<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1994
REGISTRATION NO. 33-32872
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 4 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 5 /X/
--------------------
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
_X_ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)
____ on (date) pursuant to paragraph (a) of rule 485.
------------------------
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. PURSUANT TO SECTION (B)(2) OF RULE 24F-2, THE
REGISTRANT FILED A RULE 24F-2 NOTICE FOR ITS FISCAL YEAR ENDED OCTOBER 31, 1992
WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1993.
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<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A
PART A
ITEM CAPTION PROSPECTUS
<S> <C>
1. .................................................... Cover Page
2. .................................................... Summary of Fund Expenses; Prospectus Summary
3. .................................................... Financial Highlights; Performance Information
4. .................................................... Investment Objective and Policies; The Fund and its
Management; Cover Page; Investment Restrictions;
Prospectus Summary; Financial Highlights
5. .................................................... The Fund and Its Management; Back Cover; Investment
Objective and Policies
6. .................................................... Dividends, Distributions and Taxes; Additional
Information
7. .................................................... Purchase of Fund Shares; Shareholder Services
8. .................................................... Redemptions and Repurchases; Shareholder Services
9. .................................................... Not Applicable
PART B
ITEM STATEMENT OF ADDITIONAL INFORMATION
10. .................................................... Cover Page
11. .................................................... Table of Contents
12. .................................................... The Fund and Its Management
13. .................................................... Investment Practices and Policies; Investment
Restrictions; Portfolio Transactions and Brokerage
14. .................................................... The Fund and its Management; Trustees and Officers
15. .................................................... Trustees and Officers
16. .................................................... The Fund and Its Management; Purchase of Fund Shares;
Custodian and Transfer Agent; Independent Accountants
17. .................................................... Portfolio Transactions and Brokerage
18. .................................................... Description of Shares; Validity of Shares of Beneficial
Interest
19. .................................................... Repurchase of Fund Shares; Redemptions and Repurchases;
Statement of Assets and Liabilities; Shareholder
Services
20. .................................................... Dividends, Distributions and Taxes
21. .................................................... The Distributor
22. .................................................... Performance Information
23. .................................................... Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
FEBRUARY 28, 1994
Dean Witter Precious Metals and Minerals Trust (the "Fund") is an
open-end diversified management investment company, whose investment objective
is capital appreciation. The Fund will seek to achieve its investment objective
by investing in the securities of foreign and domestic companies engaged in the
exploration, mining, fabrication, processing, distribution or trading of
precious metals and minerals or in companies engaged in financing, managing,
controlling or operating companies engaged in these activities and also by
investing a portion of its assets in gold, silver, platinum and palladium
bullion and coins. (See "Investment Objective and Policies").
Shares of the Fund are continuously offered at net asset value
without the imposition of a sales charge. However, redemptions and/or
repurchases are subject in most cases to a contingent deferred sales charge,
scaled down from 5% to 1% of the amount redeemed, if made within six years of
purchase, which charge will be paid to the Fund's Distributor, Dean Witter
Distributors Inc. See "Redemptions and Repurchases--Contingent Deferred Sales
Charge." In addition, the Fund pays the Distributor a Rule 12b-1 distribution
fee pursuant to a Plan of Distribution at the annual rate of 1.0% of the lesser
of the (i) average daily aggregate net sales or (ii) average daily net assets of
the Fund. See "Purchase of Fund Shares--Plan of Distribution."
This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated February 28, 1994, which has been filed with
the Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed below. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER
PRECIOUS METALS AND MINERALS TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR
(800) 526-8143
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/3
Financial Highlights/4
The Fund and Its Management/5
Investment Objective and Policies/5
Investment Restrictions/12
Purchase of Fund Shares/12
Shareholder Services/15
Redemptions and Repurchases/17
Dividends, Distributions and Taxes/19
Performance Information/20
Additional Information/21
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
The The Fund is organized as a Trust, commonly known as a
Fund Massachusetts business trust, and is an open-end,
diversified management investment company. The Fund invests
in the securities of foreign and domestic companies engaged
in the exploration, mining, fabrication, processing,
distribution or trading of precious metals and minerals or
in companies engaged in financing, managing, controlling or
operating companies engaged in these activities. The Fund
also invests in gold, silver, platinum and palladium bullion
and coins directly.
- --------------------------------------------------------------------------------
Shares Shares of beneficial interest with $0.01 par value (see page
Offered 21).
- --------------------------------------------------------------------------------
Offering At net asset value without sales charge (see page 12).
Price Shares redeemed within six years of purchase are subject to
a contingent deferred sales charge under most circumstances
(see page 17).
- --------------------------------------------------------------------------------
Minimum Minimum initial investment, $1,000. Minimum subsequent
Purchase investment, $100 (see page 12).
- --------------------------------------------------------------------------------
Investment The investment objective of the Fund is to provide long-term
Objective capital appreciation.
- --------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the
Manager Investment Manager of the Fund, and its wholly-owned
subsidiary, Dean Witter Services Company Inc., serve in
various investment management, advisory, management and
administrative capacities to eighty-one investment companies
and other portfolios with assets under management of
approximately $71.2 billion at December 31, 1993 (see page
5).
- --------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual
Fee rate of 0.80% of daily net assets. This fee is higher than
that paid by most other investment companies (see page 5).
- --------------------------------------------------------------------------------
Dividends Dividends from net investment income and distributions from
net capital gains, if any, are paid at least once per year.
Dividends and capital gains distributions are automatically
reinvested in additional shares at net asset value unless
the shareholder elects to receive cash (see page 19).
- --------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor"). The
and Distributor receives from the Fund a distribution fee
Distribution accrued daily and payable monthly at the rate of 1% per
Fee annum of the lesser of (i) the Fund's average daily
aggregate net sales or (ii) the Fund's average daily net
assets. This fee compensates the Distributor for the
services provided in distributing shares of the Fund and for
sales-related expenses. The Distributor also receives the
proceeds of any contingent deferred sales charges (see page
13).
- --------------------------------------------------------------------------------
Redemption-- Shares are redeemable by the shareholder at net asset value.
Contingent An account may be involuntarily redeemed if the total value
Deferred of the account is less than $100. Although no commission or
Sales sales load is imposed upon the purchase of shares, a
Charge contingent deferred sales charge (scaled down from 5% to 1%)
is imposed on any redemption of shares if after such
redemption the aggregate current value of an account with
the Fund falls below the aggregate amount of the investor's
purchase payments made during the six years preceding the
redemption. However, there is no charge imposed on
redemption of shares purchased through reinvestment of
dividends or distributions (see pages 17-19).
- --------------------------------------------------------------------------------
Risks The net asset value of the Fund's shares will fluctuate with
changes in the market value of its portfolio securities and
with fluctuations in the prices of precious metals and
minerals. The prices of precious metals and minerals are
affected by various world-wide economic, financial and
political factors and such prices may be subject to sharp
fluctuations over short periods of time (see page 7).
Additionally, the Fund's investments in foreign securities
involve certain risks due to changes in currency exchange
rates, foreign securities exchange controls and foreign tax
rates (see page 7). The Fund's use of options and futures
transactions may also involve special risks (see page 8).
- --------------------------------------------------------------------------------
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended October 31, 1993.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases................................................ None
Maximum Sales Charge Imposed on Reinvested Dividends..................................... None
Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds)...... 5.0 %
A contingent deferred sales charge is imposed at the following declining rates:
</TABLE>
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PAYMENT MADE PERCENTAGE
- --------------------------------------------------------------------------------------- -------------
<S> <C>
First.................................................................................. 5.0%
Second................................................................................. 4.0%
Third.................................................................................. 3.0%
Fourth................................................................................. 2.0%
Fifth.................................................................................. 2.0%
Sixth.................................................................................. 1.0%
Seventh and thereafter................................................................. None
</TABLE>
<TABLE>
<S> <C>
Redemption Fees.......................................................................... None
Exchange Fee............................................................................. None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Management Fees.......................................................................... .80%
12b-1 Fees*.............................................................................. 1.00%
Other Expenses........................................................................... .99%
Total Fund Operating Expenses............................................................ 2.79%
<FN>
- ------------
* A PORTION OF THE 12B-1 FEE EQUAL TO 0.25% OF THE FUND'S AVERAGE DAILY NET
ASSETS IS CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD") GUIDELINES.
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS
- ---------------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:................. $ 78 $ 117 $ 167
You would pay the following expenses on the same investment, assuming no
redemption:...................................................................... $ 28 $ 87 $ 147
<CAPTION>
EXAMPLE 10 YEARS
- ---------------------------------------------------------------------------------- -----------
<S> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:................. $ 312
You would pay the following expenses on the same investment, assuming no
redemption:...................................................................... $ 312
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, notes thereto, and the unqualified report of
independent accountants which are contained in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to Shareholders, which may be obtained without
charge upon request of the Fund.
