of a share of the Fund. Moreover, the market
prices of certain of the Fund's portfolio securities which are structured as
zero coupon and payment-in-kind securities are affected to a greater extent by
interest rate changes and thereby tend to be more volatile than securities which
pay interest periodically and in cash (see "Dividends, Distributions and Taxes"
for a discussion of the tax ramifications of investments in such securities).
The secondary market for high yield securities may be less liquid than the
markets for higher quality securities and, as such, may have an adverse effect
on the market prices of certain securities. The limited liquidity of the market
may also adversely affect the ability of the Fund's Trustees to arrive at a fair
value for certain high yield securities at certain times and could make it
difficult for the Fund to sell certain securities.
12
<PAGE>
Current laws and proposed new laws may have a potentially negative impact on
the market for high yield bonds. For example, legislation requires
federally-insured savings and loan associations to divest their investments in
high yield bonds. This legislation and other proposed legislation may have an
adverse effect upon the value of high yield securities and a concomitant
negative impact upon the net asset value of a share of the Fund.
U.S. GOVERNMENT SECURITIES. As stated in the Prospectus, while the Fund
under normal circumstances will invest primarily in corporate debt securities,
it may also invest in U.S. Government securities. Securities issued by the U.S.
Government, its agencies or instrumentalities in which the Fund may invest
include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration; the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to thirty years although the Fund may not invest in securities with
remaining maturities of more than twelve years.
(3) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but whose issuing
agency or instrumentality has the right to borrow, to meet its obligations,
from an existing line of credit with the U.S. Treasury. Among the agencies
and instrumentalities issuing such obligations are the Tennessee Valley
Authority, the Federal National Mortgage Association ("FNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") and the U.S. Postal Service.
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal Farm
Credit System and the Federal Home Loan Banks.
ZERO COUPON SECURITIES. A portion of the U.S. Government securities
purchased by the Fund may be zero coupon securities. Such securities are
purchased at a discount from their face amount, giving the purchaser the right
to receive their full value at maturity. The interest earned on such securities
is, implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner of
a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received if prevailing interest rates rise. For this
reason, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest currently. Zero coupon securities may
not exceed 5% of the Fund's total assets.
SECURITIES OF FOREIGN ISSUERS. As stated in the Prospectus, the Fund may
invest in fixed-income securities issued by foreign governments and other
foreign issuers, provided such securities are denominated in U.S. Dollars. With
regard to foreign fixed-income securities, the Investment Manager believes that
in many instances such securities may provide higher yields than similar
securities of domestic issuers. With the expiration of the Interest Equalization
Tax in 1974, many of these investments currently enjoy increased liquidity,
although such securities are generally less liquid than the securities of United
States corporations, and are certainly less liquid than securities issued by the
United States Government or its agencies.
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Foreign investments involve certain risks, including the political or
economic instability of the issuer or of the country of issue, the difficulty of
predicting international trade patterns and the possibility of imposition of
exchange controls. Such securities may also be subject to greater fluctuations
in price than securities of United States corporations or of the United States
Government. In addition, there may be less publicly available information about
a foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and with respect to certain foreign countries, there
is a possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Finally, in the
event of a default of any such foreign debt obligations, it may be more
difficult for the Fund to obtain or to enforce a judgment against the issuers of
such securities.
LENDING OF PORTFOLIO SECURITIES
As discussed in the Prospectus, consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to notice provisions described below), and are at all times
secured by cash or cash equivalents, which are maintained in a segregated
account pursuant to applicable regulations and that are equal to at least the
market value, including accrued interest, determined daily, of the loaned
securities. The advantage of such loans is that the Fund continues to receive
the income on the loaned securities while at the same time earning interest on
the cash amounts deposited as collateral, which will be invested in short-term
obligations. The Fund will not lend its portfolio securities if such loans are
not permitted by the laws or regulations of any state in which its shares are
qualified for sale and will not lend more than 25% of the value of its total
assets. A loan may be terminated by the borrower on one business day's notice,
or by the Fund on two business days' notice. If the borrower fails to deliver
the loaned securities within two days after receipt of notice, the Fund could
use the collateral to replace the securities while holding the borrower liable
for any excess of replacement cost over the value of the collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made to
firms deemed by the Fund's management to be creditworthy and when the income
which can be earned from such loans justifies the attendant risks. Upon
termination of the loan, the borrower is required to return the securities to
the Fund. Any gain or loss in the market price during the loan period would
inure to the Fund. The creditworthiness of firms to which the Fund lends its
portfolio securities will be monitored on an ongoing basis by the Investment
Manager pursuant to procedures adopted and reviewed, on an ongoing basis, by the
Board of Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative
and custodial fees in connection with a loan of its securities. However, the
Fund does not presently intend to lend any of its portfolio securities in the
foreseeable future.
REPURCHASE AGREEMENTS
When cash may be available for only a few days, it may be invested by the
Fund in repurchase agreements until such time as it may otherwise be invested or
used for payments of obligations of the Fund. A repurchase agreement may be
viewed as a type of secured lending by the Fund which typically involves the
acquisition by the Fund of government securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral") at a
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. In the event the original seller defaults on its
obligation to repurchase, as a result of its bankruptcy or otherwise, the Fund
will seek to sell the collateral, which action could involve costs or
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<PAGE>
delays. In such case, the Fund's ability to dispose of the collateral to recover
its investment may be restricted or delayed.
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. Repurchase agreements will be transacted only with large,
well-capitalized and well-established financial institutions whose financial
condition will be continuously monitored by the Investment Manager subject to
procedures established by the Trustees. The procedures also require that the
collateral underlying the agreement be specified. The Fund does not presently
intend to enter into repurchase agreements so that more than 5% of the Fund's
net assets are subject to such agreements.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
As discussed in the Prospectus, from time to time, in the ordinary course of
business, the Fund may purchase 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 transactions. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during this period. While
the Fund will only purchase securities on a when-issued, delayed delivery or
forward commitment basis with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date, if it is deemed
advisable. At the time the Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, the Fund will record the transaction and
thereafter reflect the value, each day, of such security in determining the net
asset value of the Fund. At the time of delivery of the securities, the value
may be more or less than the purchase price. The Fund will also establish a
segregated account with the Fund's custodian bank in which it will continuously
maintain cash or U.S. Government securities or other liquid portfolio securities
equal in value to commitments for such when-issued or delayed delivery
securities; subject to this requirement, the Fund may purchase securities on
such basis without limit. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued or delayed delivery
basis may increase the volatility of the Fund's net asset value. The Investment
Manager and the Board of Trustees do not believe that the Fund's net asset value
or income will be adversely affected by its purchase of securities on such
basis.
WHEN, AS AND IF ISSUED SECURITIES
As discussed in the Prospectus, the Fund may purchase securities on a "when,
as and if issued" basis under which the issuance of the security depends upon
the occurrence of a subsequent event, such as approval of a merger, corporate
reorganization, leveraged buyout or debt restructuring. The commitment for the
purchase of any such security will not be recognized in the portfolio of the
Fund until the Investment Manager determines that issuance of the security is
probable. At such time, the Fund will record the transaction and, in determining
its net asset value, will reflect the value of the security daily. At such time,
the Fund will also establish a segregated account with its custodian bank in
which it will continuously maintain cash or U.S. Government securities or other
liquid portfolio securities equal in value to recognized commitments for such
securities. Settlement of the trade will occur within five business days of the
occurrence of the subsequent event. The value of the Fund's commitments to
purchase the securities of any one issuer, together with the value of all
securities of such issuer owned by the Fund, may not exceed 5% of the value of
the Fund's total assets at the time the initial commitment to purchase such
securities is made (see "Investment Restrictions"). Subject to the foregoing
restrictions, the Fund may purchase securities on such basis without limit. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
its net asset value. The Investment Manager and the Trustees do not believe that
the net asset value of the Fund will be adversely affected by its purchase of
securities on such basis. The Fund
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may also sell securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of sale.
OPTIONS TRANSACTIONS
The Fund has no current intention to engage in options transactions. In the
event the Fund wishes to engage in options transactions in the future, the
Fund's Prospectus and Statement of Additional Information will be amended and
sent to shareholders in advance of the change.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate for the fiscal year ended August 31, 1996
was 115%. A 100% turnover rate would occur, for example, if 100% of the
securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced within
one year.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus, the
investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at a
meeting of shareholders, if the holders of 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Fund.
The Fund may not:
1. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or trustee/ director of the Fund or of the Investment Manager
owns more than 1/2 of 1% of the outstanding securities of such issuer, and
such officers and trustees/directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuers.
2. Purchase or sell real estate or interests therein, although the Fund
may purchase securities of issuers which engage in real estate operations
and securities secured by real estate or interests therein.
3. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
4. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
5. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(6) in the Prospectus.
6. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of borrowing
money in accordance with restriction (6) in the Prospectus.
7. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations in which the Fund may invest
consistent with its investment objective and policies; (b) by investment in
repurchase agreements; or (c) by lending its portfolio securities.
8. Make short sales of securities.
9. Purchase or sell commodities or commodity futures contracts.
10. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities.
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<PAGE>
11. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security.
12. Invest for the purpose of exercising control or management of any
other issuer.
In addition, the Fund, as a non-fundamental policy, will not invest in
warrants, although it may acquire warrants attached to other securities
purchased by the Fund.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Board of Trustees of the Fund, the
Investment Manager is responsible for the investment decisions and the placing
of orders for portfolio transactions for the Fund. The Fund's portfolio
transactions will occur primarily with issuers, underwriters or major dealers in
fixed-income securities acting as principals. Such transactions are normally on
a net basis which do not involve payment of brokerage commissions. The cost of
securities purchased from an underwriter usually includes a commission paid by
the issuer to the underwriter; transactions with dealers normally reflect the
spread between bid and asked prices. During the fiscal years ended August 31,
1994, 1995 and 1996, the Fund did not pay any brokerage commissions.
The Investment Manager currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain initial
and secondary public offerings, the Investment Manager may utilize a pro-rata
allocation process based on the size of the Dean Witter Funds involved and the
number of shares available from the public offering.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. In seeking to
implement the Fund's policies, the Investment Manager effects transactions with
those brokers and dealers who the Investment Manager believes provide the most
favorable prices and are capable of providing efficient executions. If the
Investment Manager believes such prices and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Investment Manager. Such services may include, but
are not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investment; wire services; and appraisals
or evaluations of portfolio securities.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by
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<PAGE>
the Investment Manager and thereby reduce its expenses, it is of indeterminable
value and the management fee paid to the Investment Manager is not reduced by
any amount that may be attributable to the value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions for the Fund,
the commissions, fees or other remuneration received by the affiliated broker or
dealer 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 the affiliated broker or
dealer to receive no more than the remuneration which would be expected to be
received by an unaffiliated broker in a commensurate arm's-length transaction.
Furthermore, the Board of Trustees of the Fund, including a majority of the
Trustees who are not "interested persons" of the Fund, as defined in the Act,
have adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid to an affiliated broker or dealer
are consistent with the foregoing standard. For the fiscal years ended August
31, 1994, 1995 and 1996, the Fund did not effect any securities transactions
with or through DWR. During the fiscal year ended August 31, 1996, the Fund
purchased bonds issued by Bear Stearns Companies, Inc. 6.75% 8/15/00, Lehman
Brothers Holdings, Inc. 5.75% 11/15/98, Lehman Brothers Holdings, Inc. 9.875%
10/15/00, Morgan Stanley Group 5.625% 3/1/99, Paine Webber Group 6.25% 6/15/98
and Salomon Inc. 6.75% 2/15/03, which issuers were among the ten brokers or the
ten dealers which executed transactions for or with the Fund in the largest
dollar amounts during the year. At August 31, 1996, the Fund held bonds issued
by Bear Stearns Companies, Inc. 6.75% 8/15/00, Lehman Brothers Holdings, Inc.
5.75% 11/15/98 and Morgan Stanley Group, Inc. 5.625% 3/1/99 with market values
of $2,071,566, $2,919,810 and $4,866,750, respectively. The Fund does not reduce
the management fee it pays to the Investment Manager by any amount of the
brokerage commissions it may pay to an affiliated broker or dealer.
THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDWD. The Trustees of the
Fund, including a majority of the Trustees who are not, and were not at the time
they voted, interested persons of the Fund, as defined in the Act (the
"Independent Trustees"), approved, at their meeting held on June 30, 1997, 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. By its terms, the Distribution Agreement has an
initial term ending April 30, 1998 and will remain in effect from year to year
thereafter if approved by the Board.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial
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<PAGE>
typesetting, printing and distribution of prospectuses and supplements thereto
to shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal securities laws and pays filing fees in accordance with
state securities laws. The Fund and the Distributor have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. Under the Distribution Agreement, the
Distributor uses its best efforts in rendering services to the Fund, but in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations, the Distributor is not liable to the Fund or any
of its shareholders for any error of judgment or mistake of law or for any act
or omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION.
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan") pursuant to which each Class, other than Class D, pays the
Distributor compensation accrued daily and payable monthly at the following
annual rates: 0.25% and 0.85% of the average daily net assets of Class A and
Class C, respectively, and, with respect to Class B, 0.85% of the lesser of: (a)
the average daily aggregate gross sales of the Fund's Class B shares since the
inception of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or upon which such charge has been
waived; or (b) the average daily net assets of Class B. The Distributor also
receives the proceeds of front-end sales charges and of contingent deferred
sales charges imposed on certain redemptions of shares, which are separate and
apart from payments made pursuant to the Plan (see "Purchase of Fund Shares" in
the Prospectus). The Distributor has informed the Fund that it and/or DWR
received approximately $567,000, $500,000 and $364,492 in contingent deferred
sales charges for the fiscal years ended August 31, 1994, 1995 and 1996
respectively, none of which was retained by the Distributor.
The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.20% of the average daily net assets of Class B
and 0.25% of the average daily net assets of Class C are currently each
characterized as a "service fee" under the Rules of the Association of the
National Association of Securities Dealers, Inc. (of which the Distributor is a
member). The "service fee" is a payment made for personal service and/or the
maintenance of shareholder accounts. The remaining portion of the Plan fees
payable by a Class, if any, is characterized as an "asset-based sales charge" as
such is defined by the aforementioned Rules of the Association.
The Plan was adopted by a vote of the Trustees of the Fund on April 27,
1989, at a Meeting of the Trustees called for the purpose of voting on such
Plan. The vote included the vote of a majority of the Trustees of the Fund who
are not "interested persons" of the Fund (as defined in the Act) and who have no
direct or indirect financial interest in the operation of the Plan (the
"Independent 12b-1 Trustees"). In making their decision to adopt the Plan, the
Trustees requested from DWR and received such information as they deemed
necessary to make an informed determination as to whether or not adoption of the
Plan was in the best interests of the shareholders of the Fund. After due
consideration of the information received, the Trustees, including the
Independent 12b-1 Trustees, determined that adoption of the Plan would benefit
the shareholders of the Fund. DWR, as then sole shareholder of the Fund,
approved the Plan on April 28, 1989, and the Plan was approved by shareholders
of the Fund at a Meeting of Shareholders on December 21, 1989.
At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved certain amendments to
the Plan which took effect in January, 1993 and were designed to reflect the
fact that upon an internal reorganization the share distribution activities
theretofore performed for the Fund by DWR were assumed by the Distributor and
DWR's sales activities are now being performed pursuant to the terms of a
selected dealer agreement between the Distributor and DWR. The amendments
provide that payments under the Plan will be made to the Distributor rather than
to DWR as before the amendment, and that the Distributor in turn is authorized
to make payments to DWR, its affiliates or other selected broker-dealers (or
direct that the Fund pay such entities directly). The
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<PAGE>
Distributor is also authorized to retain part of such fee as compensation for
its own distribution-related expenses. At their meeting held on April 28, 1993,
the Trustees, including a majority of the Independent 12b-1 Trustees, also
approved certain technical amendments to the Plan in connection with amendments
adopted by the National Association of Securities Dealers, Inc. to its Rules of
the Association. At their meeting held on October 26, 1995, the Trustees of the
Fund, including all of the Independent 12b-1 Trustees, approved an amendment to
the Plan to permit payments to be made under the Plan with respect to certain
distribution expenses incurred in connection with the distribution of shares,
including personal services to shareholders with respect to holdings of such
shares, of an investment company whose assets are acquired by the Fund in a
tax-free reorganization. At their meeting held on June 30, 1997, the Trustees,
including a majority of the Independent 12b-1 Trustees, approved amendments to
the Plan to reflect the multiple-class structure for the Fund, which took effect
on July 28, 1997.
Under the Plan and as required by Rule 12b-1, the Trustees will receive and
review promptly after the end of each fiscal quarter a written report provided
by the Distributor of the amounts expended by the Distributor under the Plan and
the purpose for which such expenditures were made. The Fund accrued $1,894,592
payable to the Distributor, pursuant to the Plan, for the fiscal year ended
August 31, 1996. This is an accrual at an annual rate of 0.85% of the average
daily net assets of the Fund and was calculated pursuant to clause (b) of the
compensation formula under the Plan. This amount is treated by the Fund as an
expense in the year it is accrued. This amount represents amounts paid by Class
B only; there were no Class A or Class C shares outstanding on such date.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes of shares, each with a different distribution arrangement as set forth
in the Prospectus.
With respect to Class A shares, DWR compensates its account executives by
paying them, from proceeds of the front-end sales charge, commissions for the
sale of Class A shares, currently a gross sales credit of up to 4.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.20% of the current value of
the respective accounts for which they are the account executives or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by 401(k) plans or other
employer-sponsored plans qualified under Section 401(a) of the Internal Revenue
Code for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust FSB
("DWTFSB") serves as Trustee or the 401(k) Support Services Group of DWR serves
as recordkeeper, the Investment Manager compensates DWR's account executives by
paying them, from its own funds, a gross sales credit of 1.0% of the amount
sold.
With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 4.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission, currently
a residual of up to 0.20% of the current value (not including reinvested
dividends or distributions) of the amount sold in all cases. In the case of
retirement plans qualified under Section 401(k) of the Internal Revenue Code and
other employer-sponsored plans qualified under Section 401(a) of the Internal
Revenue Code for which DWTC or DWTFSB serves as Trustee or the 401(k) Support
Services Group of DWR serves as recordkeeper, and which plans are opened on or
after July 28, 1997, DWR compensates its account executives by paying them, from
its own funds, a gross sales credit of 3.0% of the amount sold.
With respect to Class C shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class C shares,
currently a gross sales credit of up to 1.0% of the amount sold and an annual
residual commission, currently a residual of up to 0.85% of the current value of
the respective accounts for which they are the account executives of record.
With respect to Class D shares other than shares held by participants in
InterCapital's mutual fund asset allocation program, the Investment Manager
compensates DWR's account executives by paying them, from its own funds,
commissions for the sale of Class D shares, currently a gross sales credit of up
20
<PAGE>
to 1.0% of the amount sold. There is a chargeback of 100% of the amount paid if
the Class D shares are redeemed in the first year and a chargeback of 50% of the
amount paid if the Class D shares are redeemed in the second year after
purchase. The Investment Manager also compensates DWR's account executives by
paying them, from its own funds, an annual residual commission, currently a
residual of up to 0.10% of the current value of the respective accounts for
which they are the account executives of record (not including accounts of
participants in the InterCapital mutual fund asset allocation program).
The gross sales credit is a charge which reflects commissions paid by DWR to
its account executives and DWR's Fund-associated distribution-related expenses,
including sales compensation, and overhead and other branch office
distribution-related expenses including (a) the expenses of operating DWR's
branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies, (b) the costs of client sales seminars, (c) travel expenses of mutual
fund sales coordinators to promote the sale of Fund shares and (d) other
expenses relating to branch promotion of Fund sales. The distribution fee that
the Distributor receives from the Fund under the Plan, in effect, offsets
distribution expenses incurred under the Plan on behalf of the Fund and, in the
case of Class B shares, opportunity costs, such as the gross sales credit and an
assumed interest charge thereon ("carrying charge"). In the Distributor's
reporting of the distribution expenses to the Fund, in the case of Class B
shares, such assumed interest (computed at the "broker's call rate") has been
calculated on the gross credit as it is reduced by amounts received by the
Distributor under the Plan and any contingent deferred sales charges received by
the Distributor upon redemption of shares of the Fund. No other interest charge
is included as a distribution expense in the Distributor's calculation of its
distribution costs for this purpose. The broker's call rate is the interest rate
charged to securities brokers on loans secured by exchange-listed securities.
The Fund paid 100% of the $1,894,592 accrued under the Plan for the fiscal
year ended August 31, 1996, to the Distributor. The Distributor and DWR estimate
that they have spent, pursuant to the Plan, $20,138,337 on behalf of the Fund
since the inception of the Plan. It is estimated that this amount was spent in
approximately the following ways: (i) 10.07% ($2,028,905)--advertising and
promotional expenses; (ii) 0.69% ($138,644)--printing of prospectuses for
distribution to other than current shareholders; and (iii) 89.24%
($17,970,788)--other expenses, including the gross sales credit and the carrying
charge, of which 9.05% ($1,626,450) represents carrying charges, 36.0%
($6,469,089) represents commission credits to DWR branch offices for payments of
commissions to account executives and 54.95% ($9,875,249) represents overhead
and other branch office distribution-related expenses. These amounts represent
amounts paid by Class B only; there were no Class A or Class C shares
outstanding on such date.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 0.85%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C will
be reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to account executives, such amounts shall be
determined at the beginning of each calendar quarter by the Trustees, including
a majority of the Independent 12b-1 Trustees. Expenses representing the service
fee (for Class A) or a gross sales credit or a residual to account executives
(for Class C) may be reimbursed without prior determination. In the event that
the Distributor proposes that monies shall be reimbursed for other than such
expenses, then in making quarterly determinations of the amounts that may be
reimbursed by the Fund, the Distributor will provide and the Trustees will
review a quarterly budget of projected distribution expenses to be incurred on
behalf of the Fund, together with a report explaining the purposes and
anticipated benefits of
21
<PAGE>
incurring such expenses. The Trustees will 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 Class A and Class C shares.