<TABLE>
<CAPTION>
FOR THE
PERIOD
AUGUST 6,
FOR THE YEAR ENDED 1990*
OCTOBER 31, THROUGH
------------------------------------------- OCTOBER
1993 1992 1991 31, 1990
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $ 7.87 $ 8.59 $ 8.57 $10.00
--------- --------- ----------- ---------
Net investment (loss) income............. (0.04) (0.05) 0.06 0.05
Net realized and unrealized gain
(loss).................................. 2.97 (0.62) 0.03 (1.48)
--------- --------- ----------- ---------
Total from investment operations........... 2.93 (0.67) 0.09 (1.43)
--------- --------- ----------- ---------
Less dividends and distributions:
Dividends from net investment income..... - 0 - (0.04) (0.07) - 0 -
Distributions from capital gains......... - 0 - (0.01) - 0 - - 0 -
--------- --------- ----------- ---------
Total dividends and distributions.......... - 0 - (0.05) (0.07) - 0 -
--------- --------- ----------- ---------
Net asset value, end of period............. $ 10.80 $ 7.87 $ 8.59 $ 8.57
--------- --------- ----------- ---------
--------- --------- ----------- ---------
TOTAL INVESTMENT RETURN+..................... 37.23% (7.97)% 1.23% (14.30)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)... $45,204 $15,135 $11,246 $5,843
Ratio of expenses to average net assets.... 2.79% 3.30% 2.18%(4) 1.49%(2)(3)
Ratio of net investment (loss) income to
average net assets........................ (1.07)% (0.74)% 0.93%(4) 2.99%(2)(3)
Portfolio turnover rate.................... 25 % 9 % 11 % 0 %
<FN>
- -------------
* DATE OF COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE ANNUALIZED EXPENSE RATIO, AFTER APPLICATION
OF THE FUND'S EXPENSE LIMITATION, WOULD HAVE BEEN 3.50% AND THE ABOVE
ANNUALIZED NET INVESTMENT INCOME RATIO WOULD HAVE BEEN .98%.
(4) IF THE FUND HAD BORNE ALL EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE EXPENSE RATIO, AFTER APPLICATION OF THE
FUND'S EXPENSE LIMITATION, WOULD HAVE BEEN 3.50% AND THE ABOVE NET
INVESTMENT INCOME (LOSS) RATIO WOULD HAVE BEEN (.39)%.
</TABLE>
4
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter Precious Metals and Minerals Trust (the "Fund") is an open-end,
diversified management investment company. The Fund is a trust of the type
commonly known as a "Massachusetts business trust" and was organized under the
laws of Massachusetts on December 28, 1989.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a
balanced financial services organization providing a broad range of nationally
marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to eighty-one investment companies, twenty-nine of
which are listed on the New York Stock Exchange, with combined assets of
approximately $69.2 billion at December 31, 1993. The Investment Manager also
manages portfolios of pension plans, other institutions and individuals which
aggregated approximately $2.0 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund. The Fund's
Trustees review the various services provided by or under the direction of the
Investment Manager to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.80% of the Fund's net assets. For the fiscal year ended October
31, 1993, the Fund accrued total compensation to the Investment Manager
amounting to 0.80% of the Fund's average daily net assets and the Fund's total
expenses amounted to 2.79% of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is long-term capital appreciation. The
Fund will attempt to achieve its investment objective by investing principally
in the securities of foreign and domestic companies engaged in the exploration,
mining, fabrication, processing, distribution or trading of precious metals and
minerals or in companies engaged in financing, managing, controlling or
operating companies engaged in these activities and also by investing a portion
of its assets in gold, silver, platinum and palladium bullion and coins. There
can be no assurance that the Fund's investment objective will be achieved. The
investment objective of the Fund is a fundamental policy and, as such, may not
be changed without the approval of the shareholders of the Fund. Because the
securities in which the Fund invests may involve risks not associated with more
traditional investments, an investment in the Fund, by itself, should not be
considered a balanced investment program.
Except during temporary defensive periods, the Fund will invest at least 65%
of its total assets in precious metals and minerals securities and precious
metals bullion and coins as well as other precious metals-related investments
(such as debt
5
<PAGE>
instruments indexed to or payable in precious metals warrants). This
concentration policy is a fundamental policy of the Fund.
The precious metals and minerals securities in which the Fund will invest
include foreign and domestic common stocks, securities convertible into common
stocks, preferred stocks, debt securities, precious metals indexed debt
securities and options issued by companies engaged in the exploration, mining,
fabricating, processing, distributing or trading of precious metals and
minerals. A company will be considered to be principally engaged in such
activities if it derives more than 50% of its income or devotes 50% or more of
its assets to such activities.
Up to 35% of the Fund's total assets may be invested in (a) common stocks of
companies that derive less than 50% of their income or devote 50% or less of
their assets to precious metals and minerals activities, (b) long-term U.S.
Government securities (securities guaranteed as to principal and interest by the
U.S. Government or its agencies or instrumentalities) and (c) short-term money
market instruments such as obligations of, or guaranteed by, the United States
government, its agencies or instrumentalities; commercial paper; banker's
acceptances and certificates of deposit of U.S. domestic banks, including
foreign branches of domestic banks, with assets of $500 million or more; time
deposits; or debt securities rated within the two highest grades by Moody's
Investors Service ("Moody's") or Standard & Poor's Corporation ("S&P") or, if
not rated, are of comparable quality as determined by the Investment Manager and
which mature within one year from the date of purchase. Investments in
short-term money market instruments may equal more than 35% of the Fund's assets
during temporary defensive periods. Additionally, within the percentage
limitation described above, up to 20% of the Fund's total assets may be invested
in long-term U.S. Government securities in order to offset the possible decline
in the value of precious metals and precious metals securities during periods of
low inflation rates.
Because most of the world's gold production is outside of the United States,
the Fund expects that a majority of its assets will be invested in the
securities of foreign issuers, excluding South African issuers. The percentage
of assets invested in particular countries or regions, however, will change from
time to time according to the Investment Manager's judgement of their political
stability and economic outlook. Under normal market conditions, the Fund intends
to invest at least 30% of its assets in the securities of foreign issuers. Such
securities may be in the form of American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs") or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company evidencing ownership of the underlying securities. EDRs are European
receipts evidencing a similar arrangement with a European bank. Generally, ADRs
in registered form, are designed for use in the United States securities markets
and EDRs, in bearer form, are designed for use in the European securities
markets. In the event that ADRs or EDRs are not available for a particular
security, the Fund nevertheless may invest in that security. Such securities may
or may not be listed on a foreign securities exchange.
The Fund's policy regarding South African investments is not a fundamental
policy of the Fund and, therefore, may be changed by a vote of the Trustees if
it believes such action is appropriate in light of changed conditions in South
Africa. Although this policy will limit the number of companies in which the
Fund may invest, the Investment Manager does not believe that adherence to this
policy will prevent the Fund from achieving its investment objective.
The Fund will also invest a portion of its assets in gold, silver, platinum
and palladium bullion and coins (or certificates, receipts or contracts
representing ownership interests in these precious metals). While it is intended
that no more than 25% of the Fund's total assets will be invested in such
bul-
6
<PAGE>
lion or coins, the Fund's investment in bullion or coins may be further
restricted in order to comply with regulations of states where the Fund's shares
are qualified for sale.
Bullion and coins will only be bought from and sold to U.S. and foreign
banks, regulated U.S. commodities exchanges, exchanges affiliated with a
regulated U.S. stock exchange, and dealers who are members of, or affiliated
with members of, a regulated U.S. commodities exchange, in accordance with
applicable investment laws. Gold, silver, platinum and palladium bullion will
not be purchased in any form that is not readily marketable. Coins will not be
purchased for their numismatic value and will not be considered for purchase if
they cannot be bought or sold in an active market. Any bullion or coins
purchased by the Fund will be delivered to and stored with a qualified custodian
bank in the U.S. Investors should note that bullion and coins do not generate
income, offering only the potential for capital appreciation or depreciation,
and in these transactions the Fund may encounter higher custody and transaction
costs than those normally associated with the ownership of securities, as well
as shipping and insurance costs. The Fund may attempt to minimize the costs
associated with actual custody of bullion or coins by the use of receipts or
certificates representing ownership interests in these precious metals. The
Fund's Investment Manager believes that investments in precious metals
themselves could serve to moderate fluctuations in the value of the Fund's
portfolio since at times the prices of precious metals have tended not to
fluctuate as widely as the securities of issuers engaged in the mining of such
metals.
RISK FACTORS
Investments related to gold and other precious metals and minerals are
considered speculative and are impacted by a host of world-wide economic,
financial and political factors. Prices of gold and other precious metals may
fluctuate sharply over short periods of time due to changes in inflation or
expectations regarding inflation in various countries, the availability of
supplies of these precious metals, changes in industrial and commercial demand,
metal sales by governments, central banks or international agencies, investment
speculation, monetary and other economic policies of various governments and
governmental restrictions on the private ownership of certain precious metals
and minerals.
At the present time, there are five major producers of gold bullion. In
order of magnitude they are: the Republic of South Africa, the former Union of
Soviet Socialist Republics, Canada, the United States and Australia. Political
and economic conditions in these countries may have a direct effect on the
mining, distribution and price of gold and sales of central bank gold holdings,
particularly in the case of South Africa.
FOREIGN SECURITIES. The Fund expects that a significant portion of its
assets will be invested in securities of foreign issuers because companies
engaged in activities relating to precious metals and minerals are frequently
located outside the United States. Investments in the securities of foreign
issuers involve special risks. These risks include: less public information
available about foreign companies than is available about U.S. companies; less
government regulation of stock exchanges, brokers, listed companies and banks in
foreign countries than in the United States; foreign stock markets have less
volume than the United States markets and the securities of some foreign
companies are less liquid and more volatile than the securities of comparable
United States companies; foreign companies, generally, are not subject to the
uniform accounting, auditing and financial reporting standards and practices
applicable to United States companies; the possibility of expropriation of
assets, or confiscatory taxation of investments or nationalization of bank
deposits by foreign governments; the possible establishment of exchange controls
and currency blockages by foreign governments; adverse political and economic
developments and the difficulties of obtaining and enforcing a judgement against
the issuers of foreign securities; and fluctuations in foreign currency exchange
rates which may affect the value of the Fund's
port-
7
<PAGE>
folio securities (and consequently the net asset value of the Fund's shares),
the value of dividends and interest earned and gains and losses realized on the
sale of securities, and the value of net investment income and unrealized
appreciation or depreciation of investments.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
As a way of managing exchange rate risks, the Fund may enter into foreign
currency exchange transactions either on a cash basis at the rate prevailing in
the currency exchange market, or by entering into forward foreign currency
exchange contracts to buy or sell currencies.
A forward foreign currency exchange contract ("forward contract") involves
an obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts may be
bought or sold to protect the Fund's portfolio, to some degree, against a
possible loss resulting from an adverse change in the relationship between
foreign currencies and the U.S. dollar. Forward contracts can be used to protect
the value of the Fund's investment securities by establishing a rate of exchange
that the Fund can achieve at some future point in time; they do not eliminate
fluctuations in the underlying prices of the securities. Additionally, although
forward contracts tend to minimize the risk of loss due to a decline in the
value of the hedged currency, at the same time, they tend to limit any potential
gains that might result should the value of such currency increase. The Fund
does not intend to commit more than 20% of the value of its total assets to
forward contracts for position hedging at any one time. Additionally, the Fund,
generally, will not enter into a forward contract with a term greater than one
year.
OPTIONS AND FUTURES TRANSACTIONS
The Fund is permitted to enter into call and put options on equity
securities listed on various U.S. securities exchanges ("Listed Options") and
written in over-the-counter transactions ("OTC options").
Listed options are issued by the Options Clearing Corporation ("OCC").
OTC options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with the Fund. The Fund
is permitted to write covered call options on portfolio securities, without
limit, in order to aid it in achieving its investment objective.
The Fund may purchase listed or OTC put or call options on its portfolio
securities in amounts exceeding no more than 10% of its total assets.
The Fund may purchase call options only to close out a covered call position
or to protect against an increase in the price of a security it anticipates
purchasing. The Fund may purchase put options on securities which it holds in
its portfolio only to protect itself against a decline in the value of the
security. The Fund may also purchase put options to close out written put
positions. There are no other limits on the Fund's ability to purchase call and
put options.
The Fund may enter into futures contracts on precious metals as a hedge
("precious metals futures") against changes in the price of precious metals held
or intended to be acquired by the Fund, but not for speculation or for achieving
leverage. The Fund's hedging activities may include purchases of futures
contracts as an offset against the effect of anticipated increases in the price
of a precious metal which the Fund intends to acquire ("anticipatory hedge") or
sales of futures contracts as an offset against the effect of anticipated
declines in the price of a precious metal which the Fund owns ("hedge against an
existing position").
The Fund may enter into precious metals forward contracts which are similar
to precious metals futures contracts, in that they provide for the purchase or
sale of precious metals at an agreed price with delivery to take place at an
agreed future time. However, unlike futures contracts, forward contracts are
negotiated contracts which are primarily used in the dealer market. Unlike the
futures contract market, which is regulated by the Commodity Futures
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<PAGE>
Trading Commission ("CFTC") and by the regulations of the commodity exchanges,
the forward contract market is unregulated. The Fund will use forward contracts
for the same hedging purposes as those applicable to futures contracts, as
described above.
The Fund may also purchase and write call and put options on futures
contracts which are traded on an Exchange and enter into closing transactions
with respect to such options to terminate an existing position.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract and the
sale of a futures contract or to close out a long or short position in futures
contracts.
The Fund may also purchase put or call options on precious metals futures
contracts. Such options would be purchased solely for hedging purposes similar
to those applicable to the purchase and sale of futures contracts. The Fund may
not purchase options on precious metals and precious metals futures contracts if
the premiums paid for all such options, together with margin deposits on
precious metals futures contracts, would exceed 5% of the Fund's total assets at
the time the option is purchased. The Fund may also write covered call options
on precious metal futures contracts.
The Fund may not enter into futures contracts or related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid for
premiums for unexpired options on futures contracts exceeds 5% of the value of
the Fund's total assets after taking into account unrealized gains and
unrealized losses on such contracts it has entered into, provided, however, that
in the case of an option that is in-the-money (the exercise price of the call
(put) option is less (more) than the market price of the underlying security) at
the time of purchase, the in-the-money amount may be excluded in calculating the
5%. However, there is no overall limitation on the percentage of the Fund's
assets which may be subject to a hedge position.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures contract,
only if a liquid secondary market exists for options or futures contracts of
that series. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options will generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer. Also,
exchanges may limit the amount by which the price of many futures contracts may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's assets are not speculative in nature,
there are risks inherent in the use of such instruments. One such risk is that
the Investment Manager could be incorrect in its expectations as to the
direction or extent of various price movements or the time span within which the
movements take place.
Another risk which may arise in employing futures contracts to protect
against the price volatility of the Fund's assets is that the prices of precious
metals subject to futures contracts (and thereby the futures contract prices)
may correlate imperfectly with the prices of such assets. A correlation may also
be distorted by the fact that the futures market is dominated by short-term
traders seeking to profit from the difference between a contract or security
price objective and their cost of borrowed funds. Such distortions are generally
minor and would diminish as the contract approached maturity.
Precious metals futures and forward prices can be volatile and are
influenced principally by changes in spot market prices, which in turn are
affected by a variety of political and economic factors. In addition,
expectations of changing market conditions may at times influence the prices of
futures and forward contracts, and changes in the cost of holding physical
precious metals, including
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<PAGE>
storage, insurance and interest expense, will also affect the relationship
between spot and futures or forward prices. While the correlation between
changes in prices of futures and forward contracts and prices of the precious
metals being hedged by such contracts has historically been very strong, the
correlation may at times be imperfect and even a well conceived hedge may be
unsuccessful to some degree because of market behavior or unexpected precious
metals price trends. To the extent that interest rates move in a direction
opposite to that anticipated, the Fund may realize a loss on a futures
transaction not offset by an increase in the value of portfolio securities.
Moreover there is a possibility of a lack of a liquid secondary market for
closing out a futures position or futures option. The success of any hedging
technique depends upon the Investment Manager's accuracy in predicting the
direction of a market. If these predictions are incorrect, the Fund may realize
a loss.
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when a purchase of a
call or put option on a futures contract would result in a loss to the Fund when
the purchase or sale of a futures contract would not result in a loss, such as
when there is no movement in the prices of the underlying securities. The
writing of a put or call option on a futures contract involves risks similar to
those relating to transactions in futures contracts as are described above.
OTHER INVESTMENT POLICIES
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
and specifying the required value of the collateral underlying the agreement.
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 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
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<PAGE>
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A of the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of such
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale and the risk of
substantial delays in effecting such registration. The Securities and Exchange
Commission has adopted Rule 144A under the Securities Act, which permits the
Fund to sell restricted securities to qualified institutional buyers without
limitation. The Investment Manager, pursuant to procedures adopted by the
Trustees of the Fund, will make a determination as to the liquidity of each
restricted security purchased by the Fund. If a restricted security is
determined to be "liquid", such security will not be included within the
category "illiquid securities", which is limited by the Fund's investment
restrictions to 10% of the Fund's total assets.
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 100% of the market value determined
daily of the loaned securities. The Fund may lend up to 10% of the value of its
total assets.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, including DWR, the
views of Trustees of the Fund and others regarding economic developments and
interest rate trends; and the Investment Manager's own analysis of factors it
deems relevant.
The Fund is managed within InterCapital's Large Capitalization Equities
Group, which manages funds and fund portfolios with approximately $8 billion in
assets at December 31, 1993. Diane Lisa Sobin, Vice President of InterCapital,
and a member of the Large Capitalization Equities Group, has been the primary
portfolio manager of the Fund since July, 1990 and has been managing portfolios
comprised of equity and other securities at InterCapital for over five years.
In selecting particular investments for the Fund's portfolio, the Investment
Manager will consider a wide variety of factors including current and
anticipated prices for precious metals and minerals, the extent and quality of
the issuer's metals reserves (including ore grades of metals mined by the
issuer), the quality of the issuer's management, the financial condition of the
issuer, present and anticipated levels of taxation on the operating income of
the issuer, labor relations, the issuer's mining, processing and fabricating
costs and techniques, and the marketability of the issuer's securities and the
price at which the issuer's precious metals and minerals are sold in the free
market.