At any given time, the expenses in distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to the
Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. The Distributor has advised the Fund that
in the case of Class B shares such excess amount, including the carrying charge
designed to approximate the opportunity costs incurred which arise from it
having advanced monies without having received the amount of any sales charges
imposed at the time of sale of the Fund's Class B shares, totalled $6,167,490 as
of August 31, 1996. Because there is no requirement under the Plan that the
Distributor be reimbursed for all expenses with respect to Class B shares or any
requirement that the Plan be continued from year to year, this excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay distribution expenses in excess of payments made
under the Plan and the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares, if for any reason the Plan is terminated,
the Trustees will consider at that time the manner in which to treat such
expenses. Any cumulative expenses incurred, but not yet recovered through
distribution fees or contingent deferred sales charges, may or may not be
recovered through future distribution fees or contingent deferred sales charges.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or indirect
financial interest in the operation of the Plan except to the extent that the
Distributor, InterCapital, DWR, DWSC or certain of their employees may be deemed
to have such an interest as a result of benefits derived from the successful
operation of the Plan or as a result of receiving a portion of the amounts
expended thereunder by the Fund.
Under its terms, the Plan continued until April 30, 1990 and will remain in
effect from year to year thereafter, provided such continuance is approved
annually by a vote of the Trustees in the manner described above. Prior to the
Board's approval of amendments to the Plan to reflect the multiple-class
structure for the Fund, the most recent continuance of the Plan for one year,
until April 30, 1998, was approved by the Board of Trustees of the Fund,
including a majority of the Independent 12b-1 Trustees, at a Board meeting held
on April 24, 1997. Prior to approving the continuation of the Plan, the Trustees
requested and received from the Distributor and reviewed all the information
which they deemed necessary to arrive at an informed determination. In making
their determination to continue the Plan, the Trustees considered: (1) the
Fund's experience under the Plan and whether such experience indicates that the
Plan is operating as anticipated; (2) the benefits the Fund had obtained, was
obtaining and would be likely to obtain under the Plan; and (3) what services
had been provided and were continuing to be provided under the Plan the
Distributor to the Fund and its shareholders. Based upon their review, the
Trustees of the Fund, including each of the Independent 12b-1 Trustees,
determined that continuation of the Plan would be in the best interest of the
Fund and would have a reasonable likelihood of continuing to benefit the Fund
and its shareholders. In the Trustees' quarterly review of the Plan, they will
consider its continued appropriateness and the level of compensation provided
therein. Most recent continuation of the Plan for one year, until April 30,
1997, was aproved by the Trustees of the Fund, including all the Independent
12b-1 Trustees, at a meeting held on April 17, 1996.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of the
affected Class or Classes of the Fund, and all material amendments of the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Act) on not more
than thirty days written notice to any other party to the Plan. So long as the
Plan is in effect, the election and nomination of Independent 12b-1 Trustees
shall be committed to the discretion of the Independent 12b-1 Trustees.
22
<PAGE>
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Short-term securities with remaining maturities of sixty days or less at the
time of purchase are valued at amortized cost, unless the Trustees determine
such does not reflect the securities' market value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Other short-term debt securities will be valued on a mark-to-market basis until
such time as they reach a remaining maturity of sixty days, whereupon they will
be valued at amortized cost using their value on the 61st day unless the
Trustees determine such does not reflect the securities' market value, in which
case these securities will be valued at their fair value as determined by the
Trustees. All other securities and other assets are valued at their fair value
as determined in good faith under procedures established by and under the
supervision of the Trustees.
As discussed in the Prospectus, the net asset value per share for each Class
of shares of the Fund is determined once daily at 4:00 p.m., New York time (or,
on days when the New York Stock Exchange closes prior to 4:00 p.m., at such
earlier time), on each day that the New York Stock Exchange is open by taking
the value of all assets of the Fund, subtracting its liabilities, dividing by
the number of shares outstanding and adjusting to the nearest cent. The New York
Stock Exchange currently observes the following holidays: New Year's Day,
Reverend Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without an
initial sales charge are subject to a contingent deferred sales charge ("CDSC")
of 1.0% if redeemed within one year of purchase, except in the circumstances
discussed in the Prospectus.
RIGHT OF ACCUMULATION. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds Class A
shares of the Fund and/or other Dean Witter Funds that are multiple class funds
("Dean Witter Multi-Class Funds") or shares of other Dean Witter Funds sold with
a front-end sales charge purchased at a price including a front-end sales charge
having a current value of $5,000, and purchases $20,000 of additional shares of
the Fund, the sales charge applicable to the $20,000 purchase would be 4.0% of
the offering price.
The Distributor must be notified by the selected broker-dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the selected broker-dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Distributor or Dean Witter Trust Company (the "Transfer
Agent") fails to confirm the investor's represented holdings.
LETTER OF INTENT. As discussed in the Prospectus, reduced sales charges are
available to investors who enter into a written Letter of Intent providing for
the purchase, within a thirteen-month period, of Class A shares of the Fund from
the Distributor or from a single Selected Broker-Dealer.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of purchases over a thirteen-month period. Each
purchase of Class A shares made during the period will receive the reduced sales
commission applicable to the amount represented by the goal, as if it were a
single purchase. A number of shares equal in value to 5% of the dollar amount of
the Letter of Intent will be held in escrow by the Transfer Agent, in the name
of the shareholder. The initial purchase under a Letter of Intent must be equal
to at least 5% of the stated investment goal.
23
<PAGE>
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Distributor or, if not paid, the Distributor is authorized
by the shareholder to liquidate a sufficient number of his or her escrowed
shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level, the
sales charge on the entire amount of the purchase that results in passing that
level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under "Right of Accumulation," but
there will be no retroactive reduction of sales charges on previous purchases.
For the purpose of determining whether the investor is entitled to a further
reduced sales charge applicable to purchases at or above a sales charge level
which exceeds the stated goal of a Letter of Intent, the cumulative current net
asset value of any shares owned by the investor in any other Dean Witter Funds
held by the shareholder which were previously purchased at a price including a
front-end sales charge (including shares of the Fund and other Dean Witter Funds
acquired in exchange for those shares, and including in each case shares
acquired through reinvestment of dividends and distributions) will be added to
the cost or net asset value of shares of the Fund owned by the investor.
However, shares of "Exchange Funds" (see "Shareholder Services--Exchange
Privilege") and the purchase of shares of other Dean Witter Funds will not be
included in determining whether the stated goal of a Letter of Intent has been
reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction. The
5% escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase shares of the Fund pursuant to a Letter of
Intent should carefully read such Letter of Intent.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to a
CDSC payable upon most redemptions within six years after purchase. As stated in
the Prospectus, a CDSC will be imposed on any redemption by an investor if after
such redemption the current value of the investor's Class B shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Class B shares during the preceding six years (or, in the case of
shares held by certain employer-sponsored benefit plans, three years). However,
no CDSC will be imposed to the extent that the net asset value of the shares
redeemed does not exceed: (a) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain
employer-sponsored benefit plans, three years) prior to the redemption, plus (b)
the current net asset value of shares purchased through reinvestment of
dividends or distributions of the Fund or another Dean Witter Fund (see
"Shareholder Services-- Targeted Dividends"), plus (c) the current net asset
value of shares acquired in exchange for (i) shares of Dean Witter front-end
sales charge funds, or (ii) shares of other Dean Witter Funds for which shares
of front-end sales charge funds have been exchanged (see "Shareholder
Services--Exchange Privilege"), plus (d) increases in the net asset value of the
investor's shares above the total amount of payments for the purchase of Fund
shares made during the preceding six (three) years. The CDSC will be paid to the
Distributor.
In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years (or, in the case of shares held by certain employer-sponsored
benefit plans, three years) will be redeemed first. In the event the redemption
amount exceeds such increase in value, the next portion of the amount redeemed
will be the amount which represents the net asset value of the investor's shares
purchased more than six (three) years prior to the redemption and/or shares
purchased through reinvestment of dividends or distributions and/or shares
acquired in
24
<PAGE>
exchange for shares of Dean Witter front-end sales charge funds, or for shares
of other Dean Witter funds for which shares of front-end sales charge funds have
been exchanged. A portion of the amount redeemed which exceeds an amount which
represents both such increase in value and the value of shares purchased more
than six years (or, in the case of shares held by certain employer-sponsored
benefit plans, three years) prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions and/or shares acquired in the
above-described exchanges will be subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last day
of the month. The following table sets forth the rates of the CDSC applicable to
most Class B shares of the Fund:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ----------------------------------------------------------------------------------------- ---------------------------
<S> <C>
First.................................................................................... 5.0%
Second................................................................................... 4.0%
Third.................................................................................... 3.0%
Fourth................................................................................... 2.0%
Fifth.................................................................................... 2.0%
Sixth.................................................................................... 1.0%
Seventh and thereafter................................................................... None
</TABLE>
The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund held by 401(k) plans or other employer-sponsored plans
qualified under Section 401(a) of the Internal Revenue Code for which DWTC or
DWTFSB serves as Trustee or the 401(k) Support Services Group of DWR serves as
recordkeeper and whose accounts are opened on or after July 28, 1997:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ----------------------------------------------------------------------------------------- ---------------------------
<S> <C>
First.................................................................................... 2.0%
Second................................................................................... 2.0%
Third.................................................................................... 1.0%
Fourth and thereafter.................................................................... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable six-year or three-year period. This will result in any such CDSC
being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years (or,
in the case of shares held by certain employer-sponsored benefit plans, three
years) of purchase which are in excess of these amounts and which redemptions do
not qualify for waiver of the CDSC, as described in the Prospectus.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC of
1.0% on most redemptions made within one year after purchase, except in the
circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
25
<PAGE>
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund and maintained by Dean Witter
Trust Company (the "Transfer Agent"). This is an open account in which shares
owned by the investor are credited by the Transfer Agent in lieu of issuance of
a share certificate. If a share certificate is desired, it must be requested in
writing for each transaction. Certificates are issued only for full shares and
may be redeposited in the account at any time. There is no charge to the
investor for issuance of a certificate. Whenever a shareholder-instituted
transaction takes place in the Shareholder Investment Account, the shareholder
will be mailed a confirmation of the transaction from the Fund or from DWR or
another selected broker-dealer.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution in shares of
the applicable Class at net asset value, without the imposition of a CDSC upon
redemption, by returning the check or the proceeds to the Transfer Agent within
30 days after the payment date. If the shareholder returns the proceeds of a
dividend or distribution, such funds must be accompanied by a signed statement
indicating that the proceeds constitute a dividend or distribution to be
invested. Such investment will be made at the net asset value per share next
determined after receipt of the check or proceeds by the Transfer Agent.
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the applicable Class of the
Fund, unless the shareholder requests that they be paid in cash. Each purchase
of shares of the Fund is made upon the condition that the Transfer Agent is
thereby automatically appointed as agent of the investor to receive all
dividends and capital gains distributions on shares owned by the investor. Such
dividends and distributions will be paid, at the net asset value per share, in
shares of the applicable Class of the Fund (or in cash if the shareholder so
requests) as of the close of business on the monthly payment date, as stated in
the Prospectus. At any time an investor may request the Transfer Agent, in
writing, to have subsequent dividends and/or capital gains distributions paid to
him or her in cash rather than shares. To assure sufficient time to process the
change, such request should be received by the Transfer Agent as least five
business days prior to the payment date of the dividend or distribution or the
record date of the distribution. In the case of recently purchased shares for
which registration instructions have not been received on the record date, cash
payments will be made to the Distributor, which will be forwarded to the
shareholder, upon the receipt of proper instructions.
TARGETED DIVIDENDS-SM-. In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of any Class of a Dean Witter Fund other than
Dean Witter Intermediate Income Securities or in another Class of Dean Witter
Intermediate Income Securities. Such investment will be made as described above
for automatic investment in shares of the applicable Class of the Fund, at the
net asset value per share of the selected Dean Witter Fund as of the close of
business on the payment date of the dividend or distribution and will begin to
earn dividends, if any, in the selected Dean Witter Fund the next business day.
To participate in the Targeted Dividends program, shareholders should contact
their DWR or other selected broker-dealer account executive or the Transfer
Agent. Shareholders of the Fund must be shareholders of the selected Class of
the Dean Witter Fund targeted to receive investments from dividends at the time
they enter the Targeted Dividends program. Investors should review the
prospectus of the targeted Dean Witter Fund before entering the program.
EASYINVEST-SM-. Shareholders may subscribe to Easyinvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through Easyinvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected. For further information or to subscribe to
26
<PAGE>
Easyinvest, shareholders should contact their DWR or other selected
broker-dealer account executive or the Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon the
then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount, not
less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable CDSC will be imposed on shares redeemed under
the Withdrawal Plan (see "Purchase of Fund Shares"). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed from
his or her account so that the proceeds (net of any applicable CDSC) to the
shareholder will be the designated monthly or quarterly amount.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be mailed
by the Transfer Agent, or amounts credited to a shareholder's DWR or other
selected broker-dealer brokerage account within five business days after the
date of redemption. The Withdrawal Plan may be terminated at any time by the
Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of sales charges which may be applicable to
purchases or redemptions of shares (see "Purchase of Fund Shares").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor.) A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her account executive or by written notification to the Transfer Agent.
In addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature guarantees
required in the manner described above. The shareholder may also terminate the
Withdrawal Plan at any time by written notice to the Transfer Agent. In the
event of such termination, the account will be continued as a regular
shareholder investment account. The shareholder may also redeem all or part of
the shares held in the Withdrawal Plan account (see "Redemptions and
Repurchases" in the Prospectus) at any time.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. As discussed in the Prospectus,
shareholders may make additional investments in any Class of shares of the Fund
for which they qualify at any time by sending a check in any amount, not less
than $100, payable to Dean Witter Intermediate Income Securities, and indicating
the selected Class, directly to the Fund's Transfer Agent. In the case of Class
A shares, after deduction of any applicable sales charge, the balance will be
applied to the purchase of Fund shares, and, in the case of shares of the other
Classes, the entire amount will be applied to the purchase of Fund shares, at
the net asset value per share next computed after receipt of the check or
purchase payment by the Transfer Agent. The shares so purchased will be credited
to the investor's account.
27
<PAGE>
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of each Class of shares of the Fund
may exchange their shares for shares of the same Class of shares of any other
Dean Witter Multi-Class Fund without the imposition of any exchange fee. Shares
may also be exchanged for shares of any of the following funds: Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust
and five Dean Witter Funds which are money market funds (the foregoing nine
funds are hereinafter referred to as the "Exchange Funds"). Class A shares may
also be exchanged for shares of Dean Witter Multi-State Municipal Series Trust
and Dean Witter Hawaii Municipal Trust, which are Dean Witter Funds sold with a
front-end sales charge ("FSC Funds"). Class B shares may also be exchanged for
shares of Dean Witter Global Short-Term Income Fund Inc., Dean Witter High
Income Securities and Dean Witter National Municipal Trust, which are Dean
Witter Funds offered with a CDSC ("CDSC Funds"). Exchanges may be made after the
shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment. An exchange
will be treated for federal income tax purposes the same as a repurchase or
redemption of shares, on which the shareholder may realize a capital gain or
loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of a Dean Witter
Multi-Class Fund or any CDSC Fund are exchanged for shares of an Exchange Fund,
the exchange is executed at no charge to the shareholder, without the imposition
of the CDSC at the time of the exchange. During the period of time the
shareholder remains in the Exchange Fund (calculated from the last day of the
month in which the Exchange Fund shares were acquired), the holding period or
"year since purchase payment made" is frozen. When shares are redeemed out of
the Exchange Fund, they will be subject to a CDSC which would be based upon the
period of time the shareholder held shares in a Dean Witter Multi-Class Fund or
in a CDSC Fund. However, in the case of shares exchanged into an Exchange Fund
on or after April 23, 1990, upon a redemption of shares which results in a CDSC
being imposed, a credit (not to exceed the amount of the CDSC) will be given in
an amount equal to the Exchange Fund 12b-1 distribution fees incurred on or
after that date which are attributable to those shares. Shareholders acquiring
shares of an Exchange Fund pursuant to this exchange privilege may exchange
those shares back into a Dean Witter Multi-Class Fund or a CDSC Fund from the
Exchange Fund, with no CDSC being imposed on such exchange. The holding period
previously frozen when shares were first exchanged for shares of the Exchange
Fund resumes on the last day of the month in which shares of a Dean Witter
Multi-Class Fund or of a CDSC Fund are reacquired. A CDSC is imposed only upon
an ultimate redemption, based upon the time (calculated as described above) the
shareholder was invested in a Dean Witter Multi-Class Fund or in a CDSC Fund. In
the case of exchanges of Class A shares which are subject to a CDSC, the holding
period also includes the time (calculated as described above) the shareholder
was invested in a FSC Fund.
When shares initially purchased in a Dean Witter Multi-Class Fund or in a
CDSC Fund are exchanged for shares of a Dean Witter Multi-Class Fund, shares of
a CDSC Fund, shares of a FSC Fund, or shares of an Exchange Fund, the date of
purchase of the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
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<PAGE>
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 one, 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 FSC
Funds, or for shares of other Dean Witter Funds for which shares of FSC Funds
have been exchanged (all such shares called "Free Shares"), will be exchanged
first. After an exchange, all dividends earned on shares in an Exchange Fund
will be considered Free Shares. If the exchanged amount exceeds the value of
such Free Shares, an exchange is made, on a block-by-block basis, of non-Free
Shares held for the longest period of time (except that, with respect to Class B
shares, if shares held for identical periods of time but subject to different
CDSC schedules are held in the same Exchange Privilege account, the shares of
that block that are subject to a lower CDSC rate will be exchanged prior to the
shares of that block that are subject to a higher CDSC rate). Shares equal to
any appreciation in the value of non-Free Shares exchanged will be treated as
Free Shares, and the amount of the purchase payments for the non-Free Shares of
the fund exchanged into will be equal to the lesser of (a) the purchase payments
for, or (b) the current net asset value of, the exchanged non-Free Shares. If an
exchange between funds would result in exchange of only part of a particular
block of non-Free Shares, then shares equal to any appreciation in the value of
the block (up to the amount of the exchange) will be treated as Free Shares and
exchanged first, and the purchase payment for that block will be allocated on a
pro rata basis between the non-Free Shares of that block to be retained and the
non-Free Shares to be exchanged. The prorated amount of such purchase payment
attributable to the retained non-Free Shares will remain as the purchase payment
for such shares, and the amount of purchase payment for the exchanged non-Free
Shares will be equal to the lesser of (a) the prorated amount of the purchase
payment for, or (b) the current net asset value of, those exchanged non-Free
Shares. Based upon the procedures described in the Prospectus under the caption
"Purchase of Fund Shares," any applicable CDSC will be imposed upon the ultimate
redemption of shares of any fund, regardless of the number of exchanges since
those shares were originally purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
fund and the general administration of the Exchange Privilege. No commission or
discounts will be paid to the Distributor or any selected broker-dealer for any
transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the
Exchange Privilege account of each Class is $5,000 for Dean Witter Liquid Asset
Fund Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter California
Tax-Free Daily Income Trust and Dean Witter New York Municipal Money Market
Trust, although those funds may, at their discretion, accept initial investments
of as low as $1,000. The minimum initial investment for the Exchange Privilege
account of each Class is $10,000 for Dean Witter Short-Term U.S. Treasury Trust,
although that fund, in its discretion, may accept initial purchases as low as
$5,000. The minimum initial investment for the Exchange Privilege account of
each Class is $5,000 for Dean Witter Special Value Fund. The minimum initial
investment for the Exchange Privilege account of each Class for all other Dean
Witter Funds for which the Exchange Privilege is available is $1,000.) Upon
exchange into an Exchange Fund, the shares of that fund will be held in a
special Exchange Privilege Account separately from accounts of those
shareholders who have acquired their shares directly from
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that fund. As a result, certain services normally available to shareholders of
those funds, including the check writing feature, will not be available for
funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days' prior written notice for
termination or material revision), provided that six months' prior written
notice of termination will be given to the shareholders who hold shares of
Exchange Funds, pursuant to the Exchange Privilege, and provided further that
the Exchange Privilege may be terminated or materially revised without notice at
times (a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c) when
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, (d) during any
other period when the Securities and Exchange Commission by order so permits
(provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist) or (e) if the Fund would be unable to invest amounts effectively in
accordance with its investment objective, policies and restrictions.
The current prospectus for each fund describes its investment objectives and
policies, and shareholders should obtain a copy and examine it carefully before
investing. An exchange will be treated for federal income tax purposes the same
as a repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. As stated in the Prospectus, shares of each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable CDSC. If shares are held in shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder, the shares may be redeemed by surrendering the certificates with a
written request for redemption. The share certificate, or an accompanying stock
power, and the request for redemption, must be signed by the shareholder or
shareholders exactly as the shares are registered. Each request for redemption,
whether or not accompanied by a share certificate, must be sent to the Fund's
Transfer Agent, which will redeem the shares at their net asset value next
computed (see "Purchase of Fund Shares") after it receives the request, and
certificate, if any, in good order. Any redemption request received after such
computation will be redeemed at the next determined net asset value. The term
"good order" means that the share certificate, if any, and request for
redemption are properly signed, accompanied by any documentation required by the
Transfer Agent, and bear signature guarantees when required by the Fund or the
Transfer Agent. If redemption is requested by a corporation, partnership, trust
or fiduciary, the Transfer Agent may require that written evidence of authority
acceptable to the Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to a shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor. A stock power may be obtained from any dealer
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<PAGE>
or commercial bank. The Fund may change the signature guarantee requirements
from time to time upon notice to shareholders, which may be by means of a
supplement to the prospectus or a new prospectus.
REPURCHASE. As stated in the Prospectus, DWR and other selected
broker-dealers are authorized to repurchase shares represented by a share
certificate which is delivered to any of their offices. Shares held in a
shareholder's account without a share certificate may also be repurchased by DWR
and other selected broker-dealers upon the telephonic request of the
shareholder. The repurchase price is the net asset value next computed after
such purchase order is received by DWR or other selected broker-dealer reduced
by any applicable CDSC.
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. As discussed in the Prospectus,
payment for shares of any Class presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. The term good order means that
the share certificate, if any, and request for redemption are properly signed,
accompanied by any documentation required by the Transfer Agent, and bear
signature guarantees when required by the Fund or the Transfer Agent. Such
payment may be postponed or the right of redemption suspended at times (a) when
the New York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on that Exchange is restricted, (c) when an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) during any other period
when the Securities and Exchange Commission by order so permits; provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist. If the
shares to be redeemed have recently been purchased by check (including a
certified check or bank cashier's check), payment of the redemption proceeds may
be delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of receipt
of the check by the Transfer Agent). Shareholders maintaining accounts with DWR
or another selected broker-dealer are referred to their account executive
regarding restrictions on redemption of shares of the Fund pledged in the margin
account.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the length
of time shares subject to the charge have been held), any transfer involving
less than all of the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same proportion that the transferred shares
bear to the total shares in the account immediately prior to the transfer). The
transferred shares will continue to be subject to any applicable CDSC as if they
had not been so transferred.