Orders for transactions in other portfolio securities and commodities are
placed for the Fund with a number of brokers and dealers, including Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Investment Manager.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. In
addition, the Fund may incur brokerage commissions on transactions conducted
through DWR. The Fund's normal expectation in purchasing a security is that its
anticipated performance level will be reached over the longer, rather than the
shorter, term. Historically,
11
<PAGE>
stock prices of companies in the precious metals industry have been volatile.
The rate of portfolio turnover will not be a limiting factor when portfolio
changes are deemed appropriate. It is not anticipated that the portfolio trading
will result in the Fund's portfolio turnover rate exceeding 100%. A more
extensive discussion of the Fund's portfolio brokerage policies is set forth 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. As to 75% of its total assets, 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 of any one issuer.
3. Invest more than 10% of its total assets
in illiquid securities (OTC options and securities which are not readily
marketable or which are subject to legal or contractual restrictions on
resale) and repurchase agreements which have a maturity of longer than seven
days.
4. Invest more than 5% of the value of its
total assets in securities of issuers having a record, together with
predecessors, of less than three years of continuous operation. This
restriction shall not apply to any obligation issued or guaranteed by the
United States Government, its agencies or instrumentalities.
5. Borrow money, except that the Fund
may borrow from a bank for temporary or emergency purposes in amounts not
exceeding 5% (taken at the lower of cost or current value) of its total
assets (not including the amount borrowed).
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares to the public on a continuous basis. Pursuant to
a Distribution Agreement between the Fund and Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager, shares of the Fund are
distributed by the Distributor and offered by DWR and other dealers who have
entered into selected dealer agreements with the Distributor ("Selected
Broker-Dealers"). The principal executive office of the Distributor is located
at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000. Minimum subsequent purchases of $100
or more may be made by sending a check, payable to Dean Witter Precious Metals
and Minerals Trust, directly to Dean Witter Trust Company (the "Transfer Agent")
at P.O. Box 1040, Jersey City, NJ 07303 or by contacting an account executive of
DWR or other Selected Broker-Dealer. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans), the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required if the Fund has reason to
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<PAGE>
believe that additional investments will increase the investment in all accounts
under such Plans to at least $1,000. Certificates for shares purchased will not
be issued unless a request is made by the shareholder in writing to the Transfer
Agent. The offering price will be the net asset value per share next determined
following receipt of an order (see "Determination of Net Asset Value").
Shares of the Fund are sold through the Distributor on a normal five
business day settlement basis; that is, payment is due on the fifth business day
(settlement date) after the order is placed with the Distributor. 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 if payment is made prior thereto. As noted
above, orders placed directly with the Transfer Agent must be accompanied by
payment. Investors will be entitled to receive dividends and capital gains
distributions if their order is received by the close of business on the day
prior to the record date for such distributions (those investing through the
Distributor or other Selected Broker-Dealer will receive dividends declared the
next business day after the order is settled). While no sales charge is imposed
at the time shares are purchased, a contingent deferred sales charge may be
imposed at the time of redemption (see "Redemptions and Repurchases"). The Fund
and the Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the Fund's average daily net
assets. This fee is treated by the Fund as an expense in the year it is accrued.
A portion of the fee payable pursuant to the Plan, equal to 0.25% of the Fund's
average daily net assets, is characterized as a service fee within the meaning
of NASD guidelines.
Amounts paid under the Plan are paid to the Distributor to compensate it for
the services provided and the expenses borne by the Distributor and others in
the distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to and expenses of DWR's
account executives and others who engage in or support distribution of shares or
who service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed distribution expenses. For the fiscal year
ended October 31, 1993, the Fund accrued payments under the Plan amounting to
$264,356, which amount is equal to 1.0% of the Fund's average daily net assets
for the fiscal period.
At any given time, the expenses of distributing shares of the Fund may be in
excess of the total of (i) the payments made by the Fund pursuant to the Plan,
and (ii) the proceeds of contingent deferred sales charges paid by investors
upon the redemption of shares (see "Redemptions and Repurchases--Contingent
Deferred Sales Charge"). For example, if $1 million in expenses in distributing
shares of the Fund had been incurred and $750,000 had been received as described
in (i) and (ii) above, the excess would amount to $250,000. The Distributor has
advised the Fund that such excess amounts
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<PAGE>
including the carrying charge described above, totalled $1,922,320 at October
31, 1993, which was 4.25% of the Fund's net assets on such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, this excess amount does not constitute a liability
of the Fund. Although there is no legal obligation for the Fund to pay expenses
incurred in excess of payments made to the Distributor under the Plan and the
proceeds of contingent deferred sales charges paid by investors upon redemption
of shares, if for any reason the Plan is terminated, the Trustees will consider
at that time the manner in which to treat such expenses. Any cumulative expenses
incurred, but not yet recovered through distribution fees or contingent deferred
sales charges, may or may not be recovered through future distribution fees or
contingent deferred sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time on each day that the New York Stock Exchange is open by
taking the value of all assets of the Fund, subtracting all its liabilities,
dividing by the number of shares outstanding and adjusting to the nearest cent.
The net asset value per share will not be determined on Good Friday and on such
other federal and non-federal holidays as are observed by the New York Stock
Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange; if there were no sales that day, the security is valued at the latest
bid price (in cases where a security is traded on more than one exchange, the
security is valued on the exchange designated as the primary market by the
Trustees), and (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest bid price. When
market quotations are not readily available, including circumstances under which
it is determined by the Investment Manager that the sale or bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Fund's Trustees. For valuation purposes,
quotations of foreign portfolio securities, other assets and liabilities and
forward contracts stated in foreign currency are translated into U.S. dollar
equivalents at the prevailing market rates as of the morning of valuation.
Dividend income and other distributions are recorded on the ex-dividend date,
except for certain dividends from foreign securities which are recorded as soon
as the Fund is informed after the ex-dividend date.
Short-term debt securities with remaining maturities of sixty days or less
to maturity at the time of purchase are valued at amortized cost, unless the
Trustees determine such does not reflect the securities' fair value, in which
case these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
Gold and silver bullion will be valued at the last spot settlement price on
the Commodity Exchange, Inc. and other precious metals (such as platinum and
palladium) and minerals will be valued at the last spot settlement price or, if
not available, the settlement price of the nearest contract month on the New
York Mercantile Exchange. If prices are not available on any of these exchanges
on any given day, the relevant precious metal or mineral will be valued at
prices in the bullion markets or other markets approved by the Trustees for that
purpose; if
14
<PAGE>
there is no readily available market quotation, then bullion will be valued in a
manner, at fair value, as determined in good faith by the Trustees.
Generally, trading in foreign securities, as well as corporate bonds, United
States government securities and money market instruments, is substantially
completed each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset value of
the Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events which affect the values of such securities and
such exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange and will therefore not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Trustees.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the shareholder
requests that they be paid in cash. Shares so acquired are not subject to the
imposition of a contingent deferred sales charge upon their redemption (see
"Redemptions and Repurchases").
EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund.
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on the shares redeemed under
the Withdrawal Plan (see "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). Therefore, any shareholder participating in the Withdrawal Plan will
have sufficient shares redeemed from his or her account so that the proceeds
(net of any applicable contingent deferred sales charge) to the shareholder will
be the designated monthly or quarterly amount.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
TAX SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the Transfer
Agent.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of other Dean Witter
Funds sold with a contingent deferred sales charge ("CDSC funds"), and for
shares of Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited
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<PAGE>
Term Municipal Trust, Dean Witter Short-Term Bond Fund and five Dean Witter
Funds which are money market funds (the foregoing eight non-CDSC funds are
hereinafter referred to as the "Exchange Funds"). Exchanges may be made after
the shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for 30 days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share of
each fund after the exchange order is received. When exchanging into a money
market fund from the Fund, shares of the Fund are redeemed out of the Fund at
their next calculated net asset value and the proceeds of the redemption are
used to purchase shares of the money market fund at their net asset value
determined the following business day. Subsequent exchanges between any of the
money market funds and any of the CDSC funds can be effected on the same basis.
No contingent deferred sales charge ("CDSC") is imposed at the time of any
exchange although any applicable CDSC will be imposed upon ultimate redemption.
Shares of the Fund acquired in exchange for shares of another CDSC fund having a
different CDSC schedule than that of this Fund will be subject to the CDSC
schedule of that Fund, even if such shares are subsequently re-exchanged for
shares of the CDSC fund originally purchased. During the period of time the
shareholder remains in the Exchange Fund, (calculated from the last day of the
month in which the Exchange Fund shares were acquired), the holding period (for
the purpose of determining the rate of the CDSC) is frozen. If those shares are
subsequently reexchanged for shares of a CDSC fund, the holding period
previously frozen when the first exchange was made resumes on the last day of
the month in which shares of a CDSC fund are reacquired. Thus, the CDSC is based
upon the time (calculated as described above) the shareholder was invested in a
CDSC fund (see "Redemptions and Repurchases--Contingent Deferred Sales Charge").