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within 35 days after the date of
redemption or repurchase reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund in the same Class at the net
asset value next determined after a reinstatement request, together with such
proceeds, is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes,
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
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As discussed in the Prospectus, the Fund will determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment. If any such gains are retained, the Fund will pay federal income
tax thereon, and will notify shareholders that, following an election by the
Fund, the shareholders will be required to include such undistributed gains in
determining their taxable income and may claim their share of the tax paid by
the Fund as a credit against their individual federal income tax.
In computing net investment income, the Fund will not amortize premiums or
accrue discounts on fixed-income securities in the portfolio, except those
original issue discounts for which amortization is required for federal income
tax purposes. Additionally, with respect to market discounts on bonds issued
after July 18, 1984, and all bonds purchased after April 30, 1993, a portion of
any capital gain realized upon disposition may be re-characterized as taxable
ordinary income in accordance with the provisions of the Internal Revenue Code.
Realized gains and losses on security transactions are determined on the
identified cost method.
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have been held by the Fund for more than
twelve months. Gains or losses on the sale of securities held for twelve months
or less will be short-term gains or losses.
Because the Fund intends to distribute all of its net investment income and
capital gains to shareholders and otherwise continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, it is not
expected that the Fund will be required to pay any federal income tax.
Shareholders will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from net
investment income or short-term capital gains, are taxable to the shareholder as
ordinary income regardless of whether the shareholder receives such payments in
additional shares or in cash. Any dividends declared in the last quarter of any
year to shareholders of record of such period which are paid in the following
calendar year prior to February 1 will be deemed received by the shareholder in
the prior calendar year.
Any dividend or capital gains distribution received by a shareholder from
any regulated investment company will have the effect of reducing the net asset
value of the shareholder's stock in that company by the exact amount of the
dividend or capital gains distribution. Furthermore, capital gains distributions
and dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or realized net long-term capital gains, such payment would be in
part a return of the shareholder's investment to the extent of such reduction
below the shareholder's cost, but nonetheless would be fully taxable. Therefore,
an investor should consider the tax implications of purchasing Fund shares
immediately prior to a distribution record date.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction. Dividend payments will be eligible for the
federal dividends received deduction available to the Fund's corporate
shareholders only to the extent the aggregate dividends received by the Fund
would be eligible for the deduction if the Fund were the shareholder claiming
the dividends received deduction. The amount of dividends paid by the Fund which
may qualify for the dividends received deduction is limited to the aggregate
amount of qualifying dividends which the Fund derives from its portfolio
investments which the Fund has held for a minimum period, usually 46 days. Any
distributions made by the Fund will not be eligible for the dividends received
deduction with respect to shares which are held by the shareholder for 45 days
or less. Any long-term capital gain distributions will also not be eligible for
the dividends received deduction. The ability to take the dividends received
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<PAGE>
deduction will also be limited in the case of a Fund shareholder which incurs or
continues indebtedness which is directly attributable to its investment in the
Fund.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes,
including information as to the portion taxable as ordinary income, the portion
taxable as long-term capital gains and the portion eligible for the dividends
received deduction. To avoid being subject to a 31% federal backup withholding
tax on taxable dividends, capital gains distributions and the proceeds of
redemptions and repurchases, shareholders' taxpayer identification numbers must
be furnished and certified as to their accuracy.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature. These
figures are computed separately for Class A, Class B, Class C and Class D
shares. Yield is calculated for any 30-day period as follows: the amount of
interest income for each security in the Fund's portfolio is determined in
accordance with regulatory requirements; the total for the entire portfolio
constitutes the Fund's gross income for the period. Expenses accrued during the
period are subtracted to arrive at "net investment income" of each Class. The
resulting amount is divided by the product of the maximum offering price per
share on the last day of the period multiplied by the average number of shares
of the applicable Class outstanding during the period that were entitled to
dividends. This amount is added to 1 and raised to the sixth power. 1 is then
subtracted from the result and the difference is multiplied by 2 to arrive at
the annualized yield. For the 30-day period ended August 31, 1996, the Fund's
yield, calculated pursuant to this formula, was 5.61%. This yield is for Class B
only; there were no other Classes of shares outstanding on such date.
The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. The ending redeemable value is
reduced by any CDSC at the end of the one, five or ten year or other period. For
the purpose of this calculation, it is assumed that all dividends and
distributions are reinvested. The formula for computing the average annual total
return involves a percentage obtained by dividing the ending redeemable value by
the amount of the initial investment, taking a root of the quotient (where the
root is equivalent to the number of years in the period) and subtracting 1 from
the result. The average annual total returns of the Fund for the fiscal year
ended August 31, 1996, the five year period ended August 31, 1996 and for the
period from May 3, 1989 (commencement of operations) through August 31, 1996
were -2.27%, 5.70% and 6.35%, respectively. These returns are for Class B only;
there were no other Classes of shares outstanding on such date.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the imposition of the maximum front-end sales charge for Class A
or the deduction of the CDSC for each of Class B and Class C which, if
reflected, would reduce the performance quoted. For example, the average annual
total returns of the Fund may be calculated in the manner described above, but
without deduction for any applicable sales charge. Based on this calculation,
the average annual total return of the Fund for the fiscal year ended August 31,
1996, the five year period ended August 31, 1996 and for the period from May 3,
1989 through August 31, 1996 were 2.58%, 6.01% and 6.35%, respectively. These
returns are for Class B only; there were no other Classes of shares outstanding
on such date.
In addition, the Fund may compute its aggregate total return for each Class
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000
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<PAGE>
investment made at the beginning of the period. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing aggregate total return involves a percentage obtained
by dividing the ending value (without reduction for any sales charge) by the
initial $1,000 investment and subtracting 1 from the result. Based on the
foregoing calculation, the Fund's total return for the fiscal year ended August
31, 1996 was 2.58% and the total return for the five year period ended August
31, 1996 and for the period from May 3, 1989 through August 31, 1996 were 33.91%
and 57.05%, respectively. These returns are for Class B only; there were no
other Classes of shares outstanding on such date.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1 to
the Fund's aggregate total return to date (expressed as a decimal and without
taking into account the effect of any applicable CDSC) and multiplying by
$9,575, $48,250 and $97,250 in the case of Class A (investments of $10,000,
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as the
case may be. Investments of $10,000, $50,000 and $100,000 in the Fund at
inception would have grown to $15,705, $78,525 and $157,050, respectively, at
August 31, 1996. This information is for Class B only; there were no other
Classes of shares outstanding on such date.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indices compiled by independent organizations.
DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the shareholders of the Fund are entitled to
a full vote for each full share held. All of the Trustees have been elected by
the shareholders of the Fund, most recently at a Special Meeting of Shareholders
on May 21, 1997. On that date, Wayne E. Hedien was also elected as a Trustee of
the Fund, with his term to commence on September 1, 1997. 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 shareholders are not cumulative, so
that holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being selected, while the holders of the remaining shares
would be unable to elect any Trustees.
The 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.
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. The Trustees have not authorized any such additional series
or classes of shares other than as set forth in the Prospectus.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for obligations of
the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, in the opinion of Massachusetts
counsel to the Fund, the risk to shareholders of personal liability is remote.
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<PAGE>
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/her or its duties. It also provides that all third persons shall look
solely to the Fund's property for satisfaction of claims arising in connection
with the affairs of the Fund. With the exceptions stated, the Declaration of
Trust provides that a Trustee, officer, employee or agent is entitled to be
indemnified against all 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. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager, and of Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these services
Dean Witter Trust Company receives a per shareholder account fee from the Fund.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements, together with a report of its independent accountants,
will be sent to shareholders each year.
The Fund's fiscal year ends on August 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The annual financial statements of the Fund for the fiscal year ended August
31, 1996, which are included in this Statement of Additional Information and
incorporated by reference in the Prospectus,
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<PAGE>
have been so included and incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
36
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER INTERMEDIATE INCOME SECURITIES
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Intermediate Income
Securities (the "Fund") at August 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the seven years
in the period then ended and for the period May 3, 1989 (commencement of
operations) through August 31, 1989, 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 August 31, 1996 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
OCTOBER 11, 1996
37
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (70.1%)
AEROSPACE & DEFENSE (1.9%)
$ 4,000 Lockheed Martin Corp.......................... 6.625% 06/15/98 $ 4,004,120
---------------
AUTOMOBILE - RENTALS (1.3%)
2,900 Hertz Corp.................................... 6.00 01/15/03 2,699,088
---------------
AUTOMOTIVE (2.1%)
4,300 Chrysler Corp................................. 10.40 08/01/99 4,451,575
---------------
AUTOMOTIVE - FINANCE (5.7%)
7,000 Ford Motor Credit Co.......................... 6.25 11/08/00 6,785,170
4,975 General Motors Acceptance Corp................ 8.40 10/15/99 5,169,722
---------------
11,954,892
---------------
BANK HOLDING COMPANIES (5.6%)
5,000 BankAmerica Corp.............................. 6.20 02/15/06 4,522,950
2,474 First Chicago Corp............................ 7.625 01/15/03 2,504,974
4,975 Star Bank N.A................................. 6.375 03/01/04 4,646,302
---------------
11,674,226
---------------
BANKS (4.0%)
5,000 Shawmut Bank Connecticut, N.A................. 8.625 02/15/05 5,303,450
3,000 Societe Generale - N.Y........................ 7.40 06/01/06 2,951,610
---------------
8,255,060
---------------
BANKS - INTERNATIONAL (4.0%)
3,400 ABN-AMRO Bank NV (Netherlands)................ 7.55 06/28/06 3,400,544
5,000 Santander Financial Issuances
(Cayman Islands).............................. 7.75 05/15/05 5,025,650
---------------
8,426,194
---------------
BROKERAGE (4.7%)
2,100 Bear Stearns Companies, Inc................... 6.75 08/15/00 2,071,566
3,000 Lehman Brothers Holdings, Inc................. 5.75 11/15/98 2,919,810
5,000 Morgan Stanley Group, Inc..................... 5.625 03/01/99 4,866,750
---------------
9,858,126
---------------
CABLE & TELECOMMUNICATIONS (2.1%)
5,000 Tele-Communications, Inc...................... 6.875 02/15/06 4,427,300
---------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (3.4%)
3,000 Applied Materials Inc......................... 8.00 09/01/04 3,072,570
4,000 Texas Instruments, Inc........................ 6.875 07/15/00 3,980,520
---------------
7,053,090
---------------
FINANCE (7.6%)
3,000 Fireman's Fund Mortgage Corp.................. 8.875 10/15/01 3,153,720
7,250 Golden West Financial Corp.................... 10.25 05/15/97 7,453,666
5,000 Household Finance Corp........................ 7.65 05/15/07 5,004,450
---------------
15,611,836
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FOREIGN GOVERNMENT (5.7%)
$ 5,250 Israel (State of)............................. 6.375% 12/15/05 $ 4,792,095
5,000 Quebec (Province of) (Canada)................. 6.50 01/17/06 4,630,750
2,450 Republic of Indonesia......................... 7.75 08/01/06 2,404,185
---------------
11,827,030
---------------
HEALTHCARE (2.3%)
4,975 Columbia/HCA Healthcare Corp.................. 6.87 09/15/03 4,847,590
---------------
INDUSTRIALS (1.8%)
3,900 Comdisco, Inc................................. 5.75 02/15/01 3,687,879
---------------
LEISURE (1.5%)
3,000 Royal Caribbean Cruises, Ltd. (Liberia)....... 8.25 04/01/05 3,076,320
---------------
OIL COMPANY (0.9%)
2,000 Lasmo (U.S.A.) Inc............................ 7.125 06/01/03 1,951,660
---------------
OIL INTEGRATED - INTERNATIONAL (2.4%)
5,000 Societe Nationale Elf Aquitaine (France)...... 7.75 05/01/99 5,110,750
---------------
PAPER & FOREST PRODUCTS (3.2%)
2,000 Fletcher Challenge Capital (Canada)........... 7.75 06/20/06 1,997,560
4,900 Noranda Forest, Inc. (Canada)................. 6.875 11/15/05 4,616,241
---------------
6,613,801
---------------
RETAIL STORES (2.2%)
2,000 Kmart Corp.................................... 8.125 12/01/06 1,700,000
3,000 TJX Companies Inc............................. 6.625 06/15/00 2,926,290
---------------
4,626,290
---------------
TEXTILES (1.3%)
2,975 Burlington Industries, Inc.................... 7.25 09/15/05 2,810,542
---------------
UTILITIES - ELECTRIC (6.4%)
5,000 Chilgener S.A. (Chile)........................ 6.50 01/15/06 4,582,400
2,000 Commonwealth Edison Co........................ 7.50 01/01/01 1,988,820
2,000 Connecticut Light & Power Co.................. 7.875 06/01/01 1,995,220
500 Consolidated Edison Co. of New York, Inc...... 5.90 12/15/96 500,340
1,500 Niagara Mohawk Power Corp..................... 8.00 06/01/04 1,369,665
3,000 System Energy Resources, Inc.................. 7.71 08/01/01 2,993,970
---------------
13,430,415
---------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $152,021,731)....................................... 146,397,784
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (22.1%)
$ 2,000 Federal Home Loan Mortgage Corp............... 6.35 % 06/24/98 $ 1,994,940
1,000 Federal Home Loan Mortgage Corp............... 6.07 11/20/98 989,400
2,200 Federal Home Loan Mortgage Corp............... 6.905 06/11/99 2,200,066
190 Federal Home Loan Mortgage Corp............... 8.50 12/01/01 193,276
140 Federal Home Loan Mortgage Corp............... 8.50 01/01/02 142,325
474 Federal Home Loan Mortgage Corp............... 8.50 07/01/02 482,420
206 Federal Home Loan Mortgage Corp............... 9.00 08/01/02 212,272
1,700 Federal Home Loan Mortgage Corp............... 7.05 03/24/04 1,650,530
3,230 Federal National Mortgage Assoc............... 5.30 03/11/98 3,179,709
49 Federal National Mortgage Assoc............... 8.50 12/01/01 50,275
2,000 Federal National Mortgage Assoc............... 7.55 06/10/04 1,989,340
2,000 Federal National Mortgage Assoc............... 7.73 08/26/04 2,004,660
2,880 Private Export Funding Corp................... 6.86 04/30/04 2,873,520
12,600 U.S. Treasury Note............................ 6.75 02/28/97 12,668,544
5,000 U.S. Treasury Note............................ 5.125 04/30/98 4,910,950
5,000 U.S. Treasury Note............................ 6.75 06/30/99 5,029,650
1,300 U.S. Treasury Note............................ 5.75 10/31/00 1,255,930
3,500 U.S. Treasury Note............................ 5.75 08/15/03 3,287,935
1,000 U.S. Treasury Note............................ 7.00 07/15/06 1,003,760
---------------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(IDENTIFIED COST $46,553,206)........................................ 46,119,502
---------------
SHORT-TERM INVESTMENTS (4.6%)
U.S. GOVERNMENT AGENCY (a) (1.5%)
3,140 Federal National Mortgage Assoc............... 5.23 09/06/96 3,137,719
---------------
REPURCHASE AGREEMENT (3.1%)
6,496 The Bank of New York (dated 08/30/96; proceeds
$6,499,359; collateralized by $3,638,403
Federal Home Loan Banks 6.19% due 07/10/98
valued at $3,664,778 and $2,919,796 U.S.
Treasury Note 6.875% due 07/31/99 valued at
$2,960,796) (Identified Cost $6,495,660)...... 5.125 09/03/96 6,495,660
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $9,633,379)......................................... 9,633,379
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996, CONTINUED
<TABLE>
<CAPTION>
VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $208,208,316) (B)............................ 96.8% $202,150,665
OTHER ASSETS IN EXCESS OF LIABILITIES......................... 3.2 6,760,216
------ ------------
NET ASSETS.................................................... 100.0% $208,910,881
------ ------------
------ ------------
<FN>
- ---------------------
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation was $354,493 and the
aggregate gross unrealized depreciation was $6,412,144, resulting in net
unrealized depreciation of $6,057,651.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $208,208,316)............................ $202,150,665
Receivable for:
Shares of beneficial interest sold...................... 3,642,981
Interest................................................ 3,630,048
Principal paydowns...................................... 25,314
Prepaid expenses............................................ 15,174
------------
TOTAL ASSETS........................................... 209,464,182
------------
LIABILITIES:
Payable for:
Plan of distribution fee................................ 149,125
Shares of beneficial interest repurchased............... 111,121
Investment management fee............................... 105,265
Dividends to shareholders............................... 58,478
Accrued expenses and other payables......................... 129,312
------------
TOTAL LIABILITIES...................................... 553,301
------------
NET ASSETS:
Paid-in-capital............................................. 223,580,672
Net unrealized depreciation................................. (6,057,651)
Accumulated undistributed net investment income............. 34,895
Accumulated net realized loss............................... (8,647,035)
------------
NET ASSETS............................................. $208,910,881
------------
------------
NET ASSET VALUE PER SHARE,
22,243,950 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$9.39
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $16,288,370
-----------
EXPENSES
Plan of distribution fee.................................... 1,894,592
Investment management fee................................... 1,337,360
Transfer agent fees and expenses............................ 178,366
Professional fees........................................... 62,554
Shareholder reports and notices............................. 51,684
Registration fees........................................... 33,905
Custodian fees.............................................. 18,911
Trustees' fees and expenses................................. 15,419
Other....................................................... 11,016
-----------
TOTAL EXPENSES......................................... 3,603,807
-----------
NET INVESTMENT INCOME.................................. 12,684,563
-----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................................... (788,498)
Net change in unrealized depreciation....................... (6,023,150)
-----------
NET LOSS............................................... (6,811,648)
-----------
NET INCREASE................................................ $ 5,872,915
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1996 AUGUST 31, 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 12,684,563 $ 14,431,429
Net realized loss........................................... (788,498) (2,372,243)
Net change in unrealized depreciation....................... (6,023,150) 6,706,091
--------------- ---------------
NET INCREASE........................................... 5,872,915 18,765,277
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (12,688,795) (14,398,478)
Net realized gain........................................... -- (307,913)
--------------- ---------------
TOTAL.................................................. (12,688,795) (14,706,391)
--------------- ---------------
Net decrease from transactions in shares of beneficial
interest.................................................. (17,024,823) (17,057,209)
--------------- ---------------
TOTAL DECREASE......................................... (23,840,703) (12,998,323)
NET ASSETS:
Beginning of period......................................... 232,751,584 245,749,907
--------------- ---------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$34,895 AND $39,127, RESPECTIVELY)...................... $ 208,910,881 $ 232,751,584
--------------- ---------------
--------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Intermediate Income Securities (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is high
current income consistent with safety of principal. The Fund was organized as a
Massachusetts business trust on September 1, 1988 and commenced operations on
May 3, 1989.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or traded
on the New York or American Stock Exchange or other domestic or foreign exchange
or quoted by NASDAQ is valued at its latest sale price on that exchange or
quotation service prior to the time assets are valued; if there were no sales
that day, the security is valued at the latest bid price (in cases where a
security is traded on more than one exchange, the security is valued on the
exchange designated as the primary market pursuant to procedures adopted by the
Trustees); (2) all other portfolio securities for which over-the-counter market
quotations are readily available are valued at the latest available bid price;
(3) when market quotations are not readily available, including circumstances
under which it is determined by the Investment Manager that sale and bid prices
are not reflective of a security's market value, portfolio securities are valued
at their fair value as determined in good faith under procedures established by
and under the general supervision of the Trustees; (4) certain portfolio
securities may be valued by an outside pricing service approved by the Trustees.
The pricing service may utilize a matrix system incorporating security quality,
maturity and coupon as the evaluation model parameters, and/or research and
evaluations by its staff, including review of broker-dealer market price
quotations, in determining what it believes is the fair valuation of the
portfolio securities valued by such pricing service; and (5) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
45
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined on the identified cost method.
Discounts are accreted 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 income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, calculated daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.60% to the portion of daily net assets not exceeding $500
million; 0.50% to the portion of daily net assets exceeding $500 million but not
exceeding $750 million; 0.40% to the portion of daily net assets exceeding $750
million but not exceeding $1 billion; and 0.30% to the portion of daily net
assets exceeding $1 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
46
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED
all personnel, including officers of the Fund who are employees of the
Investment Manager. The Investment Manager also bears the cost of telephone
services, heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 0.85% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or capital gain distributions) less the
average daily aggregate net asset value of the Fund's shares redeemed since the
Fund's inception upon which a contingent deferred sales charge has been imposed
or upon which such charge has been waived; or (b) the Fund's average daily net
assets. Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided and the expenses borne by it and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to, and expenses of, the
account executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees or selected
broker-dealers who engage in or support distribution of the Fund's shares or who
service shareholder accounts, including overhead and telephone expenses,
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be in
the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, included carrying charges, totaled $6,167,490 at
August 31, 1996.
47
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED
The Distributor has informed the Fund that for the year ended August 31, 1996,
it received approximately $364,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended August 31, 1996, aggregated
$233,693,397 and $250,311,088, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $80,005,553 and
$66,339,993, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At August 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $16,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. At August 31, 1996, the Fund had an accrued pension liability of
$49,061 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1996 AUGUST 31, 1995
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 5,122,000 $ 49,165,458 4,829,143 $ 45,425,471
Reinvestment of dividends and distributions...................... 725,423 6,970,644 845,190 8,195,495
----------- -------------- ----------- ------------
5,847,423 56,136,102 5,674,333 53,620,966
Repurchased...................................................... (7,617,219) (73,160,925) (7,500,636) (70,678,175)
----------- -------------- ----------- ------------
Net decrease..................................................... (1,769,796) $ (17,024,823) (1,826,303) $(17,057,209)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
At August 31, 1996, the Fund had a net capital loss carryover of approximately
$6,966,000 of which $6,656,000 will be available through August 31, 2003 and
$310,000 will be available through August 31, 2004 to offset future capital
gains to the extent provided by regulations. Capital losses incurred after
October 31 ("post-October losses") within the taxable year are deemed to arise
on the
48
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996, CONTINUED
first business day of the Fund's next taxable year. The Fund incurred and will
elect to defer net capital losses of approximately $1,681,000 during fiscal
1996. As of August 31, 1996, the Fund had temporary book/tax differences
primarily attributable to post-October losses.