However, in the case of shares of the Fund exchanged into an Exchange Fund, upon
a redemption of shares which results in a CDSC being imposed, a credit (not to
exceed the amount of the CDSC) will be given in an amount equal to the Exchange
Fund 12b-1 distribution fees incurred on or after that date which are
attributable to those shares. (Exchange Fund 12b-1 distribution fees, if any,
are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds") but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may be limited by the Fund's refusal to
accept additional purchases and/ or exchanges from the investor. Although the
Fund does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests of
the Fund and its other shareholders, investors should be aware that the Fund and
each of the other Dean Witter Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such restriction will be made by the Fund on a prospective basis
only, upon notice to the shareholder not later than ten days following such
shareholder's most recent exchange.
Also, the Exchange Privilege may be terminated or revised at any time by the
Fund and/or any
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<PAGE>
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.
If DWR or other Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their DWR account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or another Selected Broker-Dealer but who wish to make
exchanges directly by writing or telephoning the Transfer Agent) must complete
and forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from the Transfer Agent, to initiate an
exchange. If the Authorization Form is used, exchanges may be made in writing or
by contacting the Transfer Agent at (800) 526-3143 (toll free). The Fund will
employ reasonable procedures to confirm that exchange instructions communicated
over the telephone are genuine. Such procedures may include requiring various
forms of personal identification such as name, mailing address, Social Security
or other tax identification number and DWR or other Selected Broker-Dealer
account number (if any). Telephone instructions may also be recorded. If such
procedures are not employed, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the Dean Witter
Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds may
be reduced by the amount of any applicable contingent deferred sales charges
(see below). If shares are held in a shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder, the shares may be redeemed by surrendering the certificates with a
written request for redemption along with any additional information required by
the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any charge upon redemption.
Shares redeemed sooner than six years after purchase may, however, be subject to
a charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will
17
<PAGE>
depend upon how long the shares have been held, as set forth in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE REDEEMED
- ----------------------------------- -----------------------
<S> <C>
First.............................. 5.0%
Second............................. 4.0%
Third.............................. 3.0%
Fourth............................. 2.0%
Fifth.............................. 2.0%
Sixth.............................. 1.0%
Seventh and thereafter............. None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption; (ii)
the current net asset value of shares purchased more than six years prior to the
redemption; and (iii) the current net asset value of shares purchased through
reinvestment of dividends or distributions and/or shares acquired in exchange
for shares of Dean Witter Funds sold with a front-end sales charge or of other
Dean Witter Funds acquired in exchange for such shares. Moreover, in determining
whether a CDSC is applicable it will be assumed that amounts described in (i),
(ii) and (iii) above (in that order) are redeemed first. In addition, no CDSC
will be imposed on redemptions of shares which were purchased by certain Unit
Investment Trusts (on which a sales charge has been paid) or which are
attributable to reinvestment of dividends or distributions from, or the proceeds
of, such Unit Investment Trusts.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of: (i) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship, or (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability, and (ii) redemptions in
connection with the following retirement plan distributions: (a) lump-sum or
other distributions from a qualified corporate or self-employed retirement plan
following retirement (or in the case of a "key employee" of a "top heavy" plan,
following attainment of age 59 1/2); (b) distributions from an Individual
Retirement Account or Custodial Account under Section 403(b) (7) of the Internal
Revenue Code following attainment of age 59 1/2; and (c) a tax-free return of an
excess contribution to an IRA. For the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. All waivers will be granted only following receipt by the
Distributor of confirmation of the shareholder's entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the net
asset value next computed (see "Purchase of Fund Shares") after such repurchase
order is received by DWR or other Selected Broker-Dealer, reduced by any
applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund, the Distributor,
DWR or other Selected Broker-Dealers. The offers by DWR and other Selected
Broker-Dealers to repurchase shares may be suspended without notice by them at
any time. In that event, shareholders may redeem their shares through the Fund's
Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check
18
<PAGE>
within seven days after receipt
by the Transfer Agent of the certificate and/or written request in good order.
Such payment may be postponed or the right of redemption suspended under unusual
circumstances, e.g. when normal trading is not taking place on the New York
Stock Exchange. If the shares to be redeemed have recently been purchased by
check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption or
repurchase in shares of the Fund at net asset value next determined after a
reinstatement request, together with the proceeds, is received by the Transfer
Agent and receive a pro-rata credit for any CDSC paid in connection with such
redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem, at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Internal Revenue Code) whose shares have a value of
less than $100 or such lesser amount as may be fixed by the Fund's Trustees.
However, before the Fund redeems such shares and sends the proceeds to the
shareholder, it will notify the shareholder that the value of the shares is less
than $100 and allow him or her sixty days to make an additional investment in an
amount which will increase the value of his or her account to $100 or more
before the redemption is processed. No CDSC will be imposed on any involuntary
redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund currently intends to pay dividends
and to distribute all of the Fund's net investment income and net realized
short-term and net long-term capital gains, if any, at least once each year. The
Fund may, however, determine either to distribute or to retain all or part of
any net long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in additional
Fund shares (without sales charge) and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends and/or distributions be paid
in cash. (See "Shareholder Services--Automatic Investment of Dividends and
Distributions.")
TAXES. Because the Fund intends to distribute all of its net investment
income and net capital gains to shareholders and otherwise remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code,
(the "Code"), it is not expected that the Fund will be required to pay any
federal income tax on such income and capital gains. Shareholders who are
required to pay taxes on their income will normally have to pay Federal income
taxes, and any applicable state and/or local income taxes, on the dividends and
distributions they receive from the Fund. Such dividends and distributions, to
the extent that they are derived from net investment income and net short-term
capital gains, are taxable to the shareholder as ordinary dividend income
regardless of whether the shareholder receives such payments in additional
shares or in cash.
Income received by the Fund may give rise to foreign taxes imposed and
withheld in foreign countries. Tax conventions between certain
19
<PAGE>
countries and the
United States may reduce or eliminate such taxes. If more than 50 percent of the
Fund's total assets at the close of its fiscal year consist of securities of
foreign corporations, the Fund will be eligible to file an election with the
Internal Revenue Service under which shareholders of the Fund would be required
to include their pro rata portions of foreign taxes withheld by foreign
countries as gross income in their federal income tax returns. These pro rata
portions of foreign taxes withheld may be taken by the Shareholder as a credit
or deduction in computing federal income taxes. If the election is filed, the
Fund will report to its shareholders the amount per share of such foreign taxes
withheld and the amount of foreign tax credit or deduction available for federal
income tax purposes. In the absence of such an election, the Fund would deduct
foreign tax in computing the amount of its distributable income.
Gains or losses on the Fund's transactions in certain listed options on
securities and on futures and options on futures generally are treated as 60%
long-term gain or loss and 40% short-term gain or loss. When the Fund engages in
options and futures transactions, various tax regulations applicable to the Fund
may have the effect of causing the Fund to recognize a gain or loss for tax
purposes before that gain or loss is realized, or to defer recognition of a
realized loss for tax purposes. Recognition, for tax purposes, of an unrealized
loss may result in a lesser amount of the Fund's realized net gains being
available for distribution.
As a regulated investment company, the Fund is subject to the requirement
that less than 30% of its gross income be derived from the sale or other
disposition of securities and certain other investments held for less than three
months. This requirement may limit the Fund's ability to engage in options and
futures transactions.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction.
After the end of the year, shareholders will receive full information on
their dividends and capital gains distributions for tax purposes. To avoid being
subject to a 31% federal backup withholding tax on taxable dividends, capital
gains distributions and the proceeds of redemptions and repurchases,
shareholders' taxpayer identification numbers must be furnished and certified as
to their accuracy.
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 "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average annual
total return" of the Fund refers to a figure reflecting the average annualized
percentage increase (or decrease) in the value of an initial investment in the
Fund of $1,000 over the life of the Fund. Average annual total return reflects
all income earned by the Fund, any appreciation or depreciation of the Fund's
assets, all expenses incurred by the Fund and all sales charges which would be
incurred by redeeming shareholders, for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, and year-by-year or
other types of total return figures. Such
20
<PAGE>
calculations may or may not reflect the deduction of the contingent deferred
sales charge which, if reflected, would reduce the performance quoted. The Fund
may also advertise the growth of hypothetical investments of $10,000, $50,000
and $100,000 in shares of the Fund. The Fund from time to time may also
advertise its performance relative to certain performance rankings and indexes
compiled by independent organizations (such as mutual fund performance rankings
of Lipper Analytical Services, Inc.)
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above 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 thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
21
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS
DEAN WITTER RETIREMENT SERIES
Dean Witter Liquid Asset Fund Inc.
Liquid Asset Series
Dean Witter Tax-Free Daily Income Trust
U.S. Government Money Market Series
Dean Witter New York Municipal Money Market Trust
U.S. Government Securities Series
Dean Witter California Tax-Free Daily Income Trust
Intermediate Income Securities Series
Dean Witter U.S. Government Money Market Trust
American Value Series
Capital Growth Series
Dividend Growth Series
EQUITY FUNDS
Stategist Series
Dean Witter American Value Fund
Utilities Series
Dean Witter Natural Resource Development Securities Inc.
Value-Added Market Series
Dean Witter Dividend Growth Securities Inc.
Global Equity Series
Dean Witter Developing Growth Securities Trust
Dean Witter World Wide Investment Trust
ASSET ALLOCATION FUNDS
Dean Witter Equity Income Trust
Dean Witter Value-Added Market Series
Dean Witter Managed Assets Trust
Dean Witter Utilities Fund
Dean Witter Strategist Fund
Dean Witter Precious Metals and Minerals Trust
Dean Witter Capital Growth Securities
ACTIVE ASSETS ACCOUNT PROGRAM
Dean Witter European Growth Fund Inc.
Active Assets Money Trust
Dean Witter Pacific Growth Fund Inc.
Active Assets Tax-Free Trust
Dean Witter Health Sciences Trust
Active Assets California Tax-Free Trust
Dean Witter Global Dividend Growth Securities
Active Assets Government Securities Trust
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
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 World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
<PAGE>
Dean Witter
Precious Metals and Minerals Trust
Two World Trade Center
New York, New York 10048
TRUSTEES
Jack F. Bennett
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Manuel H. Johnson DEAN WITTER
Paul Kolton PRECIOUS METALS
Michael E. Nugent AND MINERALS TRUST
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo [Logo]
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Diane Lisa Sobin
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
110 Washington Street
New York, New York 10286
TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Prospectus
February 28, 1994
2/28/94
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1994
DEAN WITTER
PRECIOUS METALS
AND MINERALS TRUST
[LOGO]
- --------------------------------------------------------------------------------
Dean Witter Precious Metals and Minerals Trust (the "Fund") is an open-end,
diversified management investment company, whose investment objective is capital
appreciation. The Fund seeks to achieve its investment objective by investing in
the securities of foreign and domestic companies engaged in the exploration,
mining, fabrication, distribution, processing or trading of precious metals and
minerals or in companies engaged in financing, managing, controlling or
operating companies engaged in these activities and also by investing a portion
of its assets in gold, silver, platinum and palladium bullion and coins. See
"Investment Practices and Policies."
A Prospectus for the Fund dated February 28, 1994, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone number listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc., at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Dean Witter
Precious Metals and
Minerals Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and Its Management.............................................. 3
Trustees and Officers.................................................... 6
Investment Practices and Policies........................................ 8
Investment Restrictions.................................................. 19
Portfolio Transactions and Brokerage..................................... 21
The Distributor.......................................................... 23
Determination of Net Asset Value......................................... 26
Shareholder Services..................................................... 26
Redemptions and Repurchases.............................................. 31
Dividends, Distributions and Taxes....................................... 33
Performance Information.................................................. 35
Description of Shares of the Fund........................................ 36
Custodian and Transfer Agent............................................. 37
Independent Accountants.................................................. 37
Reports to Shareholders.................................................. 37
Validity of Shares of Beneficial Interest................................ 38
Legal Counsel............................................................ 38
Experts.................................................................. 38
Registration Statement................................................... 38
Financial Statements--October 31, 1993................................... 41
Report of Independent Accountants........................................ 46
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund is a Trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts on
December 28, 1989.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter Discover & Co. ("DWDC"), a Delaware corporation. In an
internal reorganization which took place in January, 1993, InterCapital assumed
the investment advisory, administrative and management activities previously
performed by the InterCapital Division of Dean Witter Reynolds Inc. ("DWR"), a
broker-dealer affiliate of InterCapital. (As hereinafter used in this Statement
of Additional Information, the terms "InterCapital" and "Investment Manager"
refer to DWR's InterCapital Division prior to the internal reorganization and
Dean Witter InterCapital Inc. thereafter.) The daily management of the Fund is
conducted by or under the direction of officers of the Fund and of the
Investment Manager, subject to review of investments by the Fund's Trustees. In
addition, Trustees of the Fund provide guidance on economic factors and interest
rate trends. Information as to these Trustees and Officers is contained under
the caption "Trustees and Officers".
InterCapital is also the investment manager or investment adviser of the
following investment companies: 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., Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Tax-Exempt Securities Trust, Dean
Witter Dividend Growth Securities Inc., Dean Witter Natural Resource Development
Securities Inc., Dean Witter American Value Fund, Dean Witter Developing Growth
Securities Trust, Dean Witter U.S. Government Money Market Trust, Dean Witter
Variable Investment Series, Dean Witter World Wide Investment Trust, Dean Witter
Select Municipal Reinvestment Fund, Dean Witter U.S. Government Securities
Trust, Dean Witter California Tax-Free Income Fund, Dean Witter Equity Income
Trust, Dean Witter New York Tax-Free Income Fund, Dean Witter Convertible
Securities Trust, Dean Witter Federal Securities Trust, Dean Witter Value-Added
Market Series, High Income Advantage Trust, High Income Advantage Trust II, High
Income Advantage Trust III, Dean Witter Government Income Trust, Dean Witter
Utilities Fund, Dean Witter Managed Assets Trust, Dean Witter California
Tax-Free Daily Income Trust, Dean Witter Strategist Fund, Dean Witter World Wide
Income Trust, Dean Witter Intermediate Income Securities, Dean Witter Capital
Growth Securities, Dean Witter New York Municipal Money Market Trust, Dean
Witter European Growth Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean
Witter Global Short-Term Income Fund Inc., Dean Witter Multi-State Municipal
Series Trust, Dean Witter Premier Income Trust, Dean Witter Short-Term U.S.
Treasury Trust, InterCapital Insured Municipal Bond Trust, InterCapital Insured
Municipal Trust, InterCapital Quality Municipal Investment Trust, InterCapital
Quality Municipal Income Trust, InterCapital Insured Municipal Income Trust,
InterCapital California Insured Municipal Income Trust, Dean Witter Diversified
Income Trust, Dean Witter Health Sciences Trust, Dean Witter Retirement Series,
Dean Witter Global Dividend Growth Securities, Dean Witter Limited Term
Municipal Trust, Dean Witter Short-Term Bond Fund, InterCapital Quality
Municipal Securities, InterCapital California Quality Municipal Securities,
InterCapital New York Quality Municipal Securities, InterCapital Insured
Municipal Securities, InterCapital Insured California Municipal Securities,
Municipal Income Trust, Municipal Income Trust II, Municipal Income Trust III,
Municipal Income Opportunities Trust, Municipal Income Opportunities Trust II,
Municipal Income Opportunities Trust III, Municipal Premium Income Trust and
Prime Income Trust. The foregoing investment companies, together with the Fund,
are collectively referred to as the Dean Witter Funds. In addition, Dean Witter
Services Company Inc. ("DWSC"), a wholly-owned subsidiary of InterCapital,
serves as manager for the following companies for which TCW Funds Management,
Inc. is the investment adviser: TCW/DW Core Equity Trust, TCW/DW North American
Government Income Trust, TCW/DW Latin American
3
<PAGE>
Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth Fund, TCW/DW
Balanced Fund, TCW/DW Term Trust 2000, TCW/DW Term Trust 2002 and TCW/DW Term
Trust 2003 (the "TCW/DW Funds"). InterCapital also serves as (i) sub-adviser to
Templeton Global Opportunities Trust, an open-end investment company; (ii)
administrator of The Black Rock Strategic Term Trust Inc., a closed-end
investment company; and (iii) sub-administrator of Mass Mutual Participation
Investors and Templeton Global Governments Income Trust, closed-end investment
companies.
The Investment Manager also serves as an investment adviser for Dean Witter
World Wide Investment Fund, an investment company organized under the laws of
Luxembourg, shares of which are not available for purchase in the United States
or by American citizens outside of the United States.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
Investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objectives.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund may
reasonably require in the conduct of its business, including the preparation of
prospectuses, statements of additional information, proxy statements and reports
required to be filed with federal and state securities commissions (except
insofar as the participation or assistance of independent accountants and
attorneys is, in the opinion of the Investment Manager, necessary or desirable).
In addition, the Investment Manager pays the salaries of all personnel,
including officers of the Fund, who are employees of the Investment Manager. The
Investment Manager also bears the cost of telephone service, heat, light, power
and other utilities provided to the Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to the
Fund which were previously performed directly by InterCapital. The foregoing
internal reorganization did not result in any change in the nature or scope of
the administrative services being provided to the Fund or any of the fees being
paid by the Fund for the overall services being performed under the terms of the
existing Management Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Dean Witter Distributors Inc.
('Distributors" or the "Distributor") (see "The Distributor") will be paid by
the Fund. The expenses borne by the Fund include, but are not limited to:
expenses of the Plan of Distribution pursuant to Rule 12b-1 (see "The
Distributor"), charges and expenses of any registrar, custodian, stock transfer
and dividend disbursing agent; brokerage commissions; taxes; engraving and
printing of share certificates; registration costs of the Fund and its shares
under federal and state securities laws; the cost and expense of printing,
including typesetting, and distributing Prospectuses and Statements of
Additional Information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Trustees or members of any advisory board or
committee who are not employees of the Investment Manager or any corporate
affiliate of the Investment Manager; all expenses incident to any dividend,
withdrawal or redemption options; charges and expenses of any outside service
used for pricing of the Fund's shares; fees and expenses of legal counsel,
including counsel to the Trustees who are not interested persons of the Fund or
of the Investment Manager (not including compensation or expenses of attorneys
who are employees of the Investment Manager) and independent accountants;
membership dues of industry associations; interest on Fund borrowings; postage;
insurance premiums 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.