49
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
PERIOD
MAY 3,
1989*
FOR THE YEAR ENDED AUGUST 31 THROUGH
--------------------------------------------------------------------------- AUGUST
1996 1995 1994 1993 1992 1991 1990 31, 1989
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period............... $ 9.69 $ 9.51 $ 10.26 $ 10.05 $ 9.59 $ 9.42 $ 9.98 $ 10.00
--------- --------- --------- --------- --------- --------- --------- ---------
Net investment income.............. 0.55 0.59 0.58 0.62 0.70 0.79 0.86 0.28
Net realized and unrealized gain
(loss)............................ (0.30) 0.19 (0.73) 0.20 0.46 0.17 (0.55) (0.02)
--------- --------- --------- --------- --------- --------- --------- ---------
Total from investment operations... 0.25 0.78 (0.15) 0.82 1.16 0.96 0.31 0.26
--------- --------- --------- --------- --------- --------- --------- ---------
Less dividends and distributions
from:
Net investment income........... (0.55) (0.59) (0.56) (0.61) (0.70) (0.79) (0.86) (0.28)
Net realized gain............... -- (0.01) (0.04) -- -- -- (0.01) --
--------- --------- --------- --------- --------- --------- --------- ---------
Total dividends and
distributions..................... (0.55) (0.60) (0.60) (0.61) (0.70) (0.79) (0.87) (0.28)
--------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period..... $ 9.39 $ 9.69 $ 9.51 $ 10.26 $ 10.05 $ 9.59 $ 9.42 $ 9.98
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 2.58% 8.56% (1.50)% 8.43% 12.58% 10.78% 3.22% 2.57%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.62% 1.63% 1.63% 1.62% 1.69% 1.69% 1.75% 1.42%(2)(3)
Net investment income.............. 5.69% 6.23% 5.80% 6.12% 7.11% 8.49% 8.78% 8.18%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $208,911 $232,752 $245,750 $254,431 $187,285 $115,204 $114,086 $69,946
Portfolio turnover rate............ 115% 114% 122% 132% 93% 150% 135% 30%(1)
</TABLE>
<TABLE>
<C> <S>
<FN>
- ---------------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all the expenses that were assumed or waived by the
Investment Manager, the above expense and net investment income ratios
would have been 2.15% and 7.44%, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (82.1%)
AEROSPACE & DEFENSE (2.2%)
$ 4,000 Lockheed Martin Corp.......................... 6.625% 06/15/98 $ 4,023,160
---------------
AUTOMOBILE - RENTALS (1.7%)
3,250 Hertz Corp.................................... 6.00 01/15/03 3,107,552
---------------
AUTOMOTIVE (2.4%)
4,300 Chrysler Corp................................. 10.40 08/01/99 4,368,241
---------------
AUTOMOTIVE - FINANCE (2.8%)
4,975 General Motors Acceptance Corp................ 8.40 10/15/99 5,199,472
---------------
BANK HOLDING COMPANIES (4.0%)
2,474 First Chicago Corp............................ 7.625 01/15/03 2,561,357
4,975 Star Bank N.A................................. 6.375 03/01/04 4,794,059
---------------
7,355,416
---------------
BANKS (7.4%)
3,000 Banque Nationale De Paris..................... 7.20 01/15/07 2,981,310
5,000 Shawmut Bank Connecticut, N.A................. 8.625 02/15/05 5,461,750
5,000 Societe Generale.............................. 7.40 06/01/06 5,066,450
---------------
13,509,510
---------------
BANKS - INTERNATIONAL (2.8%)
5,000 Santander Financial Issuances (Cayman
Islands)...................................... 7.75 05/15/05 5,183,050
---------------
BROKERAGE (4.4%)
3,000 Lehman Brothers Inc........................... 6.125 02/01/01 2,926,380
5,000 Salomon Inc................................... 7.00 05/15/99 5,043,600
---------------
7,969,980
---------------
CABLE & TELECOMMUNICATIONS (2.5%)
5,000 Tele-Communications, Inc...................... 6.875 02/15/06 4,654,700
---------------
CHEMICALS (1.1%)
2,000 Millennium America Inc........................ 7.00 11/15/06 1,945,280
---------------
CHEMICALS - SPECIALTY (1.1%)
2,000 W. R. Grace & Co.............................. 7.40 02/01/00 2,036,220
---------------
COMPUTERS (1.0%)
1,900 Oracle Corp................................... 6.91 02/15/07 1,869,391
---------------
ELECTRONICS - SEMICONDUCTORS/ COMPONENTS (1.7%)
3,000 Applied Materials Inc......................... 8.00 09/01/04 3,159,390
---------------
FINANCE (6.8%)
7,250 Golden West Financial Corp.................... 10.25 05/15/97 7,314,307
5,000 Household Finance Corp........................ 7.65 05/15/07 5,164,050
---------------
12,478,357
---------------
FINANCIAL (1.7%)
3,000 Nac Re Corp................................... 8.00 06/15/99 3,093,900
---------------
FOREIGN GOVERNMENT (4.1%)
5,250 Israel (State of)............................. 6.375 12/15/05 4,963,823
2,450 Republic of Indonesia......................... 7.75 08/01/06 2,479,327
---------------
7,443,150
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FUNERAL SERVICES (1.6%)
$ 3,000 Stewart Enterprises........................... 6.70 % 12/01/03 $ 2,926,590
---------------
HEALTHCARE (2.7%)
4,975 Columbia/HCA Healthcare Corp.................. 6.87 09/15/03 4,969,229
---------------
LEASING (1.6%)
2,900 Comdisco, Inc................................. 6.375 11/30/01 2,847,945
---------------
LEISURE (1.7%)
3,000 Royal Caribbean Cruises, Ltd. (Liberia)....... 8.25 04/01/05 3,170,040
---------------
MANUFACTURING - DIVERSIFIED (1.1%)
2,000 Carlisle Companies Inc........................ 7.25 01/15/07 1,997,220
---------------
MEDICAL SERVICES (1.6%)
3,000 Medpartners Inc............................... 7.375 10/01/06 3,007,260
---------------
MORTGAGE REVENUE (1.7%)
3,000 Source One Mortgage Services Corp............. 8.875 10/15/01 3,186,360
---------------
OIL INTEGRATED - INTERNATIONAL (2.8%)
5,000 Societe Nationale Elf Aquitaine (France)...... 7.75 05/01/99 5,132,750
---------------
PAPER & FOREST PRODUCTS (2.6%)
4,900 Noranda Forest, Inc. (Canada)................. 6.875 11/15/05 4,782,204
---------------
PHOTOGRAPHY (2.2%)
4,000 Polaroid Corp................................. 8.00 03/15/99 4,113,160
---------------
RETAIL STORES (2.2%)
1,000 Kmart Corp.................................... 8.125 12/01/06 977,500
3,000 TJX Companies, Inc............................ 6.625 06/15/00 2,984,550
---------------
3,962,050
---------------
TELEPHONES (1.6%)
3,000 U.S. West Capital Funding, Inc................ 6.85 01/15/02 2,996,130
---------------
TEXTILES (1.6%)
2,975 Burlington Industries, Inc.................... 7.25 09/15/05 2,916,214
---------------
UTILITIES - ELECTRIC (9.4%)
2,000 Arizona Public Service Co..................... 7.625 06/15/99 2,046,120
5,000 Chilgener S.A. (Chile)........................ 6.50 01/15/06 4,740,550
2,000 Commonwealth Edison Co........................ 7.50 01/01/01 2,012,280
3,800 Connecticut Light & Power Co.................. 7.875 06/01/01 3,845,372
1,500 Niagara Mohawk Power Corp..................... 8.00 06/01/04 1,469,025
3,000 System Energy Resources, Inc.................. 7.71 08/01/01 3,056,880
---------------
17,170,227
---------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $152,495,988)....................................... 150,574,148
---------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (15.4%)
1,000 Federal Home Loan Mortgage Corp............... 6.07 11/20/98 997,570
162 Federal Home Loan Mortgage Corp............... 8.50 12/01/01 164,979
119 Federal Home Loan Mortgage Corp............... 8.50 01/01/02 121,834
389 Federal Home Loan Mortgage Corp............... 8.50 07/01/02 396,978
179 Federal Home Loan Mortgage Corp............... 9.00 08/01/02 184,094
1,700 Federal Home Loan Mortgage Corp............... 7.05 03/24/04 1,679,583
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,230 Federal National Mortgage Assoc............... 5.30 % 03/11/98 $ 3,211,654
2,000 Federal National Mortgage Assoc............... 6.50 01/27/00 1,998,540
45 Federal National Mortgage Assoc............... 8.50 12/01/01 46,566
2,000 Federal National Mortgage Assoc............... 7.55 06/10/04 2,015,560
2,000 Federal National Mortgage Assoc............... 7.73 08/26/04 2,030,280
2,700 Private Export Funding Corp................... 6.86 04/30/04 2,720,385
1,150 U.S. Treasury Note............................ 5.125 04/30/98 1,141,490
7,700 U.S. Treasury Note............................ 5.875 02/15/00 7,629,699
850 U.S. Treasury Note............................ 5.875 11/30/01 832,252
3,000 U.S. Treasury Note............................ 6.50 10/15/06 2,981,414
---------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(IDENTIFIED COST $27,954,990)........................................ 28,152,878
---------------
SHORT-TERM INVESTMENT (1.1%)
REPURCHASE AGREEMENT
1,987 The Bank of New York (dated 02/28/97; proceeds
$1,988,090; collateralized by $1,446,798
Federal National Mortgage Assoc. 6.75% due
08/24/00 valued at $1,452,029 and $574,519
U.S. Treasury Note 6.375% due 08/15/02 valued
at $574,936) (Identified Cost $1,987,221)..... 5.25 03/03/97 1,987,221
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST $182,438,199) (A)............................ 98.6% 180,714,247
OTHER ASSETS IN EXCESS OF LIABILITIES......................... 1.4 2,494,718
------ ------------
NET ASSETS.................................................... 100.0% $183,208,965
------ ------------
------ ------------
<FN>
- ---------------------
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,256,060 and the
aggregate gross unrealized depreciation is $2,980,012, resulting in net
unrealized depreciation of $1,723,952.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $182,438,199)............................ $180,714,247
Receivable for:
Interest................................................ 3,197,831
Shares of beneficial interest sold...................... 77,742
Principal paydowns...................................... 14,852
Prepaid expenses and other assets........................... 55,515
------------
TOTAL ASSETS........................................... 184,060,187
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased............... 190,397
Plan of distribution fee................................ 121,768
Investment management fee............................... 85,954
Dividends to shareholders............................... 56,143
Accrued expenses and other payables......................... 396,960
------------
TOTAL LIABILITIES...................................... 851,222
------------
NET ASSETS:
Paid-in-capital............................................. 194,279,890
Net unrealized depreciation................................. (1,723,952)
Accumulated undistributed net investment income............. 32,835
Accumulated net realized loss............................... (9,379,808)
------------
NET ASSETS............................................. $183,208,965
------------
------------
NET ASSET VALUE PER SHARE,
19,179,664 SHARES OUTSTANDING (UNLIMITED SHARES OF $.01
PAR VALUE)................................................
$9.55
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $6,973,782
----------
EXPENSES
Plan of distribution fee.................................... 827,775
Investment management fee................................... 584,312
Professional fees........................................... 253,641
Transfer agent fees and expenses............................ 81,549
Custodian fees.............................................. 48,757
Shareholder reports and notices............................. 34,356
Registration fees........................................... 16,720
Trustees' fees and expenses................................. 4,564
Other....................................................... 3,407
----------
TOTAL EXPENSES......................................... 1,855,081
----------
NET INVESTMENT INCOME.................................. 5,118,701
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (732,773)
Net change in unrealized depreciation....................... 4,333,699
----------
NET GAIN............................................... 3,600,926
----------
NET INCREASE................................................ $8,719,627
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 1997 AUGUST 31, 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 5,118,701 $ 12,684,563
Net realized loss........................................... (732,773) (788,498)
Net change in unrealized depreciation....................... 4,333,699 (6,023,150)
----------------- ---------------
NET INCREASE........................................... 8,719,627 5,872,915
Dividends from net investment income........................ (5,120,761) (12,688,795)
Net decrease from transactions in shares of beneficial
interest.................................................. (29,300,782) (17,024,823)
----------------- ---------------
NET DECREASE........................................... (25,701,916) (23,840,703)
NET ASSETS:
Beginning of period......................................... 208,910,881 232,751,584
----------------- ---------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$32,835 AND $34,895, RESPECTIVELY)...................... $183,208,965 $ 208,910,881
----------------- ---------------
----------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Intermediate Income Securities (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is high
current income consistent with safety of principal. The Fund was organized as a
Massachusetts business trust on September 1, 1988 and commenced operations on
May 3, 1989.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign exchange is valued at its latest
sale price on that exchange prior to the time when assets are valued; if there
were no sales that day, the security is valued at the latest bid price (in cases
where a security is traded on more than one exchange, the security is valued on
the exchange designated as the primary market pursuant to procedures adopted by
the Trustees); (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest available bid
price; (3) when market quotations are not readily available, including
circumstances under which it is determined by Dean Witter InterCapital Inc. (the
"Investment Manager") that sale and bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Trustees; (4) certain portfolio securities may be valued by
an outside pricing service approved by the Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service; and (5) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
57
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined on the identified cost method.
Discounts are accreted 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 income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays a management fee, calculated daily and payable monthly, by applying
the following annual rates to the net assets of the Fund determined as of the
close of each business day: 0.60% to the portion of daily net assets not
exceeding $500 million; 0.50% to the portion of daily net assets exceeding $500
million but not exceeding $750 million; 0.40% to the portion of daily net assets
exceeding $750 million but not exceeding $1 billion; and 0.30% to the portion of
daily net assets exceeding $1 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.
58
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 0.85% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or capital gain distributions) less the
average daily aggregate net asset value of the Fund's shares redeemed since the
Fund's inception upon which a contingent deferred sales charge has been imposed
or upon which such charge has been waived; or (b) the Fund's average daily net
assets. Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided and the expenses borne by it and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to, and expenses of, the
account executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees or selected
broker-dealers who engage in or support distribution of the Fund's shares or who
service shareholder accounts, including overhead and telephone expenses,
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be in
the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, including carrying charges, totaled $5,848,541 at
February 28, 1997.
The Distributor has informed the Fund that for the six months ended February 28,
1997, it received approximately $183,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
59
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1997 (UNAUDITED) CONTINUED
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/prepayments of portfolio
securities, excluding short-term investments, for the six months ended February
28, 1997, aggregated $85,612,676 and $103,075,546, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$24,791,766 and $47,924,592 respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At February 28, 1997, the Fund had
transfer agent fees and expenses payable of approximately $15,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. At February 28, 1997, the Fund had an accrued pension liability of
$47,054 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FEBRUARY 28, 1997 FOR THE YEAR
---------------------------- ENDED
AUGUST 31, 1996
(UNAUDITED) --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 3,145,944 $ 30,047,421 5,122,000 $ 49,165,458
Reinvestment of dividends........................................ 294,780 2,824,098 725,423 6,970,644
----------- -------------- ----------- ------------
3,440,724 32,871,519 5,847,423 56,136,102
Repurchased...................................................... (6,505,010) (62,172,301) (7,617,219) (73,160,925)
----------- -------------- ----------- ------------
Net decrease..................................................... (3,064,286) $ (29,300,782) (1,769,796) $(17,024,823)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
At August 31, 1996, the Fund had a net capital loss carryover of approximately
$6,966,000 of which $6,656,000 will be available through August 31, 2003 and
$310,000 will be available through August 31, 2004 to offset future capital
gains to the extent provided by regulations. Capital losses incurred after
October 31 ("post-October losses") within the taxable year are deemed to arise
on the first business day of the Fund's next taxable year. The Fund incurred and
will elect to defer net capital losses of approximately $1,681,000 during fiscal
1996. As of August 31, 1996, the Fund had temporary book/tax differences
primarily attributable to post-October losses.
60
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FEBRUARY 28, FOR THE YEAR ENDED AUGUST 31
1997 --------------------------------
(UNAUDITED) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.39 $ 9.69 $ 9.51 $ 10.26
------ ---------- --------- ---------
Net investment income................................................. 0.29 0.55 0.59 0.58
Net realized and unrealized gain (loss)............................... 0.16 (0.30) 0.19 (0.73)
------ ---------- --------- ---------
Total from investment operations...................................... 0.45 0.25 0.78 (0.15)
------ ---------- --------- ---------
Less dividends and distributions from:
Net investment income................................................. (0.29) (0.55) (0.59) (0.56)
Net realized gain..................................................... -- -- (0.01) (0.04)
------ ---------- --------- ---------
Total dividends and distributions..................................... (0.29) (0.55) (0.60) (0.60)
------ ---------- --------- ---------
Net asset value, end of period........................................ 9.55 $ 9.39 $ 9.69 $ 9.51
------ ---------- --------- ---------
------ ---------- --------- ---------
TOTAL INVESTMENT RETURN+.............................................. 4.38%(1) 2.58% 8.56% (1.50)%
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.88%(2) 1.62% 1.63% 1.63%
Net investment income................................................. 5.15%(2) 5.69% 6.23% 5.80%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $183,209 $208,911 $232,752 $245,750
Portfolio turnover rate............................................... 48%(1) 115% 114% 122%
<CAPTION>
1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 10.05 $ 9.59
---------- ---------
Net investment income................................................. 0.62 0.70
Net realized and unrealized gain (loss)............................... 0.20 0.46
---------- ---------
Total from investment operations...................................... 0.82 1.16
---------- ---------
Less dividends and distributions from:
Net investment income................................................. (0.61) (0.70)
Net realized gain..................................................... -- --
---------- ---------
Total dividends and distributions..................................... (0.61) (0.70)
---------- ---------
Net asset value, end of period........................................ $ 10.26 $ 10.05
---------- ---------
---------- ---------
TOTAL INVESTMENT RETURN+.............................................. 8.43% 12.58%
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.62% 1.69%
Net investment income................................................. 6.12% 7.11%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $254,431 $187,285
Portfolio turnover rate............................................... 132% 93%
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
RATINGS OF INVESTMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
BOND RATINGS
<TABLE>
<S> <C>
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely to change,
such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate, and therefore not well safeguarded during
both good and bad times 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.
</TABLE>
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.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. The ratings apply to Municipal Commercial Paper as well as taxable
Commercial Paper. Moody's employs the following three
designa-
62
<PAGE>
tions, 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 catagories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
BOND RATINGS
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
<TABLE>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and
differs from the highest-rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than other speculative
grade debt. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate capacity
or willingness to pay interest and repay principal.
B Debt rated "B" has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to pay
interest and repay principal.
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.
</TABLE>
63
<PAGE>
<TABLE>
<S> <C>
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 rating from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major ratings
categories.
</TABLE>
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by Standard and Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.
The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2 and 3 to indicate the relative degree of safety.
<TABLE>
<S> <C>
A-1 indicates that the degree of safety regarding timely payment is very strong.
A-2 indicates capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1."
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying this
designation are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
</TABLE>
64
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
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 May 3, 1989
through August 31, 1989 and for the years
ended August 31, 1990, 1991, 1992, 1993, 1994,
1995 and 1996 and for the six months ended February
28, 1997 (unaudited)............................... 6
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
--------
Portfolio of Investments at August 31, 1996 ....... 38
Statement of Assets and Liabilities at
August 31, 1996 ................................... 42
Statement of Operations for the year ended
August 31, 1996.................................... 43
Statement of changes in net assets for
the years ended August 31, 1995 and 1996........... 44
Notes to Financial Statements at August 31, 1996... 45
Financial highlights for the period May 3, 1989
through August 31, 1989 and for the years
ended August 31, 1990, 1991, 1992, 1993, 1994,
1995 and 1996...................................... 50
Portfolio of Investments at February 28, 1997
(unaudited)........................................ 51
Statement of Assets and Liabilities at February
28, 1997 (unaudited)................................ 54
Statement of Operations for the six months ended
February 28, 1997 (unaudited)...................... 55
Statement of changes in net assets for the year
ended August 31, 1996 and the six months ended
February 28, 1997 (unaudited)....................... 56
Notes to Financial Statements at February 28, 1997
(unaudited)......................................... 57
<PAGE>
Financial highlights for the years
1992, 1993, 1994, 1995 and 1996 and for the
six months ended February 28, 1997 (unaudited)...... 61
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
1. -- Form of Instrument Establishing and Designating
Additional Classes.
2. -- Amended and Restated By-Laws of the Registrant
dated as of October 25, 1996.
5. -- Form of Investment Management Agreement between
the Registrant and Dean witter InterCapital Inc.
6. (a) Form of Distribution Agreement between the
Registrant and Dean Witter Distributors Inc.
(b) Form of Multiple-Class Distribution Agreement
between the Registrant and Dean Witter
Distributors Inc.
11. -- Consent of Independent Accountants.
15. -- Form of Amended and Restated Plan of Distribution
pursuant to Rule 12b-1.
27. -- Financial Data Schedule.
Other -- Form of Multiple-Class Plan pursuant to
18f-3.
- ------------------------------
All other exhibits were previously filed and are hereby incorporated by
reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at June 30, 1997
-------------- -----------------------
Shares of Beneficial Interest 10,093
2
<PAGE>
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 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.
3
<PAGE>
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 Morgan Stanley, Dean Witter, Discover & Co. The principal address
of the Dean Witter Funds is Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(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
4
<PAGE>
(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 Short-Term U.S. Treasury Trust
(32) Dean Witter Diversified Income Trust
(33) Dean Witter U.S. Government Money Market Trust
(34) Dean Witter Global Dividend Growth Securities
(35) Active Assets California Tax-Free Trust
(36) Dean Witter Natural Resource Development Securities Inc.
(37) Active Assets Government Securities Trust
(38) Active Assets Money Trust
(39) Active Assets Tax-Free Trust
(40) Dean Witter Limited Term Municipal Trust
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter High Income Securities
(45) Dean Witter National Municipal Trust
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Mid-Cap Growth Fund
(48) Dean Witter Select Dimensions Investment Series
(49) Dean Witter Balanced Growth Fund
(50) Dean Witter Balanced Income Fund
(51) Dean Witter Hawaii Municipal Trust
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
5
<PAGE>
(56) Dean Witter Income Builder Fund
(57) Dean Witter Special Value Fund
(58) Dean Witter Financial Services Trust
(59) Dean Witter Market Leader Trust
The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10)TCW/DW Strategic Income Trust
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; Director and/or
officer of various Morgan Stanley, Dean Witter,
Discover & Co. ("MSDWD") subsidiaries; Formerly
Executive Vice President and Director of Dean
Witter, Discover & Co.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of MSDWD and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
MSDWD subsidiaries.
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
- ----------------- ------------------------------------------------
Richard M. DeMartini President and Chief Operating Officer
Director of Dean Witter Capital, a division of DWR;
Director of DWR, DWSC, Distributors
and DWTC; Trustee of the TCW/DW Funds.
James F. Higgins President and Chief Operating Officer of
Director Dean Witter Financial; Director of DWR,
DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Strategic
Executive Vice and Administrative Officer of MSDWD; Executive
President, Chief Vice President and Chief Financial Officer of
Financial Officer and DWSC and Distributors; Director of DWR,
Director DWSC and Distributors.
Christine A. Edwards Executive Vice President, Chief Legal Officer
Director and Secretary of MSDWD; 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.
Mitchell M. Merin President and Chief Strategic Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Strategic Officer Executive Vice President and Director of DWTC;
Executive Vice President and Director of DWR;
Director of SPS Transaction Services, Inc. and
various other MSDWD subsidiaries.
John B. Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Joseph J. McAlinden
Executive Vice President
and Chief Investment Vice President of the Dean Witter Funds and
Officer Director of DWTC.
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
Secretary and General President, Assistant Secretary and Assistant
Counsel General Counsel of Distributors; Vice President,
Secretary and General Counsel of the Dean Witter
Funds and the TCW/DW Funds.
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
- ----------------- ------------------------------------------------
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 F. Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone Senior Vice President of DWSC, Distributors
Senior Vice President and DWTC and Director of DWTC; Vice President
of the Dean Witter Funds and the TCW/DW Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita H. Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira N. Ross
Senior Vice President Vice President of various Dean Witter Funds.
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader
Senior Vice President Trust.
Rafael Scolari Vice President of Prime Income Trust.
Senior Vice President
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter 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
- ----------------- ------------------------------------------------
Jayne M. Stevlingston Vice President of various Dean Witter Funds.
Senior Vice President
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.
Douglas Brown
First Vice President
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.
Thomas Chronert
First Vice President
Rosalie Clough
First Vice President
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.
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.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Robert Zimmerman
First Vice President
Dale Albright
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
- ----------------- ------------------------------------------------
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Kirk Balzer
Vice President Vice President of Various Dean Witter Funds.
Nancy Belza
Vice President
Dale Boettcher
Vice President
Joseph Cardwell
Vice President
Philip Casparius
Vice President
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Michael Geringer
Vice President
Stephen Greenhut
Vice President
Peter W. Gurman
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
- ----------------- ------------------------------------------------
Matthew Haynes Vice President of Dean Witter
Vice President Variable Investment Series
Peter Hermann
Vice President Vice President of various Dean Witter Funds
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
Christopher Jones
Vice President
James P. Kastberg
Vice President
Michelle Kaufman
Vice President Vice President of various Dean Witter Funds
Michael Knox
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 J. Lian
Vice President Vice President of various Dean Witter Funds.
Catherine Maniscalco Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
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
11
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Mary Beth Mueller
Vice President
David Myers Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Carsten Otto Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
George Paoletti
Vice President
Anne Pickrell Vice President of Dean Witter Global Short-
Vice President Term Income Fund Inc.
Michael Roan
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious Metal and
Vice President Minerals Trust.
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust
Naomi Stein
Vice President
Kathleen H. Stromberg
Vice President Vice President of various Dean Witter Funds.
Marybeth Swisher
Vice President
12
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Robert Vanden Assem
Vice President
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Katherine Wickham
Vice President
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
13
<PAGE>
(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 Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter High Income Securities
(45) Dean Witter National Municipal Trust
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Balanced Growth Fund
(48) Dean Witter Balanced Income Fund
(49) Dean Witter Hawaii Municipal Trust
(50) Dean Witter Variable Investment Series
(51) Dean Witter Capital Appreciation Fund
(52) Dean Witter Intermediate Term U.S. Treasury Trust
(53) Dean Witter Information Fund
(54) Dean Witter Japan Fund
(55) Dean Witter Income Builder Fund
(56) Dean Witter Special Value Fund
(57) Dean Witter Financial Services Trust
(58) Dean Witter Market Leader Trust
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
(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.
14
<PAGE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service
contract.
Item 32. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
15
<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 25th day of July, 1997.
DEAN WITTER INTERMEDIATE INCOME SECURITIES
By /s/ Barry Fink
-----------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 10 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 07/25/97
---------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 07/25/97
---------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 07/25/97
---------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
By /s/ David M. Butowsky 07/25/97
---------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
DEAN WITTER INTERMEDIATE INCOME SECURITIES
1. -- Form of Instrument Establishing and Designating
Additional Classes.
2. -- Amended and Restated By-Laws of the Registrant
dated as of October 25, 1996.
5. -- Form of Investment Management Agreement between
the Registrant and Dean Witter InterCapital Inc.
6. (a) Form of Distribution Agreement between the
Registrant and Dean Witter Distributors Inc.
(b) Form of Multiple-Class Distribution Agreement
between the Registrant and Dean Witter Distributors
Inc.
11. -- Consent of Independent Accountants.
15. -- Form of Amended and Restated Plan of Distribution
pursuant to Rule 12b-1.
27. -- Financial Data Schedule.
Other-- Form of Multiple-Class Plan pursuant to 18f-3.
- -----------------------------
All other exhibits were previously filed and are hereby incorporated by
reference.
<PAGE>
CERTIFICATE
The undersigned hereby certifies that he is the Secretary of Dean
Witter Intermediate Income Securities (the "Trust"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, that
annexed hereto is an Instrument Establishing and Designating Additional Classes
of Shares of the Trust unanimously adopted by the Trustees of the Trust on June
30, 1997, as provided in Section 6.9(h) of the said Declaration, said Instrument
to take effect on July 28, 1997, and I do hereby further certify that such
Instrument has not been amended and is on the date hereof in full force and
effect.
Dated this 28th day of July, 1997.
------------------------------
Barry Fink
Secretary
(SEAL)
<PAGE>
DEAN WITTER INTERMEDIATE INCOME SECURITIES
INSTRUMENT ESTABLISHING AND DESIGNATING
ADDITIONAL CLASSES OF SHARES
WHEREAS, Dean Witter Intermediate Income Securities (the "Trust") was
established by the Declaration of Trust dated August 31, 1988, as amended from
time to time (the "Declaration"), under the laws of the Commonwealth of
Massachusetts;
WHEREAS, Section 6.9(h) of the Declaration provides that the establishment and
designation of any additional class of shares shall be effective upon the
execution by a majority of the then Trustees of an instrument setting forth such
establishment and designation and the relative rights, preferences, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of such class, or as otherwise provided in such instrument, which
instrument shall have the status of an amendment to the Declaration; and
WHEREAS, the Trustees of the Trust have deemed it advisable to establish and
designate three additional classes of shares and to designate classes for the
existing shares held prior to July 28, 1997 ("Existing Class") as provided
herein.
NOW, THEREFORE, BE IT RESOLVED, pursuant to Section 6.9(h) of the Declaration,
there are hereby established and designated three additional classes of shares,
to be known as: Class A, Class C and Class D (the "Additional Classes"), each
of which shall be subject to the relative rights, preferences, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption set forth in the Declaration with respect to the
Existing Class, except to the extent the DEAN WITTER FUNDS MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3 attached hereto as EXHIBIT A sets forth differences (i)
between each of the Additional Classes, or (ii) among each of the Existing Class
and the Additional Classes; and be it further
RESOLVED, pursuant to Section 6.9(h) of the Declaration, all shares of the Trust
held prior to July 28, 1997 are hereby designated as Class B shares of the
Trust, except that shares held by certain employee benefit plans established by
Dean Witter Reynolds Inc. and its affiliate, SPS Transaction Services, Inc., are
hereby designated as Class D shares.
This instrument 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 THEREOF, the undersigned, the Trustees of the Trust, have executed
this instrument this 30th day of June, 1997.
/s/ Michael Bozic /s/ Manuel H. Johnson
- ------------------------------------- -------------------------------------
Michael Bozic, as Trustee Manuel H. Johnson, as Trustee
and not individually and not individually
c/o Levitz Furniture Corp. c/o Johnson Smick International Inc.
6111 Broken Sound Parkway, N.W. 1133 Connecticut Avenue, N.W.
Boca Raton, FL 33487 Washington, D.C. 20036
/s/ Charles A. Fiumefreddo /s/ Michael E. Nugent
- ------------------------------------- -------------------------------------
Charles A. Fiumefreddo, as Trustee Michael E. Nugent, as Trustee
and not individually and not individually
Two World Trade Center c/o Triumph Capital, L.P.
New York, NY 10048 237 Park Avenue
New York, NY 10017
/s/ Edwin J. Garn /s/ Philip J. Purcell
- ------------------------------------- -------------------------------------
Edwin J. Garn, as Trustee Philip J. Purcell, as Trustee
and not individually and not individually
c/o Huntsman Chemical Corporation Two World Trade Center
500 Huntsman Way New York, NY 10048
Salt Lake City, UT 84111
/s/ John R. Haire /s/ John L. Schroeder
- ------------------------------------- -------------------------------------
John R. Haire, as Trustee John L. Schroeder, as Trustee
and not individually and not individually
Two World Trade Center c/o Gordon Altman Butowsky Weitzen
New York, NY 10048 Shalov & Wein
Counsel to the Independent Trustees
114 West 47th Street
New York, NY 10036
<PAGE>
STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
On this 30th day of June, 1997, MICHAEL BOZIC, CHARLES A. FIUMEFREDDO,
EDWIN J. GARN, JOHN R. HAIRE, MANUEL H. JOHNSON, MICHAEL E. NUGENT, PHILIP J.
PURCELL and JOHN L. SCHROEDER, 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:
MARILYN K. CRANNEY
NOTARY PUBLIC, STATE OF NEW YORK
NO. 24-4795538
QUALIFIED IN KINGS COUNTY
COMMISSION EXPIRES MAY 31, 1999
<PAGE>
EXHIBIT A
DEAN WITTER FUNDS
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3
INTRODUCTION
This plan (the "Plan") is adopted pursuant to Rule 18f-3(d) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and will be
effective as of July 28, 1997. The Plan relates to shares of the open-end
investment companies to which Dean Witter InterCapital Inc. acts as investment
manager, that are listed on Schedule A, as may be amended from time to time
(each, a "Fund" and collectively, the "Funds"). The Funds are distributed
pursuant to a system (the "Multiple Class System") in which each class of shares
(each, a "Class" and collectively, the "Classes") of a Fund represents a pro
rata interest in the same portfolio of investments of the Fund and differs only
to the extent outlined below.
I. DISTRIBUTION ARRANGEMENTS
One or more Classes of shares of the Funds are offered for purchase by
investors with the sales load structures described below. In addition, pursuant
to Rule 12b-1 under the 1940 Act, the Funds have each adopted a Plan of
Distribution (the "12b-1 Plan") under which shares of certain Classes are
subject to the service and/or distribution fees ("12b-1 fees") described below.
1. CLASS A SHARES
Class A shares are offered with a front-end sales load ("FESL"). The
schedule of sales charges applicable to a Fund and the circumstances under which
the sales charges are subject to reduction are set forth in each Fund's current
prospectus. As stated in each Fund's current prospectus, Class A shares may be
purchased at net asset value (without a FESL): (i) in the case of certain large
purchases of such shares; and (ii) by certain limited categories of investors,
in each case, under the circumstances and conditions set forth in each Fund's
current prospectus. Class A shares purchased at net asset value may be subject
to a contingent deferred sales charge ("CDSC") on redemptions made within one
year of purchase. Further information relating to the CDSC, including the manner
in which it is calculated, is set forth in paragraph 6 below. Class A shares are
also subject to payments under each Fund's 12b-1 Plan to reimburse Dean Witter
Distributors Inc., Dean Witter Reynolds Inc. ("DWR"), its affiliates and other
broker-dealers for distribution expenses incurred by them specifically on behalf
of the Class, assessed at an annual rate of up to 0.25% of average daily net
assets. The entire amount of the 12b-1 fee represents a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD") guidelines.
2. CLASS B SHARES
Class B shares are offered without a FESL, but will in most cases be subject
to a six-year declining CDSC which is calculated in the manner set forth in
paragraph 6 below. Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a three-year declining CDSC
which is calculated in the manner set forth in paragraph 6 below. The schedule
of CDSC charges applicable to each Fund is set forth in each Fund's current
prospectus. With the exception of certain of the Funds which have a different
formula described below (Dean Witter American Value Fund, Dean Witter Natural
Resource Development Securities Inc., Dean Witter Strategist Fund and Dean
Witter Dividend Growth Securities Inc.)(1), Class B
- ------------
(1)The payments under the 12b-1 Plan for each of Dean Witter American Value
Fund, Dean Witter Natural Resource Development Securities Inc. and Dean Witter
Dividend Growth Securities Inc. are assessed at the annual rate of 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
shares since the inception of the Fund's Plan (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares redeemed since the Plan's inception
upon which a contingent deferred sales charge has been imposed or waived, or (b)
the average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since inception of the Plan. The payments under the
12b-1 Plan for the Dean Witter Strategist Fund are assessed at the annual rate
of: (i) 1% of the lesser of (a) the average daily aggregate gross sales of the
Fund's Class B shares since the effectiveness of the first amendment of the Plan
on November 8, 1989 (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the effectiveness of the first amended Plan, upon
which a contingent deferred sales charge has been imposed or waived, or (b) the
average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since the effectiveness of the first amended Plan; plus
(ii) 0.25% of the average daily net assets of Class B attributable to shares
issued, net of related shares redeemed, prior to effectiveness of the first
amended Plan.
1
<PAGE>
shares are also subject to a fee under each Fund's respective 12b-1 Plan,
assessed at the annual rate of up to 1.0% of either: (a) the lesser of (i) the
average daily aggregate gross sales of the Fund's Class B shares since the
inception of the Fund (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the Fund's inception upon which a CDSC has been
imposed or waived, or (ii) the average daily net assets of Class B; or (b) the
average daily net assets of Class B. A portion of the 12b-1 fee equal to up to
0.25% of the Fund's average daily net assets is characterized as a service fee
within the meaning of the NASD guidelines and the remaining portion of the 12b-1
fee, if any, is characterized as an asset-based sales charge. Also, Class B
shares have a conversion feature ("Conversion Feature") under which such shares
convert to Class A shares after a certain holding period. Details of the
Conversion Feature are set forth in Section IV below.
3. CLASS C SHARES
Class C shares are offered without imposition of a FESL, but will in most
cases be subject to a CDSC of 1.0% on redemptions made within one year after
purchase. Further information relating to the CDSC is set forth in paragraph 6
below. In addition, Class C shares, under each Fund's 12b-1 Plan, are subject to
12b-1 payments to reimburse Dean Witter Distributors Inc., DWR, its affiliates
and other broker-dealers for distribution expenses incurred by them specifically
on behalf of the Class, assessed at the annual rate of up to 1.0% of the average
daily net assets of the Class. A portion of the 12b-1 fee equal to up to 0.25%
of the Fund's average daily net assets is characterized as a service fee within
the meaning of NASD guidelines. Unlike Class B shares, Class C shares do not
have the Conversion Feature.
4. CLASS D SHARES
Class D shares are offered without imposition of a FESL, CDSC or a 12b-1 fee
for purchases of Fund shares by (i) investors meeting an initial minimum
investment requirement and (ii) certain other limited categories of investors,
in each case, as may be approved by the Boards of Directors/Trustees of the
Funds and as disclosed in each Fund's current prospectus.
5. ADDITIONAL CLASSES OF SHARES
The Boards of Directors/Trustees of the Funds have the authority to create
additional Classes, or change existing Classes, from time to time, in accordance
with Rule 18f-3 under the 1940 Act.
6. CALCULATION OF THE CDSC
Any applicable CDSC is calculated based upon the lesser of net asset value
of the shares at the time of purchase or at the time of redemption. The CDSC
does not apply to amounts representing an increase in share value due to capital
appreciation and shares acquired through the reinvestment of dividends or
capital gains distributions. The CDSC schedule applicable to a Fund and the
circumstances in which the CDSC is subject to waiver are set forth in each
Fund's prospectus.
II. EXPENSE ALLOCATIONS
Expenses incurred by a Fund are allocated among the various Classes of
shares pro rata based on the net assets of the Fund attributable to each Class,
except that 12b-1 fees relating to a particular Class are allocated directly to
that Class. In addition, other expenses associated with a particular Class
(except advisory or custodial fees), may be allocated directly to that Class,
provided that such expenses are reasonably identified as specifically
attributable to that Class and the direct allocation to that Class is approved
by the Fund's Board of Directors/Trustees.
III. CLASS DESIGNATION
All shares of the Funds held prior to July 28, 1997 (other than the shares
held by certain employee benefit plans established by DWR and its affiliate, SPS
Transaction Services, Inc., shares of Funds offered with a FESL, and shares of
Dean Witter Balanced Growth Fund and Dean Witter Balanced Income Fund) have been
designated Class B shares. Shares held prior to July 28, 1997 by such employee
benefit plans have been designated Class D shares. Shares held prior to July 28,
1997 of Funds offered with a FESL have been designated Class D shares. In
addition, shares of Dean Witter American Value Fund purchased prior to April 30,
1984, shares of Dean Witter Strategist Fund purchased prior to November 8, 1989
and shares of Dean Witter Natural Resource Development Securities Inc. and Dean
Witter Dividend Growth Securities Inc. purchased prior to July 2, 1984 (with
respect to such shares of each Fund, including such proportion of shares
acquired through reinvestment of dividends and capital gains distributions as
the total number of shares acquired prior to each of the preceding dates in this
sentence bears to the total number of shares purchased and owned by the
shareholder of that Fund) have been designated Class D shares. Shares of Dean
Witter Balanced Growth Fund and Dean Witter Balanced Income Fund held prior to
July 28, 1997 have
2
<PAGE>
been designated Class C shares except that shares of Dean Witter Balanced Growth
Fund and Dean Witter Balanced Income Fund held prior to July 28, 1997 that were
acquired in exchange for shares of an investment company offered with a CDSC
have been designated Class B shares and those that were acquired in exchange for
shares of an investment company offered with a FESL have been designated Class A
shares.
IV. THE CONVERSION FEATURE
Class B shares held before May 1, 1997 will convert to Class A shares in
May, 2007, except that Class B shares which are purchased before July 28, 1997
by trusts for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust FSB
("DWTFSB") provides discretionary trustee services will convert to Class A
shares on or about August 29, 1997 (the CDSC will not be applicable to such
shares upon the conversion). In all other instances, Class B shares of each Fund
will automatically convert to Class A shares, based on the relative net asset
values of the shares of the two Classes on the conversion date, which will be
approximately ten (10) years after the date of the original purchase.
Conversions will be effected once a month. The 10 year period will be calculated
from the last day of the month in which the shares were purchased or, in the
case of Class B shares acquired through an exchange or a series of exchanges,
from the last day of the month in which the original Class B shares were
purchased, provided that shares originally purchased before May 1, 1997 will
convert to Class A shares in May, 2007. Except as set forth below, the
conversion of shares purchased on or after May 1, 1997 will take place in the
month following the tenth anniversary of the purchase. There will also be
converted at that time such proportion of Class B shares acquired through
automatic reinvestment of dividends owned by the shareholder as the total number
of his or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a 401(k) plan or other employer-sponsored plan
qualified under Section 401(a) of the Internal Revenue Code (the "Code") and for
which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services Group of
DWR serves as recordkeeper, all Class B shares will convert to Class A shares on
the conversion date of the first shares of a Fund purchased by that plan. In the
case of Class B shares previously exchanged for shares of an "Exchange Fund" (as
such term is defined in the prospectus of each Fund), the period of time the
shares were held in the Exchange Fund (calculated from the last day of the month
in which the Exchange Fund shares were acquired) is excluded from the holding
period for conversion. If those shares are subsequently re-exchanged for Class B
shares of a Fund, the holding period resumes on the last day of the month in
which Class B shares are reacquired.
Effectiveness of the Conversion Feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel to the effect that (i) the conversion of shares does not constitute a
taxable event under the Code; (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion; and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The Conversion Feature may be suspended if the Ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B fees under the applicable Fund's 12b-1 Plan.
V. EXCHANGE PRIVILEGES
Shares of each Class may be exchanged for shares of the same Class of the
other Funds and for shares of certain other investment companies without the
imposition of an exchange fee as described in the prospectuses and statements of
additional information of the Funds. The exchange privilege of each Fund may be
terminated or revised at any time by the Fund upon such notice as may be
required by applicable regulatory agencies as described in each Fund's
prospectus.
VI. VOTING
Each Class shall have exclusive voting rights on any matter that relates
solely to its 12b-1 Plan, except that Class B shareholders will have the right
to vote on any proposed material increase in Class A's expenses, including
payments under the Class A 12b-1 Plan, if such proposal is submitted separately
to Class A shareholders. If the amount of expenses, including payments under the
Class A 12b-1 Plan, is increased materially without the approval of Class B
shareholders, the Fund will establish a new Class A for Class B shareholders
whose shares automatically convert on the same terms as applied to Class A
before the increase. In addition, each Class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one Class
differ from the interests of any other Class.
3
<PAGE>
DEAN WITTER FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
SCHEDULE A
AT JULY 28, 1997
1) Dean Witter American Value Fund
2) Dean Witter Balanced Growth Fund
3) Dean Witter Balanced Income Fund
4) Dean Witter California Tax-Free Income Fund
5) Dean Witter Capital Appreciation Fund
6) Dean Witter Capital Growth Securities
7) Dean Witter Convertible Securities Trust
8) Dean Witter Developing Growth Securities Trust
9) Dean Witter Diversified Income Trust
10) Dean Witter Dividend Growth Securities Inc.
11) Dean Witter European Growth Fund Inc.
12) Dean Witter Federal Securities Trust
13) Dean Witter Financial Services Trust
14) Dean Witter Global Asset Allocation Fund
15) Dean Witter Global Dividend Growth Securities
16) Dean Witter Global Utilities Fund
17) Dean Witter Health Sciences Trust
18) Dean Witter High Yield Securities Inc.
19) Dean Witter Income Builder Fund
20) Dean Witter Information Fund
21) Dean Witter Intermediate Income Securities
22) Dean Witter International SmallCap Fund
23) Dean Witter Japan Fund
24) Dean Witter Managers' Select Fund
25) Dean Witter Market Leader Trust
26) Dean Witter Mid-Cap Growth Fund
27) Dean Witter Natural Resource Development Securities Inc.