4
<PAGE>
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily at an annual rate of
.80% of the daily net assets of the Fund. Total compensation accrued to the
Investment Manager under the Agreement and for the fiscal years ended October
31, 1991, October 31, 1992 and October 31, 1993, was $24,381, $103,573, and
$211,463 respectively.
Pursuant to the Agreement, total operating expenses of the Fund are subject
to applicable limitations under rules and regulations of states where the Fund
is authorized to sell its shares. Therefore, operating expenses are effectively
subject to the most restrictive of such limitations as the same may be amended
from time to time. Presently, the most restrictive limitation is as follows. If,
in any fiscal year, the Fund's total operating expenses, exclusive of taxes,
interest, brokerage fees, distribution fees and extraordinary expenses (to the
extent permitted by applicable state securities laws and regulations), exceed
2 1/2% of the first $30,000,000 of average daily net assets, 2% of the next
$70,000,000 and 1 1/2% of any excess over $100,000,000, the Investment Manager
will reimburse the Fund for the amount of such excess. Such amount, if any, will
be calculated daily and credited on a monthly basis. For the fiscal year ended
October 31, 1993, the Fund did not exceed the expense limitation.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder, the
Investment Manager is not liable to the Fund or any of its investors for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors. The Agreement in no way restricts the Investment Manager from
acting as investment manager or adviser to others.
The Investment Manager has paid the organizational expenses of the Fund
incurred prior to the offering of the Fund's shares. The Fund has reimbursed the
Investment Manager for such expenses. The Fund has deferred and is amortizing
the reimbursed expenses on the straight line method over a period not to exceed
five years from the date of commencement of the Fund's operations.
The Agreement was initially approved by the Board of Trustees on October 30,
1992 and by the Shareholders of the Fund at a Special Meeting of Shareholders on
January 12, 1993. The Agreement is substantially identical to a prior Investment
Management Agreement which was initially approved by the trustees on February
15, 1990 and by DWR as the then sole shareholder on June 7,1990 and by the
Shareholders of the Fund at a Special Meeting of Shareholders on September 20,
1991. The Agreement took effect on June 30, 1993 upon the Spin-off by Sears,
Roebuck & Co. of its remaining shares of DWDC. The Agreement may be terminated
at any time, without penalty, on thirty days' notice by the Trustees of the
Fund, by the holders of a majority as defined in the Investment Company Act of
1940, as amended (the "Act"), of the outstanding shares of the Fund, or by the
Investment Manager. The Agreement will automatically terminate in the event of
its assignment (as defined in the Act).
Under its terms, the Agreement will continue in effect until April 30, 1994,
and 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 Agreement is terminated, or if the affiliation between
InterCapital and its parent 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 Dean Witter Funds and the TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Jack F. Bennett ...................................... Retired; Director or Trustee of the Dean Witter Funds;
Trustee formerly Senior Vice President and Director of Exxon
141 Taconic Road Corporation (1975-January, 1989) and Under Secretary of
Greenwich, Connecticut the U.S. Treasury for Monetary Affairs (1974-1975);
Director of Philips Electronics N.V., Tandem Computers
Inc. and Massachusetts Mutual Life Insurance Co.; director
or trustee of various other not-for-profit and business
organizations.
Charles A. Fiumefreddo* .............................. Chairman, Chief Executive Officer and Director of
Chairman of the Board, President, Chief InterCapital Distributors and DWSC; Executive Vice
Executive Officer and Trustee President and Director of DWR; Chairman, Director or
Two World Trade Center Trustee, President and Chief Executive Officer of Dean
New York, New York Witter Funds; Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Chairman and Director of Dean
Witter Trust Company (since October, 1989); formerly
Executive Vice President and Director of DWDC (until
February, 1993); Director and/or officer of various DWDC
subsidiaries.
Edwin J. Garn ........................................ Director or Trustee of the Dean Witter Funds; formerly
Trustee United States Senator (R-Utah) (1974-1992) and Chairman,
2000 Eagle Gate Tower Senate Banking Committee (1980-1986); formerly Mayor of
Salt Lake City, Utah Salt Lake City, Utah (1971-1974); formerly Astronaut,
Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Chemical Corporation (since January,
1993); member of the board of various civic and charitable
organizations.
John R. Haire ........................................ Chairman of the Audit Committee and Chairman of the
Trustee Committee of the Independent Directors or Trustees and
439 East 51st Street Director or Trustee of the Dean Witter Funds; Trustee of
New York, New York the TCW/DW Funds; formerly President, Council for Aid to
Education (1978-October, 1989) and Chairman and Chief
Executive Officer of Anchor Corporation, an Investment
Adviser (1964-1978); Director of Washington National Cor-
poration (insurance) and Bowne & Co., Inc. (printing).
Dr. John E. Jeuck .................................... Retired; Director or Trustee of the Dean Witter Funds;
Trustee formerly Robert Law Professor of Business Administration,
70 East Cedar Street Graduate School of Business, University of Chicago (until
Chicago, Illinois July, 1989); Business Consultant.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Dr. Manuel H. Johnson ................................ Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Koch Professor of International Eco-
7521 Old Dominion Drive nomics and Director of the Center for Global Market
McLean, Virginia Studies at George Mason University (since September,
1990); Co-Chairman and a founder of the Group of Seven
Council (G7C), an international economic commission (since
September, 1990); Director or Trustee of the Dean Witter
Funds; Trustee of the TCW/DW Funds; Director of Greenwich
Capital Markets Inc. (broker-dealer); formerly Vice
Chairman of the Board of Governors of the Federal Reserve
System (February, 1986-August, 1990) and Assistant
Secretary of the U.S. Treasury (1982-1986).
Paul Kolton .......................................... Director or Trustee of the Dean Witter Funds; Chairman of
Trustee the Audit Committee and Chairman of the Committee of the
9 Hunting Ridge Road Independent Trustees and Trustee of the TCW/DW Funds;
Stamford, Connecticut formerly Chairman of the Financial Accounting Standards
Advisory Council and Chairman and Chief Executive Officer
of the American Stock Exchange; Director of UCC Investors
Holdings Inc. (Uniroyal Chemical Company, Inc.); director
or trustee of various not-for-profit organizations.
Michael E. Nugent .................................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership (since April, 1988); Director or
237 Park Avenue Trustee of the Dean Witter Funds; Trustee of the TCW/DW
New York, New York Funds; formerly Vice President, Bankers Trust Company and
BT Capital Corporation (September, 1984-March, 1988);
Director of various business organizations.
Edward R. Telling* ................................... Retired; Director or Trustee of the Dean Witter Funds;
Trustee formerly Chairman of the Board of Directors and Chief
Sears Tower Executive Officer (1978-1985) and President (from January,
Chicago, Illinois 1981-March, 1982 and from February, 1984-August, 1984) of
Sears, Roebuck and Co.; formerly Director of Sears,
Roebuck and Co.
Sheldon Curtis* ...................................... Senior Vice President, Secretary and General Counsel of
Vice President, Secretary InterCapital and DWSC; Senior Vice President and Secretary
and General Counsel of Dean Witter Trust Company (since October, 1989); Senior
Two World Trade Center Vice President, Assistant Secretary and Assistant General
New York, New York Counsel of Distributors; Assistant Secretary of DWDC and
DWR; Vice President, Secretary and General Counsel of the
Dean Witter Funds and the TCW/DW Funds.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Diane Lisa Sobin ..................................... Vice President (since May, 1991) and Portfolio Manager
Vice President (May, 1986-March 1989) of InterCapital; Vice President of
Two World Trade Center various Dean Witter Funds.
New York, New York
Thomas F. Caloia ..................................... First Vice President (since May, 1991) and Assistant
Treasurer Treasurer (since January 1993) of InterCapital; First Vice
Two World Trade Center President and Assistant Treasurer of DWSC and Treasurer of
New York, New York the Dean Witter Funds and the TCW/DW Funds; previously
Vice President of InterCapital.
<FN>
- ------------------------
*Denotes Trustees who are "Interested persons" of the Fund, as defined in the
Act.
</TABLE>
In addition, Robert M. Scanlan, President of InterCapital, and David A
Hughey and Edmund C. Puckhaber, Executive Vice Presidents of InterCapital, and
Thomas H. Connelly, Paul D. Vance and Ira W. Ross, Senior Vice Presidents of
InterCapital, are Vice Presidents of the Fund. Barry Fink, First Vice President
and Assistant General Counsel of InterCapital, and Marilyn K. Cranney, Lawrence
S. Lafer, LouAnne D. McInnis, and Ruth Rossi, Vice Presidents and Assistant
General Counsels of InterCapital, are Assistant Secretaries of the Fund.
The Fund pays each trustee who is not an employee, or retired employee, of
the Investment Manager or an affiliated company an annual fee of $1,200 plus $50
for each meeting of the Board of Trustees, the Audit Committee or the Committee
of the Independent Trustees attended by the Trustee in person (the Fund pays the
Chairman of the Audit Committee an additional annual fee of $1,000 meeting fee
and pays the Chairman of the Committee of the Independent Trustees an additional
annual fee of $2,400 in each case inclusive of the Committee meeting fees). The
Fund also reimburses trustees for travel and other out-of-pocket expenses
incurred by them in connection with attending such meetings. Trustees and
officers of the Fund who are employed by the Investment Manager or an affiliated
company thereof receive no compensation or expense reimbursement from the Fund.