28) Dean Witter New York Tax-Free Income Fund
29) Dean Witter Pacific Growth Fund Inc.
30) Dean Witter Precious Metals and Minerals Trust
31) Dean Witter Special Value Fund
32) Dean Witter Strategist Fund
33) Dean Witter Tax-Exempt Securities Trust
34) Dean Witter U.S. Government Securities Trust
35) Dean Witter Utilities Fund
36) Dean Witter Value-Added Market Series/Equity Portfolio
37) Dean Witter World Wide Income Trust
38) Dean Witter World Wide Investment Trust
4
<PAGE>
BY-LAWS
OF
DEAN WITTER INTERMEDIATE INCOME SECURITIES
AMENDED AND RESTATED AS OF OCTOBER 25, 1996
ARTICLE I
DEFINITIONS
The terms "COMMISSION", "DECLARATION", "DISTRIBUTOR", "INVESTMENT
ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SHAREHOLDER", "SHARES",
"TRANSFER AGENT", "TRUST", "TRUST PROPERTY", and "TRUSTEES" have the
respective meanings given them in the Declaration of Trust of Dean Witter
Intermediate Income Securities dated September 1, 1988.
ARTICLE II
OFFICES
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. OTHER OFFICES. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. MEETINGS. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote not less than twenty-five percent
(25%) of all the votes entitled to be cast at such meeting, except to the
extent otherwise required by Section 16(c) of the 1940 Act, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
Such request shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. Except to the extent otherwise
required by Section 16(c) of the 1940 Act, as made applicable to the Trust by
the provisions of Section 2.3 of the Declaration, the Secretary shall inform
such Shareholders of the reasonable estimated cost of preparing and mailing
such notice of the meeting, and upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of Shareholders
held during the preceding twelve months.
SECTION 3.3. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
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SECTION 3.4. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the Shareholders present or represented
by proxy and entitled to vote thereat shall have power to adjourn the meeting
from time to time. Any adjourned meeting may be held as adjourned without
further notice. At any adjourned meeting at which a quorum shall be present,
any business may be transacted as if the meeting had been held as originally
called.
SECTION 3.5. VOTING RIGHTS, PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. VOTE REQUIRED. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. INSPECTION OF BOOKS AND RECORDS. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under the Corporations and Associations Law of
the State of Maryland.
SECTION 3.9. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
SECTION 3.10. PRESENCE AT MEETINGS. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
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ARTICLE IV
TRUSTEES
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any
two (2) Trustees.
SECTION 4.2. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. TELEPHONE MEETINGS. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. ACTION BY TRUSTEES WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. EXPENSES AND FEES. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative
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(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Trustee, officer, employee, or agent of the Trust. The
indemnification shall be against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by him in connection with the action, suit, or proceeding, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person
shall be entitled to indemnification for any liability, whether or not
there is an adjudication of liability, arising by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties
as described in Section 17(h) and (i) of the Investment Company Act of 1940
("disabling conduct"). A person shall be deemed not liable by reason of
disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
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(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the
Trustee, officer, employee or agent of the Trust to repay the advance if it
is not ultimately determined that such person is entitled to be indemnified
by the Trust; and
(3) either, (i) such person provides a security for his undertaking,
or
(ii) the Trust is insured against losses by reason of any
lawful advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who
are neither "interested persons" of the Trust, as defined in
Section 2(a)(19) of the 1940 Act, nor parties to the action, suit
or proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
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The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the President the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. TERM AND REMOVAL AND VACANCIES. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to
the extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. POWER AND DUTIES. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. THE CHAIRMAN. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, shall be a signatory on all Annual and
Semi-Annual Reports as may be sent to shareholders, and he shall perform such
other duties as the Trustees may from time to time prescribe.
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SECTION 6.7. THE PRESIDENT. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the Board
of Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time prescribe.
SECTION 6.8. THE VICE PRESIDENTS. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.
SECTION 6.9. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the President.
SECTION 6.10. THE SECRETARY. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
President may from time to time prescribe.
SECTION 6.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the President, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the President, may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the President, may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
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Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of the
Trust by the President, or a Vice President, and countersigned by the
Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. APPOINTMENT AND DUTIES. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
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all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
Shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. LOCATION OF BOOKS AND RECORDS. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. RECORD DATE. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. SEAL. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. FISCAL YEAR. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
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SECTION 11.5. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter Intermediate Income
Securities, dated September 1, 1988, a copy of which is on file in the office
of the Secretary of the Commonwealth of Massachusetts, provides that the name
Dean Witter Intermediate Income Securities refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally;
and no Trustee, Shareholder, officer, employee or agent of Dean Witter
Intermediate Income Securities shall be held to any personal liability, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise, in connection with the affairs of said Dean
Witter Intermediate Income Securities, but the Trust Estate only shall be
liable.
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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 31st day of May, 1997 by and between Dean Witter
Intermediate Income Securities, an unincorporated business trust organized under
the laws of the Commonwealth of Massachusetts (hereinafter called the "Fund"),
and Dean Witter InterCapital Inc., a Delaware corporation (hereinafter called
the "Investment Manager"):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Fund and, subject to the supervision of the Trustees, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager
shall obtain and evaluate such information and advice relating to the
economy, securities and commodities markets and securities and commodities as
it deems necessary or useful to discharge its duties hereunder; shall
continuously manage the assets of the Fund in a manner consistent with the
investment objectives and policies of the Fund; shall determine the
securities and commodities to be purchased, sold or otherwise disposed of by
the Fund and the timing of such purchases, sales and dispositions; and shall
take such further action, including the placing of purchase and sale orders
on behalf of the Fund, as the Investment Manager shall deem necessary or
appropriate. The Investment Manager shall also furnish to or place at the
disposal of the Fund such of the information, evaluations, analyses and
opinions formulated or obtained by the Investment Manager in the discharge of
its duties as the Fund may, from time to time, reasonably request.
2. The Investment Manager shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Investment
Manager shall be deemed to include persons employed or otherwise retained by
the Investment Manager to furnish statistical and other factual data, advice
regarding economic factors and trends, information with respect to technical
and scientific developments, and such other information, advice and
assistance as the Investment Manager may desire. The Investment Manager
shall, as agent for the Fund, maintain the Fund's records and books of
account (other than those maintained by the Fund's transfer agent, registrar,
custodian and other agencies). All such books and records so maintained shall
be the property of the Fund and, upon request therefor, the Investment
Manager shall surrender to the Fund such of the books and records so
requested.
3. The Fund will, from time to time, furnish or otherwise make available
to the Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the
Investment Manager may reasonably require in order to discharge its duties
and obligations hereunder.
4. The Investment Manager shall bear the cost of rendering the
investment management and supervisory services to be performed by it under
this Agreement, and shall, at its own expense, pay the compensation of the
officers and employees, if any, of the Fund, and provide such office space,
facilities and equipment and such clerical help and bookkeeping services as
the Fund shall reasonably require in the conduct of its
<PAGE>
business. The Investment Manager shall also bear the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses
of the Fund, including without limitation: fees pursuant to any plan of
distribution that the Fund may adopt; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities or commodities and other
property, and any stock transfer or dividend agent or agents appointed by the
Fund; brokers' commissions chargeable to the Fund in connection with
portfolio transactions to which the Fund is a party; all taxes, including
securities or commodities issuance and transfer taxes, and fees payable by
the Fund to federal, state or other governmental agencies; the cost and
expense of engraving or printing certificates representing shares of the
Fund; all costs and expenses in connection with the registration and
maintenance of registration of the Fund and its shares with the Securities
and Exchange Commission and various states and other jurisdictions (including
filing fees and legal fees and disbursements of counsel); the cost and
expense of printing, including typesetting, and distributing prospectuses and
statements of additional information of the Fund and supplements thereto to
the Fund's shareholders; all expenses of shareholders' and Trustees' meetings
and of preparing, printing and mailing proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to the
payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for
pricing of the Fund's shares; charges and expenses of legal counsel,
including counsel to the Trustees of the Fund who are not interested persons
(as defined in the Act) of the Fund or the Investment Manager, and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Trustees) of the Fund which inure to its benefit; extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other
charges and costs of the Fund's operation unless otherwise explicitly
provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the
Investment Manager monthly compensation determined by applying the following
annual rates to the Fund's daily net assets: 0.60% of daily net assets up to
$500 million; 0.50% of the next $250 million; 0.40% of the next $250 million;
and 0.30% of daily net assets over $1 billion. Except as hereinafter set
forth, compensation under this Agreement shall be calculated and accrued
daily and the amounts of the daily accruals shall be paid monthly. Such
calculations shall be made by applying 1/365ths of the annual rates to the
Fund's net assets each day determined as of the close of business on that day
or the last previous business day. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day
of a month, compensation for that part of the month this Agreement is in
effect shall be prorated in a manner consistent with the calculation of the
fees as set forth above.
Subject to the provisions of paragraph 7 hereof, payment of the Investment
Manager's compensation for the preceding month shall be made as promptly as
possible after completion of the computations contemplated by paragraph 7
hereof.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to paragraph 6 hereof, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by state securities laws
or regulations thereunder, as such limitations may be raised or lowered from
time to time, the Investment Manager shall reduce its management fee to the
extent of such excess and, if required, pursuant to any such laws or
regulations, will reimburse the Fund for annual operating expenses in excess
of any expense limitation that may be applicable; provided, however, there
shall be excluded from such expenses the amount of any interest, taxes,
brokerage commissions, distribution fees and extraordinary expenses
(including but not limited to legal claims and liabilities and litigation
costs and any indemnification related thereto) paid or payable by the Fund.
Such reduction, if any, shall be computed and accrued daily, shall be settled
on a monthly basis, and shall be based upon the expense limitation applicable
to the Fund as at the end of the last
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business day of the month. Should two or more such expense limitations be
applicable as at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Investment Manager's
fee shall be applicable.
For purposes of this provision, should any applicable expense limitation be
based upon the gross income of the Fund, such gross income shall include, but
not be limited to, interest on debt securities in the Fund's portfolio accrued
to and including the last day of the Fund's fiscal year, and dividends declared
on equity securities in the Fund's portfolio, the record dates for which fall on
or prior to the last day of such fiscal year, but shall not include gains from
the sale of securities.
8. The Investment Manager will use its best efforts in the supervision
and management of the investment activities of the Fund, but in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations hereunder, the Investment Manager shall not be liable to the
Fund or any of its investors for any error of judgment or mistake of law or
for any act or omission by the Investment Manager or for any losses sustained
by the Fund or its investors.
9. Nothing contained in this Agreement shall prevent the Investment
Manager or any affiliated person of the Investment Manager from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way bind or restrict the Investment Manager or any such
affiliated person from buying, selling or trading any securities or
commodities for their own accounts or for the account of others for whom they
may be acting. Nothing in this Agreement shall limit or restrict the right of
any Trustee, officer or employee of the Investment Manager to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any other business whether of a similar or
dissimilar nature.
10. This Agreement shall remain in effect until April 30, 1999 and from
year to year thereafter provided such continuance is approved at least
annually by the vote of holders of a majority, as defined in the Investment
Company Act of 1940, as amended (the "Act"), of the outstanding voting
securities of the Fund or by the Trustees of the Fund; provided that in
either event such continuance is also approved annually by the vote of a
majority of the Trustees of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party, which vote
must be cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that (a) the Fund may, at any time and without
the payment of any penalty, terminate this Agreement upon thirty days'
written notice to the Investment Manager, either by majority vote of the
Trustees of the Fund or by the vote of a majority of the outstanding voting
securities of the Fund; (b) this Agreement shall immediately terminate in the
event of its assignment (to the extent required by the Act and the rules
thereunder) unless such automatic terminations shall be prevented by an
exemptive order of the Securities and Exchange Commission; and (c) the
Investment Manager may terminate this Agreement without payment of penalty on
thirty days' written notice to the Fund. Any notice under this Agreement
shall be given in writing, addressed and delivered, or mailed post-paid, to
the other party at the principal office of such party.
11. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Agreement to the
requirements of applicable federal laws or regulations, but neither the Fund
nor the Investment Manager shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.
13. The Investment Manager and the Fund each agree that the name "Dean
Witter," which comprises a component of the Fund's name, is a property right
of Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will
only use the name "Dean Witter" as a component of its name and for no other
purpose, (ii) it will not purport to grant to any third party the right to
use the name "Dean Witter" for any purpose, (iii) the Investment Manager or
its parent, Morgan Stanley, Dean Witter, Discover & Co., or any corporate
affiliate of the Investment Manager's parent, may use or grant to others the
right to use the name
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"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, (iv) at the
request of the Investment Manager or its parent, the Fund will take such
action as may be required to provide its consent to the use of the name "Dean
Witter," or any combination or abbreviation thereof, by the Investment
Manager or its parent or any corporate affiliate of the Investment Manager's
parent, or by any person to whom the Investment Manager or its parent or any
corporate affiliate of the Investment Manager's parent shall have granted the
right to such use, and (v) upon the termination of any investment advisory
agreement into which the Investment Manager and the Fund may enter, or upon
termination of affiliation of the Investment Manager with its parent, the
Fund shall, upon request by the Investment Manager or its parent, cease to
use the name "Dean Witter" as a component of its name, and shall not use the
name, or any combination or abbreviation thereof, as a part of its name or
for any other commercial purpose, and shall cause its officers, Trustees and
shareholders to take any and all actions which the Investment Manager or its
parent may request to effect the foregoing and to reconvey to the Investment
Manager or its parent any and all rights to such name.
14. The Declaration of Trust establishing Dean Witter Intermediate Income
Securities, dated September 1, 1988, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Intermediate Income Securities refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally;
and no Trustee, shareholder, officer, employee or agent of Dean Witter
Intermediate Income Securities shall be held to any personal liability, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise, in connection with the affairs of said Dean
Witter Intermediate Income Securities, but the Trust Estate only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
DEAN WITTER INTERMEDIATE INCOME SECURITIES
By:
.......................................
Attest:
...................................
DEAN WITTER INTERCAPITAL INC.
By:
......................................
Attest:
...................................
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DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 31st day of May, 1997 between each of the open-end
investment companies to which Dean Witter InterCapital Inc. acts as investment
manager, that are listed on Schedule A, as may be amended from time to time
(each, a "Fund" and collectively, the "Funds"), and Dean Witter Distributors
Inc., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and it is in the
interest of each Fund to offer its shares for sale continuously, and
WHEREAS, each Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of each Fund's transferable
shares, of $0.01 par value (the "Shares"), to commence on the date listed above,
in order to promote the growth of each Fund and facilitate the distribution of
its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR.
(a) Each Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Fund to sell Shares to the public on the terms set forth
in this Agreement and that Fund's prospectus and the Distributor hereby accepts
such appointment and agrees to act hereunder. Each Fund, during the term of this
Agreement, shall sell Shares to the Distributor upon the terms and conditions
set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from each Fund and to sell Shares as principal to investors, and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in that Fund's prospectus
(the "Prospectus") and statement of additional information included in the
Fund's registration statement (the "Registration Statement") most recently filed
from time to time with the Securities and Exchange Commission (the "SEC") and
effective under the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act or as the Prospectus may be otherwise amended or supplemented and filed
with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of each Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by each Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund; (ii)
pursuant to reinvestment of dividends or capital gains distributions; or (iii)
pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM EACH FUND.
(a) The Distributor shall have the right to buy from each Fund the Shares
needed, but not more than the Shares needed (except for clerical errors in
transmission), to fill unconditional orders for Shares placed with the
Distributor by investors or securities dealers. The price which the Distributor
shall pay for the Shares so purchased from the Fund shall be the net asset
value, determined as set forth in the Prospectus, used in determining the public
offering price on which such orders were based.
(b) The Shares are to be resold by the Distributor at the public offering
price of Shares as set forth in the Prospectus, to investors or to securities
dealers, including DWR, who have entered into selected dealer agreements with
the Distributor upon the terms and conditions set forth in Section 7 hereof
("Selected Dealers").
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(c) Each Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section (f) hereof. Each Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of a Fund, makes it impracticable to sell its Shares.
(d) Each Fund, or any agent of a Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by a Fund; provided, however, that a Fund
will not arbitrarily or without reasonable cause refuse to accept orders for the
purchase of Shares. The Distributor will confirm orders upon their receipt, and
each Fund (or its agent) upon receipt of payment therefor and instructions will
deliver share certificates for such Shares or a statement confirming the
issuance of Shares. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct each Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to each Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES.
(a) Any of the outstanding Shares of a Fund may be tendered for redemption
at any time, and each Fund agrees to redeem its Shares so tendered in accordance
with the applicable provisions set forth in its Prospectus. The price to be paid
to redeem the Shares shall be equal to the net asset value determined as set
forth in the Prospectus less, in the case of a Fund whose Shares are offered
with a contingent deferred sales charge ("CDSC"), any applicable CDSC. Upon any
redemption of Shares the Fund shall pay the total amount of the redemption price
in New York Clearing House funds in accordance with applicable provisions of the
Prospectus.
(b) In the case of a Fund whose Shares are offered with a front-end sales
charge, the redemption by a Fund of any of its Shares purchased by or through
the Distributor will not affect the applicable front-end sales charge secured by
the Distributor or any Selected Dealer in the course of the original sale,
except that if any Shares are tendered for redemption within seven business days
after the date of the confirmation of the original purchase, the right to the
applicable front-end sales charge shall be forfeited by the Distributor and the
Selected Dealer which sold such Shares.
(c) In the case of a Fund whose Shares are offered with a CDSC, the proceeds
of any redemption of Shares shall be paid by each Fund as follows: (i) any
applicable CDSC shall be paid to the Distributor or to the Selected Dealer, or,
when applicable, pursuant to the Rules of the Association of the National
Association of Securities Dealers, Inc. ("NASD"), retained by the Fund and (ii)
the balance shall be paid to the redeeming shareholders, in each case in
accordance with applicable provisions of its Prospectus in New York Clearing
House funds. The Distributor is authorized to direct a Fund to pay directly to
the Selected Dealer any CDSC payable by a Fund to the Distributor in respect of
Shares sold by the Selected Dealer to the redeeming shareholders.
(d) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in each
Fund's Prospectus. The Distributor shall promptly transmit to the transfer agent
of the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(e) The Distributor is authorized, as agent for each Fund, to repurchase
Shares held in a shareholder's account with a Fund for which no share
certificate has been issued, upon the telephonic request of the
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shareholders, or at the discretion of the Distributor. The Distributor shall
promptly transmit to the transfer agent of the Fund, for redemption, all such
orders for repurchase of Shares. Payment for Shares repurchased may be made by a
Fund to the Distributor for the account of the shareholder. The Distributor
shall be responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
(f) Redemption of its Shares or payment by a Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or
during any other period when the SEC, by order, so permits.
(g) With respect to its Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of a Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and to
instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer, and
shall maintain, a record of such orders. The Distributor is further authorized
to obtain from the Fund, and shall maintain, a record of payment made directly
to the Selected Dealer on behalf of the Distributor.
SECTION 5. DUTIES OF THE FUND.
(a) Each Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of its Shares, including one
certified copy, upon request by the Distributor, of all financial statements
prepared by the Fund and examined by independent accountants. Each Fund shall,
at the expense of the Distributor, make available to the Distributor such number
of copies of its Prospectus as the Distributor shall reasonably request.
(b) Each Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) Each Fund shall use its best efforts to pay the filing fees for an
appropriate number of its Shares to be sold under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by a Fund at any
time in its discretion. As provided in Section 8(c) hereof, such filing fees
shall be paid by the Fund. The Distributor shall furnish any information and
other material relating to its affairs and activities as may be required by a
Fund in connection with the sale of its Shares in any state.
(d) Each Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of its annual and
interim reports.
SECTION 6. DUTIES OF THE DISTRIBUTOR.
(a) The Distributor shall sell shares of each Fund through DWR and may sell
shares through other securities dealers and its own Account Executives, and
shall devote reasonable time and effort to promote sales of the Shares, but
shall not be obligated to sell any specific number of Shares. The services of
the Distributor hereunder are not exclusive and it is understood that the
Distributor may act as principal underwriter for other registered investment
companies, so long as the performance of its obligations hereunder is not
impaired thereby. It is also understood that Selected Dealers, including DWR,
may also sell shares for other registered investment companies.
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the appropriate Fund.
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(c) The Distributor agrees that it will at all times comply with the
applicable terms and limitations of the Rules of the Association of the NASD.
SECTION 7. SELECTED DEALERS AGREEMENTS.
(a) The Distributor shall have the right to enter into selected dealer
agreements with Selected Dealers for the sale of Shares. In making agreements
with Selected Dealers, the Distributor shall act only as principal and not as
agent for a Fund. Shares sold to Selected Dealers shall be for resale by such
dealers only at the public offering price set forth in the Prospectus. With
respect to Funds whose Shares are offered with a front-end sales charge, in such
agreement the Distributor shall have the right to fix the portion of the
applicable front-end sales charge which may be allocated to the Selected
Dealers.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by each
Fund, for the confirmation of sales of its Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. PAYMENT OF EXPENSES.
(a) Each Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors/Trustees
of each Fund who are not interested persons (as defined in the 1940 Act) of the
Fund or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and Prospectuses
and all amendments and supplements thereto, and the expense of preparing,
printing, mailing and otherwise distributing prospectuses and statements of
additional information, annual or interim reports or proxy materials to
shareholders.
(b) The Distributor shall bear all expenses incurred by it in connection
with its duties and activities under this Agreement including the payment to
Selected Dealers of any sales commissions, service fees and other expenses for
sales of a Fund's Shares (except such expenses as are specifically undertaken
herein by a Fund) incurred or paid by Selected Dealers, including DWR. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the Distributor or
furnished by it for use by Selected Dealers in connection with the offering of
the Shares for sale. Any expenses of advertising incurred in connection with
such offering will also be the obligation of the Distributor. It is understood
and agreed that, so long as a Fund's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act ("Rule 12b-1 Plan") continues in effect, any expenses
incurred by the Distributor hereunder may be paid in accordance with the terms
of such Rule 12b-1 Plan.
(c) Each Fund shall pay the filing fees, and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying each Fund as a
broker or dealer, in such states of the United States or other jurisdictions as
shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION.
(a) Each Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith) arising by reason of any person acquiring
any Shares, which may be based upon the 1933 Act, or on any other statute or at
common law, on the ground that the Registration Statement or related Prospectus
and Statement of Additional Information, as from time to time amended and
supplemented, or the annual or interim reports to shareholders of a Fund,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in
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conformity with, information furnished to the Fund in connection therewith by or
on behalf of the Distributor; provided, however, that in no case (i) is the
indemnity of a Fund in favor of the Distributor and any such controlling persons
to be deemed to protect the Distributor or any such controlling persons thereof
against any liability to a Fund or its security holders to which the Distributor
or any such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement; or (ii) is a Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or uch controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. Each Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense, of any such suit brought to
enforce any such liability, but if a Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. Each Fund shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Directors/Trustees in
connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless each Fund and
each of its Directors/ Trustees and officers and each person, if any, who
controls the Fund against any loss, liability, claim, damage, or expense
described in the indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to a Fund in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus and Statement of Additional Information, as from time to time
amended, or the annual or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless each Fund and
each Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which arise
as a result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to Section 4(g) hereof and pay the proceeds to, or as directed by, the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance thereof
and receive payment therefor pursuant to Section 3(e) hereof.
(iii) In case any action shall be brought against a Fund or any person so
indemnified by this Section 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to a Fund, and the Fund and each person so indemnified shall have the rights and
duties given to the Distributor, by the provisions of subsection (a) of this
Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifiying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by a Fund on the one hand and the Distributor on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in
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such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of a Fund on the one hand and the Distributor on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by a Fund on the one hand and the Distributor on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by a Fund or the Distributor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each Fund and the Distributor agree that it would not be
just and equitable if contribution were determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such claim. Notwithstanding the
provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages which it has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective with respect to a Fund as of the date first above written
and shall remain in force until April 30, 1998, and thereafter, but only so long
as such continuance is specifically approved at least annually by (i) the Board
of Directors/Trustees of each Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, cast in person or by proxy, and (ii)
a majority of those Directors/Trustees who are not parties to this Agreement or
interested persons of any such party and who have no direct or indirect
financial interest in this Agreement or in the operation of the Fund's Rule
12b-1 Plan or in any agreement related thereto, cast in person at a meeting
called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Directors/ Trustees of a Fund, by a majority of the
Directors/Trustees of a Fund who are not interested persons of the Fund and who
have no direct or indirect financial interest in this Agreement, or by vote of a
majority of the outstanding voting securities of a Fund, or by the Distributor,
on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Directors/Trustees of a Fund, or by the vote of a majority of outstanding voting
securities of a Fund, and (ii) a majority of those Directors/Trustees of a Fund
who are not parties to this Agreement or interested persons of any such party
and who have no direct or indirect financial interest in this Agreement or in
any Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a meeting
called for the purpose of voting on such approval.
SECTION 12. ADDITIONAL FUNDS. If at any time another Fund desires to
appoint the Distributor as its principal underwriter and distributor under this
Agreement, it shall notify the Distributor in writing. If the Distributor is
willing to serve as the Fund's principal underwriter and distributor under this
Agreement, it shall notify the Fund in writing, whereupon such other Fund shall
become a Fund hereunder.
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SECTION 13. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the State of New York, or any of the
provisions herein, conflicts with the applicable provisions of the 1940 Act, the
latter shall control.
SECTION 14. PERSONAL LIABILITY. With respect to any Fund that is organized
as an unincorporated business trust under the laws of the Commonwealth of
Massachusetts, its Declaration of the Trust (each, a "Declaration") is on file
in the office of the Secretary of the Commonwealth of Massachusetts. Each
Declaration provides that the name of the Fund refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of any Fund shall be held to
any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with the
affairs of any Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
ON BEHALF OF THE FUNDS SET FORTH ON
SCHEDULE A, ATTACHED HERETO
By: ..................................
DEAN WITTER DISTRIBUTORS INC.
By: ..................................
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DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
SCHEDULE A
AT MAY 31, 1997
1) Dean Witter American Value Fund
2) Dean Witter Balanced Growth Fund
3) Dean Witter Balanced Income Fund
4) Dean Witter California Tax-Free Income Fund
5) Dean Witter Capital Appreciation Fund
6) Dean Witter Capital Growth Securities
7) Dean Witter Convertible Securities Trust
8) Dean Witter Developing Growth Securities Trust
9) Dean Witter Diversified Income Trust
10) Dean Witter Dividend Growth Securities Inc.
11) Dean Witter European Growth Fund Inc.
12) Dean Witter Federal Securities Trust
13) Dean Witter Financial Services Trust
14) Dean Witter Global Asset Allocation Fund
15) Dean Witter Global Dividend Growth Securities
16) Dean Witter Global Utilities Fund
17) Dean Witter Health Sciences Trust
18) Dean Witter High Yield Securities Inc.
19) Dean Witter Income Builder Fund
20) Dean Witter Information Fund
21) Dean Witter Intermediate Income Securities
22) Dean Witter International SmallCap Fund
23) Dean Witter Japan Fund
24) Dean Witter Managers' Select Fund
25) Dean Witter Market Leader Trust
26) Dean Witter Mid-Cap Growth Fund
27) Dean Witter Natural Resource Development Securities Inc.
28) Dean Witter New York Tax-Free Income Fund
29) Dean Witter Pacific Growth Fund Inc.
30) Dean Witter Precious Metals and Minerals Trust
31) Dean Witter Special Value Fund
32) Dean Witter Strategist Fund
33) Dean Witter Tax-Exempt Securities Trust
34) Dean Witter U.S. Government Securities Trust
35) Dean Witter Utilities Fund
36) Dean Witter Value-Added Market Series/Equity Portfolio
37) Dean Witter World Wide Income Trust
38) Dean Witter World Wide Investment Trust
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DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 28th day of July, 1997 between each of the
open-end investment companies to which Dean Witter InterCapital Inc. acts as
investment manager, that are listed on Schedule A, as may be amended from time
to time (each, a "Fund" and collectively, the "Funds"), and Dean Witter
Distributors Inc., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and it is in the
interest of each Fund to offer its shares for sale continuously, and
WHEREAS, each Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of each Fund's transferable
shares, of $0.01 par value (the "Shares"), to commence on the date listed above,
in order to promote the growth of each Fund and facilitate the distribution of
its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR.
(a) Each Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Fund to sell Shares to the public on the terms set forth
in this Agreement and that Fund's prospectus and the Distributor hereby accepts
such appointment and agrees to act hereunder. Each Fund, during the term of this
Agreement, shall sell Shares to the Distributor upon the terms and conditions
set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from each Fund and to sell Shares as principal to investors, and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in that Fund's prospectus
(the "Prospectus") and statement of additional information included in the
Fund's registration statement (the "Registration Statement") most recently filed
from time to time with the Securities and Exchange Commission (the "SEC") and
effective under the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act or as the Prospectus may be otherwise amended or supplemented and filed
with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of each Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by each Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund; (ii)
pursuant to reinvestment of dividends or capital gains distributions; or (iii)
pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM EACH FUND. The Shares are offered in
four classes (each, a "Class"), as described in the Prospectus, as amended or
supplemented from time to time.
(a) The Distributor shall have the right to buy from each Fund the Shares of
the particular class needed, but not more than the Shares needed (except for
clerical errors in transmission), to fill unconditional orders for Shares of the
applicable class placed with the Distributor by investors or securities dealers.
The price which the Distributor shall pay for the Shares so purchased from the
Fund shall be the net asset value, determined as set forth in the Prospectus,
used in determining the public offering price on which such orders were based.
(b) The Shares are to be resold by the Distributor at the public offering
price of Shares of the applicable class as set forth in the Prospectus, to
investors or to securities dealers, including DWR, who
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have entered into selected dealer agreements with the Distributor upon the terms
and conditions set forth in Section 7 hereof ("Selected Dealers").
(c) Each Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(f) hereof. Each Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of a Fund, makes it impracticable to sell its Shares.
(d) Each Fund, or any agent of a Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by a Fund; provided, however, that a Fund
will not arbitrarily or without reasonable cause refuse to accept orders for the
purchase of Shares. The Distributor will confirm orders upon their receipt, and
each Fund (or its agent) upon receipt of payment therefor and instructions will
deliver share certificates for such Shares or a statement confirming the
issuance of Shares. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct each Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to each Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES.
(a) Any of the outstanding Shares of a Fund may be tendered for redemption
at any time, and each Fund agrees to redeem its Shares so tendered in accordance
with the applicable provisions set forth in its Prospectus. The price to be paid
to redeem the Shares shall be equal to the net asset value determined as set
forth in the Prospectus less any applicable contingent deferred sales charge
("CDSC"). Upon any redemption of Shares the Fund shall pay the total amount of
the redemption price in New York Clearing House funds in accordance with
applicable provisions of the Prospectus.
(b) The redemption by a Fund of any of its Class A Shares purchased by or
through the Distributor will not affect the applicable front-end sales charge
secured by the Distributor or any Selected Dealer in the course of the original
sale, except that if any Class A Shares are tendered for redemption within seven
business days after the date of the confirmation of the original purchase, the
right to the applicable front-end sales charge shall be forfeited by the
Distributor and the Selected Dealer which sold such Shares.
(c) The proceeds of any redemption of Class A, Class B or Class C Shares
shall be paid by each Fund as follows: (i) any applicable CDSC shall be paid to
the Distributor or to the Selected Dealer, or, when applicable, pursuant to the
Rules of the Association of the National Association of Securities Dealers, Inc.
("NASD"), retained by the Fund and (ii) the balance shall be paid to the
redeeming shareholders, in each case in accordance with applicable provisions of
its Prospectus in New York Clearing House funds. The Distributor is authorized
to direct a Fund to pay directly to the Selected Dealer any CDSC payable by a
Fund to the Distributor in respect of Class A, Class B, or Class C Shares sold
by the Selected Dealer to the redeeming shareholders.
(d) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in each
Fund's Prospectus. The Distributor shall promptly transmit to the transfer agent
of the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
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<PAGE>
(e) The Distributor is authorized, as agent for each Fund, to repurchase
Shares held in a shareholder's account with a Fund for which no share
certificate has been issued, upon the telephonic request of the shareholders, or
at the discretion of the Distributor. The Distributor shall promptly transmit to
the transfer agent of the Fund, for redemption, all such orders for repurchase
of Shares. Payment for Shares repurchased may be made by a Fund to the
Distributor for the account of the shareholder. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(f) Redemption of its Shares or payment by a Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or
during any other period when the SEC, by order, so permits.
(g) With respect to its Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of a Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and to
instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer, and
shall maintain, a record of such orders. The Distributor is further authorized
to obtain from the Fund, and shall maintain, a record of payment made directly
to the Selected Dealer on behalf of the Distributor.
SECTION 5. DUTIES OF THE FUND.
(a) Each Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of its Shares, including one
certified copy, upon request by the Distributor, of all financial statements
prepared by the Fund and examined by independent accountants. Each Fund shall,
at the expense of the Distributor, make available to the Distributor such number
of copies of its Prospectus as the Distributor shall reasonably request.
(b) Each Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) Each Fund shall use its best efforts to pay the filing fees for an
appropriate number of its Shares to be sold under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by a Fund at any
time in its discretion. As provided in Section 8(c) hereof, such filing fees
shall be paid by the Fund. The Distributor shall furnish any information and
other material relating to its affairs and activities as may be required by a
Fund in connection with the sale of its Shares in any state.
(d) Each Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of its annual and
interim reports.
SECTION 6. DUTIES OF THE DISTRIBUTOR.
(a) The Distributor shall sell shares of each Fund through DWR and may sell
shares through other securities dealers and its own Account Executives, and
shall devote reasonable time and effort to promote sales of the Shares, but
shall not be obligated to sell any specific number of Shares. The services of
the Distributor hereunder are not exclusive and it is understood that the
Distributor may act as principal underwriter for other registered investment
companies, so long as the performance of its obligations hereunder is not
impaired thereby. It is also understood that Selected Dealers, including DWR,
may also sell shares for other registered investment companies.
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<PAGE>
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the appropriate Fund.
(c) The Distributor agrees that it will at all times comply with the
applicable terms and limitations of the Rules of the Association of the NASD.
SECTION 7. SELECTED DEALERS AGREEMENTS.
(a) The Distributor shall have the right to enter into selected dealer
agreements with Selected Dealers for the sale of Shares. In making agreements
with Selected Dealers, the Distributor shall act only as principal and not as
agent for a Fund. Shares sold to Selected Dealers shall be for resale by such
dealers only at the public offering price set forth in the Prospectus. With
respect to Class A Shares, in such agreement the Distributor shall have the
right to fix the portion of the applicable front-end sales charge which may be
allocated to the Selected Dealers.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by each
Fund, for the confirmation of sales of its Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. PAYMENT OF EXPENSES.
(a) Each Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors/Trustees
of each Fund who are not interested persons (as defined in the 1940 Act) of the
Fund or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and Prospectuses
and all amendments and supplements thereto, and the expense of preparing,
printing, mailing and otherwise distributing prospectuses and statements of
additional information, annual or interim reports or proxy materials to
shareholders.
(b) The Distributor shall bear all expenses incurred by it in connection
with its duties and activities under this Agreement including the payment to
Selected Dealers of any sales commissions, service fees and other expenses for
sales of a Fund's Shares (except such expenses as are specifically undertaken
herein by a Fund) incurred or paid by Selected Dealers, including DWR. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the Distributor or
furnished by it for use by Selected Dealers in connection with the offering of
the Shares for sale. Any expenses of advertising incurred in connection with
such offering will also be the obligation of the Distributor. It is understood
and agreed that, so long as a Fund's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act ("Rule 12b-1 Plan") continues in effect, any expenses
incurred by the Distributor hereunder may be paid in accordance with the terms
of such Rule 12b-1 Plan.
(c) Each Fund shall pay the filing fees, and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying each Fund as a
broker or dealer, in such states of the United States or other jurisdictions as
shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION.
(a) Each Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith) arising by reason of any person acquiring
any Shares, which may be based upon the 1933 Act, or on any other statute or at
common law, on the ground that the Registration Statement or related Prospectus
and Statement of Additional Information, as from time to time amended
4
<PAGE>
and supplemented, or the annual or interim reports to shareholders of a Fund,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of a Fund in favor of the Distributor and any such
controlling persons to be deemed to protect the Distributor or any such
controlling persons thereof against any liability to a Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement; or (ii) is a Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or any such controlling persons, as the case may be, shall have
notified the Fund in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Distributor or uch controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. Each Fund will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense,
of any such suit brought to enforce any such liability, but if a Fund elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Fund does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
Each Fund shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or
Directors/Trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless each Fund and each
of its Directors/ Trustees and officers and each person, if any, who controls
the Fund against any loss, liability, claim, damage, or expense described in the
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to a Fund in writing by or on behalf of the Distributor
for use in connection with the Registration Statement or related Prospectus and
Statement of Additional Information, as from time to time amended, or the annual
or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless each Fund and
each Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which arise
as a result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to Section 4(g) hereof and pay the proceeds to, or as directed by, the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance thereof
and receive payment therefor pursuant to Section 3(e) hereof.
(iii) In case any action shall be brought against a Fund or any person
so indemnified by this Section 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to a Fund, and the Fund and each person so indemnified shall have the rights and
duties given to the Distributor, by the provisions of subsection (a) of this
Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifiying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by a Fund on the one hand and the Distributor on the other
from the
5
<PAGE>
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of a Fund on the one hand and the Distributor on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by a Fund on the one hand and the Distributor on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by a Fund or the Distributor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each Fund and the Distributor agree that it would not be
just and equitable ifcontribution were determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such claim. Notwithstanding the
provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages which it has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective with respect to a Fund as of the date first above written
and shall remain in force until April 30, 1998, and thereafter, but only so long
as such continuance is specifically approved at least annually by (i) the Board
of Directors/Trustees of each Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, cast in person or by proxy, and (ii)
a majority of those Directors/Trustees who are not parties to this Agreement or
interested persons of any such party and who have no direct or indirect
financial interest in this Agreement or in the operation of the Fund's Rule
12b-1 Plan or in any agreement related thereto, cast in person at a meeting
called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Directors/ Trustees of a Fund, by a majority of the
Directors/Trustees of a Fund who are not interested persons of the Fund and who
have no direct or indirect financial interest in this Agreement, or by vote of a
majority of the outstanding voting securities of a Fund, or by the Distributor,
on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Directors/Trustees of a Fund, or by the vote of a majority of outstanding voting
securities of a Fund, and (ii) a majority of those Directors/Trustees of a Fund
who are not parties to this Agreement or interested persons of any such party
and who have no direct or indirect financial interest in this Agreement or in
any Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a meeting
called for the purpose of voting on such approval.
SECTION 12. ADDITIONAL FUNDS. If at any time another Fund desires to
appoint the Distributor as its principal underwriter and distributor under this
Agreement, it shall notify the Distributor in writing. If the Distributor is
willing to serve as the Fund's principal underwriter and distributor under this
Agreement, it shall notify the Fund in writing, whereupon such other Fund shall
become a Fund hereunder.
SECTION 13. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the
6
<PAGE>
State of New York, or any of the provisions herein, conflicts with the
applicable provisions of the 1940 Act, the latter shall control.
SECTION 14. PERSONAL LIABILITY. With respect to any Fund that is organized
as an unincorporated business trust under the laws of the Commonwealth of
Massachusetts, its Declaration of the Trust (each, a "Declaration") is on file
in the office of the Secretary of the Commonwealth of Massachusetts. Each
Declaration provides that the name of the Fund refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of any Fund shall be held to
any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with the
affairs of any Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
ON BEHALF OF THE FUNDS SET FORTH ON
SCHEDULE A, ATTACHED HERETO
By: ..................................
DEAN WITTER DISTRIBUTORS INC.
By: ..................................
7
<PAGE>
DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
SCHEDULE A
AT JULY 28, 1997
1) Dean Witter American Value Fund
2) Dean Witter Balanced Growth Fund
3) Dean Witter Balanced Income Fund
4) Dean Witter California Tax-Free Income Fund
5) Dean Witter Capital Appreciation Fund
6) Dean Witter Capital Growth Securities
7) Dean Witter Convertible Securities Trust
8) Dean Witter Developing Growth Securities Trust
9) Dean Witter Diversified Income Trust
10) Dean Witter Dividend Growth Securities Inc.
11) Dean Witter European Growth Fund Inc.
12) Dean Witter Federal Securities Trust
13) Dean Witter Financial Services Trust
14) Dean Witter Global Asset Allocation Fund
15) Dean Witter Global Dividend Growth Securities
16) Dean Witter Global Utilities Fund
17) Dean Witter Health Sciences Trust
18) Dean Witter High Yield Securities Inc.
19) Dean Witter Income Builder Fund
20) Dean Witter Information Fund
21) Dean Witter Intermediate Income Securities
22) Dean Witter International SmallCap Fund
23) Dean Witter Japan Fund
24) Dean Witter Managers' Select Fund
25) Dean Witter Market Leader Trust
26) Dean Witter Mid-Cap Growth Fund
27) Dean Witter Natural Resource Development Securities Inc.
28) Dean Witter New York Tax-Free Income Fund
29) Dean Witter Pacific Growth Fund Inc.
30) Dean Witter Precious Metals and Minerals Trust
31) Dean Witter Special Value Fund
32) Dean Witter Strategist Fund
33) Dean Witter Tax-Exempt Securities Trust
34) Dean Witter U.S. Government Securities Trust
35) Dean Witter Utilities Fund
36) Dean Witter Value-Added Market Series/Equity Portfolio
37) Dean Witter World Wide Income Trust
38) Dean Witter World Wide Investment Trust
8
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 10 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
October 11, 1996, relating to the financial statements and financial
highlights of Dean Witter Intermediate Income Securities, which appears in
such Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the references to us under the
headings "Independent Accountants" and "Experts" in such Statement of
Additional Information and to the reference to us under the heading
"Financial Highlights" in such Prospectus.
/s/ Price Waterhouse LLP
- ----------------------------
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
July 24, 1997
<PAGE>
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER INTERMEDIATE INCOME SECURITIES
WHEREAS, Dean Witter Intermediate Income Securities (the "Fund") is
engaged in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, on October 26, 1995, the Fund most recently amended and restated
a Plan of Distribution pursuant to Rule 12b-1 under the Act which had
initially been adopted on April 28, 1989, and the Trustees then determined
that there was a reasonable likelihood that adoption of the Plan of
Distribution, as then amended and restated, would benefit the Fund and its
shareholders; and
WHEREAS, the Trustees believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to
continue to benefit the Fund and its shareholders; and
WHEREAS, on April 28, 1989, the Fund and Dean Witter Reynolds Inc. ("DWR")
entered into a Distribution Agreement pursuant to which the Fund employed DWR
as distributor of the Fund's shares; and
WHEREAS, on January 4, 1993, the Fund and DWR substituted Dean Witter
Distributors Inc. (the "Distributor") in the place of DWR as distributor of
the Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will continue
to promote the sale of Fund shares and provide personal services to Fund
shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor entered into a separate Distribution
Agreement dated as of July 28, 1997 (which superseded a Distribution
Agreement dated May 31, 1997, which Agreement in turn superseded an Agreement
dated June 30, 1993), pursuant to which the Fund has employed the Distributor
in such capacity during the continuous offering of shares of the Fund.
NOW, THEREFORE, the Fund hereby amends the Plan of Distribution previously
adopted and amended and restated, and the Distributor hereby agrees to the
terms of said Plan of Distribution (the "Plan"), as amended herein, in
accordance with Rule 12b-1 under the Act on the following terms and
conditions with respect to the Class A, Class B and Class C shares of the
Fund:
1(a)(i). With respect to Class A and Class C shares of the Fund, the
Distributor hereby undertakes to directly bear all costs of rendering the
services to be performed by it under this Plan and under the Distribution
Agreement, except for those specific expenses that the Trustees determine to
reimburse as hereinafter set forth.
1(a)(ii). The Fund is hereby authorized to reimburse the Distributor, DWR,
its affiliates and other broker-dealers for distribution expenses incurred by
them specifically on behalf of Class A and Class C shares of the Fund.
Reimbursement will be made through payments at the end of each month. The
amount of each monthly payment may in no event exceed an amount equal to a
payment at the annual rate of 0.25%, in the case of Class A, and 0.85%, in
the case of Class C, of the average net assets of the respective Class during
the month. With respect to Class A, in the case of all expenses other than
expenses representing the service fee and, with respect to Class C, in the
case of all expenses other than expenses representing a gross sales credit or
a residual to account executives, such amounts shall be determined at the
beginning of each calendar quarter by the Trustees, including a majority of
the Trustees who are not "interested persons" of the Fund, as defined in the
Act. Expenses representing the service fee (for Class A) or a gross sales
credit or a residual to account executives (for Class C) may be reimbursed
without prior determination. In the event that the Distributor proposes that
monies shall be reimbursed for other than such expenses, then in making the
quarterly determinations of the amounts that may be expended by the Fund, the
Distributor shall provide, and the Trustees shall review, a quarterly budget
of projected distribution expenses to be incurred by the Distributor, DWR,
its affiliates or other broker-dealers on behalf of the Fund together with a
report explaining the purposes and anticipated benefits of incurring
<PAGE>
such expenses. The Trustees shall determine the particular expenses, and the
portion thereof that may be borne by the Fund, and in making such
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares directly
or through DWR, its affiliates or other broker-dealers.
1(a)(iii). If, as of the end of any calendar year, the actual expenses
incurred by the Distributor, DWR, its affiliates and other broker-dealers on
behalf of Class A or Class C shares of the Fund (including accrued expenses
and amounts reserved for incentive compensation and bonuses) are less than
the amount of payments made by such Class pursuant to this Plan, the
Distributor shall promptly make appropriate reimbursement to the appropriate
Class. If, however, as of the end of any calendar year, the actual expenses
(other than expenses representing a gross sales credit) of the Distributor,
DWR, its affiliates and other broker-dealers are greater than the amount of
payments made by Class A or Class C shares of the Fund pursuant to this Plan,
such Class will not reimburse the Distributor, DWR, its affiliates or other
broker-dealers for such expenses through payments accrued pursuant to this
Plan in the subsequent fiscal year. Expenses representing a gross sales
credit may be reimbursed in the subsequent calendar year.
1(b). With respect to Class B shares of the Fund, the Fund shall pay to
the Distributor, as the distributor of securities of which the Fund is the
issuer, compensation for distribution of its Class B shares at the rate of
the lesser of (i) 0.85% per annum of the average daily aggregate sales of the
Fund's Class B shares since the Fund's inception (not including reinvestment
of dividends and capital gains distributions from the Fund) less the average
daily aggregate net asset value of the Fund's Class B shares redeemed since
the Fund's inception upon which a contingent deferred sales charge has been
imposed or upon which such charge has been waived, or (ii) 0.85% per annum of
the average daily net assets of Class B. Such compensation shall be
calculated and accrued daily and paid monthly or at such other intervals as
the Trustees shall determine.
The Distributor may direct that all or any part of the amounts receivable
by it under this Plan be paid directly to DWR, its affiliates or other
broker-dealers who provide distribution and shareholder services. All
payments made hereunder pursuant to the Plan shall be in accordance with the
terms and limitations of the Rules of the Association of the National
Association of Securities Dealers, Inc.
2. With respect to expenses incurred by each Class, the amount set forth
in paragraph 1 of this Plan shall be paid for services of the Distributor,
DWR its affiliates and other broker-dealers it may select in connection with
the distribution of the Fund's shares, including personal services to
shareholders with respect to their holdings of Fund shares, and may be spend
by the Distributor, DWR, its affiliates and such broker-dealers on any
activities or expenses related to the distribution of the Fund's shares or
services to shareholders, including, but not limited to: compensation to, and
expenses of, account executives or other employees of the Distributor, DWR,
its affiliates or other broker-dealers; overhead and other branch office
distribution-related expenses and telephone expenses of persons who engage in
or support distribution of shares or who provide personal services to
shareholders; printing of prospectuses and reports for other than existing
shareholders; preparation, printing and distribution of sales literature and
advertising materials and, with respect to Class B, opportunity costs in
incurring the foregoing expenses (which may be calculated as a carrying
charge on the excess of the distribution expenses incurred by the
Distributor, DWR, its affiliates or other broker-dealers over distribution
revenues received by them, such excess being hereinafter referred to as
"carryover expenses"). The overhead and other branch office
distribution-related expenses referred to in this paragraph 2 may include:
(a) the expenses operating the branch offices of the Distributor or other
broker-dealers, including DWR, in connection with the sale of the Fund
shares, including lease costs, the salaries and employee benefits of
operations and sales support personnel, utility costs, communications costs
and the costs of stationery and supplies; (b) the costs of client sales
seminars; (c) travel expenses of mutual fund sales coordinators to promote
the sale of Fund shares; and (d) other expenses relating to branch promotion
of Fund sales. Payments may also be made with respect to distribution
expenses incurred in connection with the distribution of shares, including
personal services to shareholders with respect to holdings of such shares, of
an investment company whose assets are acquired by the Fund in a tax-free
reorganization, provided that, with respect to Class B, carryover expenses as
a percentage of Fund assets will not be materially increased thereby. It is
2
<PAGE>
contemplated that, with respect to Class A shares, the entire fee set forth
in paragraph 1(a) will be characterized as a service fee within the meaning
of the National Association of Securities Dealers, Inc. guidelines and that,
with respect to Class B shares, payments at the annual rate of 0.20% will be
so characterized and that, with respect to Class C shares, payments at the
annual rate of 0.25% will be so characterized.
3. This Plan, as amended and restated, shall not take effect with respect
to any particular Class until it has been approved, together with any related
agreements, by votes of a majority of the Board of Trustees of the Fund and
of the Trustees who are not "interested persons" of the Fund (as defined in
the Act) and have no direct financial interest in the operation of this Plan
or any agreements related to it (the "Rule 12b-1 Trustees"), cast in person
at a meeting (or meetings) called for the purpose of voting on this Plan and
such related agreements.
4. This Plan shall continue in effect with respect to each Class until
April 30, 1998, and from year to year thereafter, provided such continuance
is specifically approved at least annually in the manner provided for
approval of this Plan in paragraph 3 hereof.
5. The Distributor shall provide to the Trustees of the Fund and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made. In this
regard, the Trustees shall request the Distributor to specify such items of
expenses as the Trustees deem appropriate. The Trustees shall consider such
items as they deem relevant in making the determinations required by
paragraph 4 hereof.
6. This Plan may be terminated at any time with respect to a Class by vote
of a majority of the Rule 12b-1 Trustees, or by vote of a majority of the
outstanding voting securities of the Fund. The Plan may remain in effect with
the respect to a particular Class even if the Plan has been terminated in
accordance with this paragraph 6 with respect to any other Class. In the
event of any such termination or in the event of nonrenewal, the Fund shall
have no obligation to pay expenses which have been incurred by the
Distributor, DWR, its affiliates or other broker-dealers in excess of
payments made by the Fund pursuant to this Plan. However, with respect to
Class B, this shall not preclude consideration by the Trustees of the manner
in which such excess expenses shall be treated.
7. This Plan may not be amended with respect to any Class to increase
materially the amount each Class may spend for distribution provided in
paragraph 1 hereof unless such amendment is approved by a vote of at least a
majority (as defined in the Act) of the outstanding voting securities of that
Class, and no material amendment to the Plan shall be made unless approved in
the manner provided for approval in paragraph 3 hereof. Class B shares will
have the right to vote on any material increase in the fee set forth in
paragraph 1(a) above affecting Class A shares.
8. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Trustees who are not interested persons.
9. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 5 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible
place.
10. The Declaration of Trust establishing Dean Witter Intermediate Income
Securities, dated September 1, 1988, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Intermediate Income Securities refers to the Trustees under the
Declaration collectively as Trustees but not as individuals or personally;
and no Trustee, shareholder, officer, employee or agent of Dean Witter
Intermediate Income Securities shall be held to any personal liability, nor
shall resort be had to their private property for this satisfaction of any
obligation or claim or otherwise, in connection with the affairs of said Dean
Witter Intermediate Income Securities, but the Trust Estate only shall be
liable.
3
<PAGE>
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
amended and restated Plan of Distribution as of the day and year set forth
below in New York, New York.
Date: April 28, 1989
As Amended on January 4, 1993,
April 28, 1993, October 26, 1995
and July 28, 1997
Attest: DEAN WITTER INTERMEDIATE INCOME
SECURITIES
.................................. By:................................
Attest: DEAN WITTER DISTRIBUTORS INC.
.................................. By:................................
Attest: DEAN WITTER REYNOLDS INC.
.................................. By:................................
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 182,438,199
<INVESTMENTS-AT-VALUE> 180,714,247
<RECEIVABLES> 3,290,425
<ASSETS-OTHER> 55,515
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 184,060,187
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 851,222
<TOTAL-LIABILITIES> 851,222
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 194,279,890
<SHARES-COMMON-STOCK> 19,179,664
<SHARES-COMMON-PRIOR> 22,243,950
<ACCUMULATED-NII-CURRENT> 32,835
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9,379,808)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,723,952)
<NET-ASSETS> 183,208,965
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,973,782
<OTHER-INCOME> 0
<EXPENSES-NET> (1,855,081)
<NET-INVESTMENT-INCOME> 5,118,701
<REALIZED-GAINS-CURRENT> (732,773)
<APPREC-INCREASE-CURRENT> 4,333,699
<NET-CHANGE-FROM-OPS> 8,719,627
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,120,761)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,145,944
<NUMBER-OF-SHARES-REDEEMED> (6,505,010)
<SHARES-REINVESTED> 294,780
<NET-CHANGE-IN-ASSETS> (25,701,916)
<ACCUMULATED-NII-PRIOR> 34,895
<ACCUMULATED-GAINS-PRIOR> (8,647,035)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 584,312
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,855,081
<AVERAGE-NET-ASSETS> 196,384,701
<PER-SHARE-NAV-BEGIN> 9.39
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> .16
<PER-SHARE-DIVIDEND> (.29)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.55
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
DEAN WITTER FUNDS
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3
INTRODUCTION
This plan (the "Plan") is adopted pursuant to Rule 18f-3(d) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and will be
effective as of July 28, 1997. The Plan relates to shares of the open-end
investment companies to which Dean Witter InterCapital Inc. acts as investment
manager, that are listed on Schedule A, as may be amended from time to time
(each, a "Fund" and collectively, the "Funds"). The Funds are distributed
pursuant to a system (the "Multiple Class System") in which each class of shares
(each, a "Class" and collectively, the "Classes") of a Fund represents a pro
rata interest in the same portfolio of investments of the Fund and differs only
to the extent outlined below.
I. DISTRIBUTION ARRANGEMENTS
One or more Classes of shares of the Funds are offered for purchase by
investors with the sales load structures described below. In addition, pursuant
to Rule 12b-1 under the 1940 Act, the Funds have each adopted a Plan of
Distribution (the "12b-1 Plan") under which shares of certain Classes are
subject to the service and/or distribution fees ("12b-1 fees") described below.
1. CLASS A SHARES
Class A shares are offered with a front-end sales load ("FESL"). The
schedule of sales charges applicable to a Fund and the circumstances under which
the sales charges are subject to reduction are set forth in each Fund's current
prospectus. As stated in each Fund's current prospectus, Class A shares may be
purchased at net asset value (without a FESL): (i) in the case of certain large
purchases of such shares; and (ii) by certain limited categories of investors,
in each case, under the circumstances and conditions set forth in each Fund's
current prospectus. Class A shares purchased at net asset value may be subject
to a contingent deferred sales charge ("CDSC") on redemptions made within one
year of purchase. Further information relating to the CDSC, including the manner
in which it is calculated, is set forth in paragraph 6 below. Class A shares are
also subject to payments under each Fund's 12b-1 Plan to reimburse Dean Witter
Distributors Inc., Dean Witter Reynolds Inc. ("DWR"), its affiliates and other
broker-dealers for distribution expenses incurred by them specifically on behalf
of the Class, assessed at an annual rate of up to 0.25% of average daily net
assets. The entire amount of the 12b-1 fee represents a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD") guidelines.
2. CLASS B SHARES
Class B shares are offered without a FESL, but will in most cases be subject
to a six-year declining CDSC which is calculated in the manner set forth in
paragraph 6 below. Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a three-year declining CDSC
which is calculated in the manner set forth in paragraph 6 below. The schedule
of CDSC charges applicable to each Fund is set forth in each Fund's current
prospectus. With the exception of certain of the Funds which have a different
formula described below (Dean Witter American Value Fund, Dean Witter Natural
Resource Development Securities Inc., Dean Witter Strategist Fund and Dean
Witter Dividend Growth Securities Inc.)(1), Class B
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(1)The payments under the 12b-1 Plan for each of Dean Witter American Value
Fund, Dean Witter Natural Resource Development Securities Inc. and Dean Witter
Dividend Growth Securities Inc. are assessed at the annual rate of 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
shares since the inception of the Fund's Plan (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares redeemed since the Plan's inception
upon which a contingent deferred sales charge has been imposed or waived, or (b)
the average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since inception of the Plan. The payments under the
12b-1 Plan for the Dean Witter Strategist Fund are assessed at the annual rate
of: (i) 1% of the lesser of (a) the average daily aggregate gross sales of the
Fund's Class B shares since the effectiveness of the first amendment of the Plan
on November 8, 1989 (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the effectiveness of the first amended Plan, upon
which a contingent deferred sales charge has been imposed or waived, or (b) the
average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since the effectiveness of the first amended Plan; plus
(ii) 0.25% of the average daily net assets of Class B attributable to shares
issued, net of related shares redeemed, prior to effectiveness of the first
amended Plan.
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shares are also subject to a fee under each Fund's respective 12b-1 Plan,
assessed at the annual rate of up to 1.0% of either: (a) the lesser of (i) the
average daily aggregate gross sales of the Fund's Class B shares since the
inception of the Fund (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the Fund's inception upon which a CDSC has been
imposed or waived, or (ii) the average daily net assets of Class B; or (b) the
average daily net assets of Class B. A portion of the 12b-1 fee equal to up to
0.25% of the Fund's average daily net assets is characterized as a service fee
within the meaning of the NASD guidelines and the remaining portion of the 12b-1
fee, if any, is characterized as an asset-based sales charge. Also, Class B
shares have a conversion feature ("Conversion Feature") under which such shares
convert to Class A shares after a certain holding period. Details of the
Conversion Feature are set forth in Section IV below.
3. CLASS C SHARES
Class C shares are offered without imposition of a FESL, but will in most
cases be subject to a CDSC of 1.0% on redemptions made within one year after
purchase. Further information relating to the CDSC is set forth in paragraph 6
below. In addition, Class C shares, under each Fund's 12b-1 Plan, are subject to
12b-1 payments to reimburse Dean Witter Distributors Inc., DWR, its affiliates
and other broker-dealers for distribution expenses incurred by them specifically
on behalf of the Class, assessed at the annual rate of up to 1.0% of the average
daily net assets of the Class. A portion of the 12b-1 fee equal to up to 0.25%
of the Fund's average daily net assets is characterized as a service fee within
the meaning of NASD guidelines. Unlike Class B shares, Class C shares do not
have the Conversion Feature.
4. CLASS D SHARES
Class D shares are offered without imposition of a FESL, CDSC or a 12b-1 fee
for purchases of Fund shares by (i) investors meeting an initial minimum
investment requirement and (ii) certain other limited categories of investors,
in each case, as may be approved by the Boards of Directors/Trustees of the
Funds and as disclosed in each Fund's current prospectus.
5. ADDITIONAL CLASSES OF SHARES
The Boards of Directors/Trustees of the Funds have the authority to create
additional Classes, or change existing Classes, from time to time, in accordance
with Rule 18f-3 under the 1940 Act.
6. CALCULATION OF THE CDSC
Any applicable CDSC is calculated based upon the lesser of net asset value
of the shares at the time of purchase or at the time of redemption. The CDSC
does not apply to amounts representing an increase in share value due to capital
appreciation and shares acquired through the reinvestment of dividends or
capital gains distributions. The CDSC schedule applicable to a Fund and the
circumstances in which the CDSC is subject to waiver are set forth in each
Fund's prospectus.
II. EXPENSE ALLOCATIONS
Expenses incurred by a Fund are allocated among the various Classes of
shares pro rata based on the net assets of the Fund attributable to each Class,
except that 12b-1 fees relating to a particular Class are allocated directly to
that Class. In addition, other expenses associated with a particular Class
(except advisory or custodial fees), may be allocated directly to that Class,
provided that such expenses are reasonably identified as specifically
attributable to that Class and the direct allocation to that Class is approved
by the Fund's Board of Directors/Trustees.
III. CLASS DESIGNATION
All shares of the Funds held prior to July 28, 1997 (other than the shares
held by certain employee benefit plans established by DWR and its affiliate, SPS
Transaction Services, Inc., shares of Funds offered with a FESL, and shares of
Dean Witter Balanced Growth Fund and Dean Witter Balanced Income Fund) have been
designated Class B shares. Shares held prior to July 28, 1997 by such employee
benefit plans have been designated Class D shares. Shares held prior to July 28,
1997 of Funds offered with a FESL have been designated Class D shares. In
addition, shares of Dean Witter American Value Fund purchased prior to April 30,
1984, shares of Dean Witter Strategist Fund purchased prior to November 8, 1989
and shares of Dean Witter Natural Resource Development Securities Inc. and Dean
Witter Dividend Growth Securities Inc. purchased prior to July 2, 1984 (with
respect to such shares of each Fund, including such proportion of shares
acquired through reinvestment of dividends and capital gains distributions as
the total number of shares acquired prior to each of the preceding dates in this
sentence bears to the total number of shares purchased and owned by the
shareholder of that Fund) have been designated Class D shares. Shares of Dean
Witter Balanced Growth Fund and Dean Witter Balanced Income Fund held prior to
July 28, 1997 have
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been designated Class C shares except that shares of Dean Witter Balanced Growth
Fund and Dean Witter Balanced Income Fund held prior to July 28, 1997 that were
acquired in exchange for shares of an investment company offered with a CDSC
have been designated Class B shares and those that were acquired in exchange for
shares of an investment company offered with a FESL have been designated Class A
shares.
IV. THE CONVERSION FEATURE
Class B shares held before May 1, 1997 will convert to Class A shares in
May, 2007, except that Class B shares which are purchased before July 28, 1997
by trusts for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust FSB
("DWTFSB") provides discretionary trustee services will convert to Class A
shares on or about August 29, 1997 (the CDSC will not be applicable to such
shares upon the conversion). In all other instances, Class B shares of each Fund
will automatically convert to Class A shares, based on the relative net asset
values of the shares of the two Classes on the conversion date, which will be
approximately ten (10) years after the date of the original purchase.
Conversions will be effected once a month. The 10 year period will be calculated
from the last day of the month in which the shares were purchased or, in the
case of Class B shares acquired through an exchange or a series of exchanges,
from the last day of the month in which the original Class B shares were
purchased, provided that shares originally purchased before May 1, 1997 will
convert to Class A shares in May, 2007. Except as set forth below, the
conversion of shares purchased on or after May 1, 1997 will take place in the
month following the tenth anniversary of the purchase. There will also be
converted at that time such proportion of Class B shares acquired through
automatic reinvestment of dividends owned by the shareholder as the total number
of his or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a 401(k) plan or other employer-sponsored plan
qualified under Section 401(a) of the Internal Revenue Code (the "Code") and for
which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services Group of
DWR serves as recordkeeper, all Class B shares will convert to Class A shares on
the conversion date of the first shares of a Fund purchased by that plan. In the
case of Class B shares previously exchanged for shares of an "Exchange Fund" (as
such term is defined in the prospectus of each Fund), the period of time the
shares were held in the Exchange Fund (calculated from the last day of the month
in which the Exchange Fund shares were acquired) is excluded from the holding
period for conversion. If those shares are subsequently re-exchanged for Class B
shares of a Fund, the holding period resumes on the last day of the month in
which Class B shares are reacquired.
Effectiveness of the Conversion Feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel to the effect that (i) the conversion of shares does not constitute a
taxable event under the Code; (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion; and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The Conversion Feature may be suspended if the Ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B fees under the applicable Fund's 12b-1 Plan.
V. EXCHANGE PRIVILEGES
Shares of each Class may be exchanged for shares of the same Class of the
other Funds and for shares of certain other investment companies without the
imposition of an exchange fee as described in the prospectuses and statements of
additional information of the Funds. The exchange privilege of each Fund may be
terminated or revised at any time by the Fund upon such notice as may be
required by applicable regulatory agencies as described in each Fund's
prospectus.
VI. VOTING
Each Class shall have exclusive voting rights on any matter that relates
solely to its 12b-1 Plan, except that Class B shareholders will have the right
to vote on any proposed material increase in Class A's expenses, including
payments under the Class A 12b-1 Plan, if such proposal is submitted separately
to Class A shareholders. If the amount of expenses, including payments under the
Class A 12b-1 Plan, is increased materially without the approval of Class B
shareholders, the Fund will establish a new Class A for Class B shareholders
whose shares automatically convert on the same terms as applied to Class A
before the increase. In addition, each Class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one Class
differ from the interests of any other Class.
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DEAN WITTER FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
SCHEDULE A
AT JULY 28, 1997
1) Dean Witter American Value Fund
2) Dean Witter Balanced Growth Fund
3) Dean Witter Balanced Income Fund
4) Dean Witter California Tax-Free Income Fund
5) Dean Witter Capital Appreciation Fund
6) Dean Witter Capital Growth Securities
7) Dean Witter Convertible Securities Trust
8) Dean Witter Developing Growth Securities Trust
9) Dean Witter Diversified Income Trust
10) Dean Witter Dividend Growth Securities Inc.
11) Dean Witter European Growth Fund Inc.
12) Dean Witter Federal Securities Trust
13) Dean Witter Financial Services Trust
14) Dean Witter Global Asset Allocation Fund
15) Dean Witter Global Dividend Growth Securities
16) Dean Witter Global Utilities Fund
17) Dean Witter Health Sciences Trust
18) Dean Witter High Yield Securities Inc.
19) Dean Witter Income Builder Fund
20) Dean Witter Information Fund
21) Dean Witter Intermediate Income Securities
22) Dean Witter International SmallCap Fund
23) Dean Witter Japan Fund
24) Dean Witter Managers' Select Fund
25) Dean Witter Market Leader Trust
26) Dean Witter Mid-Cap Growth Fund
27) Dean Witter Natural Resource Development Securities Inc.
28) Dean Witter New York Tax-Free Income Fund
29) Dean Witter Pacific Growth Fund Inc.
30) Dean Witter Precious Metals and Minerals Trust
31) Dean Witter Special Value Fund
32) Dean Witter Strategist Fund
33) Dean Witter Tax-Exempt Securities Trust
34) Dean Witter U.S. Government Securities Trust
35) Dean Witter Utilities Fund
36) Dean Witter Value-Added Market Series/Equity Portfolio
37) Dean Witter World Wide Income Trust
38) Dean Witter World Wide Investment Trust
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