As of the date of this Statement of Additional Information, the aggregate shares
of the Fund owned by the Fund's officers and directors as a group was less than
1 percent of the Fund's shares outstanding. For the fiscal year ended October
31, 1993, the Fund accrued a total of $22,309 in Trustee's fees and expenses.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES
As discussed in the Prospectus, the Fund may invest up to 35% of its total
assets in, among other securities, securities issued by the U.S. Government, its
agencies or instrumentalities. Such securities include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to 30 years.
8
<PAGE>
(3) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but whose issuing
agency or instrumentality has the right to borrow, to meet its obligations,
from an existing line of credit with the U.S. Treasury. Among the agencies
and instrumentalities issuing such obligations are the Tennessee Valley
Authority, the Federal National Mortgage Association ("FNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") and the U.S. Postal Service.
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal Farm
Credit System and the Federal Home Loan Banks.
Neither the value nor the yield of the U.S. Government securities which may
be invested in by the Fund are guaranteed by the U.S. Government. Such values
and yield will fluctuate with changes in prevailing interest rates and other
factors. Generally, as prevailing interest rates rise, the value of any U.S.
Government securities held by the Fund will fall. Such securities with longer
maturities generally tend to produce higher yields and are subject to greater
market fluctuation as a result of changes in interest rates than debt securities
with shorter maturities. The Fund may invest up to 20% of its total assets in
long-term U.S. Government securities.
ZERO COUPON TREASURY SECURITIES
A portion of the U.S. Government securities purchased by the Fund may be
"zero coupon" Treasury securities. These are U.S. Treasury bills, notes and
bonds which have been stripped of their unmatured interest coupons and receipts
or which are certificates representing interests in such stripped debt
obligations and coupons. Such securities are purchased at a discount from their
face amount, giving the purchaser the right to receive their full value at
maturity. A zero coupon security pays no interest to its holder during its life.
Its value to an investor consists of the difference between its face value at
the time of maturity and the price for which it was acquired, which is generally
an amount significantly less than its face value (sometimes referred to as a
"deep discount" price).
The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant rate
eliminates the risk of receiving lower yields upon reinvestment of interest if
prevailing interest rates decline, the owner of a zero coupon security will be
unable to participate in higher yields upon reinvestment of interest received if
prevailing interest rates rise. For this reason, zero coupon securities are
subject to substantially greater market price fluctuations during periods of
changing prevailing interest rates than are comparable debt securities which
make current distributions of interest. Current federal tax law requires that a
holder (such as the Fund) of a zero coupon security accrue a portion of the
discount at which the security was purchased as income each year even though the
Fund receives no interest payments in cash on the security during the year. See
"Dividends, Distributions and Taxes" for a discussion of the tax treatment of
zero coupon Treasury securities.
Currently the only U.S. Treasury security issued without coupons is the
Treasury bill. However, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of the U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a custodial or
trust account).
FOREIGN SECURITIES
As discussed in the Prospectus, investing in securities issued by companies
whose principal business activities are outside the United States may involve
risks not present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Foreign
9
<PAGE>
issuers are generally not bound by uniform accounting, auditing and financial
reporting requirements comparable to those applicable to U.S. issuers. Foreign
stock markets, while growing in volume and sophistication, are generally not as
developed as those in the U.S. and securities of some foreign issuers,
particularly those located in developing countries, may be less liquid and more
volatile than securities of comparable U.S. companies. Foreign brokerage
commissions are generally higher than commissions on securities traded in the
U.S. and foreign securities trading practices, including those involving
securities settlement, may expose the Fund's portfolio to increased risk in the
event of a failed trade or the insolvency of a foreign broker-dealer. Moreover,
there is generally less overall governmental supervision and regulation of
securities exchanges, brokers and listed companies than in the U.S.
Investments in foreign securities also involve the risk of possible adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets,
political or financial instability or diplomatic and other developments which
could affect such investments. In addition, since the securities of foreign
issuers are generally denominated in foreign currencies, fluctuations in
monetary exchange rates will affect the dollar value of the Fund's foreign
investments.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
As discussed in the Prospectus, the Fund may enter into foreign currency
exchange transactions as a way of managing exchange rate risks. The Fund will
conduct its foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market, or
through entering into forward contracts to purchase or sell foreign currencies.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted directly
between currency traders (usually large, commercial banks) and their customers.
Such forward contracts will only be entered into with United States banks and
their foreign branches or foreign banks whose assets total $1 billion or more. A
forward contract generally has no deposit requirement, and no commissions are
charged at any stage for trades.
The Fund may enter into a forward contract under the following
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency or is informed that it will
receive a dividend denominated in a foreign currency, it may desire to "lock in"
the U.S. dollar price of the security or the value of the dividend. By entering
into a forward contract for the purchase or sale, for a fixed amount of U.S.
dollars, of the amount of foreign currency involved in the underlying securities
transaction or dividend payment, the Fund will be able to protect itself against
a possible low resulting from and adverse change in the relationship between the
U.S. dollar and the respective foreign currency during the period between (i)
the time the security is purchased or sold and the date on which payment is made
or received or (ii) the time the dividend is declared by an issuer and the date
when it is received by the Fund. Second, when management of the Fund believes
that the currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar, it may enter into a forward contract to sell,
for a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. The Fund will also not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts would obligate the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, the Investment Manager believes that it is important to have the
flexibility to enter
10
<PAGE>
into such forward contracts when it determines that the best interests of the
Fund will be served. The Fund's custodian bank will place cash, U.S. Government
securities, debt securities or equity securities in a separate account of the
Fund in an amount equal to the value of the Fund's total assets committed to the
consummation of forward contracts entered into under the circumstances set forth
above. If the value of the securities placed in the separate account declines,
additional cash or securities will be placed in the account on a daily basis so
that the value of the account will equal the amount of the Fund's commitments
with respect to such contracts.
At the maturity of a forward contract for delivery by the Fund of a foreign
currency, the Fund may either sell the portfolio security and make delivery of
the foreign currency, or it may retain the security and terminate its
contractual obligation to deliver the foreign currency by purchasing an
"offsetting" contract with the same currency trader obligating it to purchase,
on the same maturity date, the same amount of the foreign currency. It is
impossible to forecast the market value of portfolio securities at the
expiration of the contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of the portfolio security if its market value exceeds the amount
of foreign currency the Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been movement in spot or forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the foreign currency. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase of
the foreign currency, the Fund will realize a gain to the extent the price of
the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Fund will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell. The Fund generally will not enter
into a forward contract for a term greater than one year.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will, however, do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the spread
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
OPTIONS AND FUTURES TRANSACTIONS
As discussed in the Prospectus, the Fund may write covered call options
against securities held in its portfolio and covered put options on eligible
portfolio securities and may purchase options of the same series to effect
closing transactions. The Fund may also hedge against potential changes in the
market value of its investments, or anticipated investments, by purchasing put
and call options on portfolio securities and engaging in transactions involving
futures contracts and options on such contracts.
COVERED CALL WRITING. As stated in the Prospectus, the Fund is permitted to
write covered call options on portfolio securities, without limit, in order to
aid in achieving its investment objectives. Generally, a call option is
"covered" if the Fund owns, or has the right to acquire, without additional cash
consideration (or for additional cash consideration held for the Fund by its
Custodian in a segregated account) the underlying security or currency subject
to the option except that in the case of call options on U.S. Treasury Bills,
the Fund might own U.S. Treasury Bills of a different series from those
underlying the call option, but with a principal amount and value corresponding
to the exercise price and a maturity date no later than that of the security
deliverable under the call option. A call option is also covered if the
11
<PAGE>
Fund holds a call on the same security as the underlying security of the written
option, where the exercise price of the call used for coverage is equal to or
less than the exercise price of the call written or greater than the exercise
price of the call written if the mark to market difference is maintained by the
Fund in cash, U.S. Government securities or other high grade debt obligations
which the Fund holds in a segregated account maintained with its Custodian.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities or currencies alone. Moreover,
the premium received will offset a portion of the potential loss incurred by the
Fund if the securities underlying the option are ultimately sold or exchanged by
the Fund at a loss. The premium received will fluctuate with varying economic
market conditions. If the market value of the portfolio securities upon which
call options have been written increases, the Fund may receive a lower total
return from the portion of its portfolio upon which calls have been written than
it would have had such calls not been written.
As regards listed options and certain over-the-counter ("OTC") options,
during the option period, the Fund may be required, at any time, to deliver the
underlying security against payment of the exercise price on any calls it has
written (exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation is terminated upon the expiration of the
option period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of an underlying security or to enable the Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. The Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the amount of the premium
received on the call option is more or less than the cost of effecting the
closing purchase transaction. Any loss incurred in a closing purchase
transaction may be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part or exceeded by
a decline in the market value of the underlying security or currency.
If a call option expires unexercised, the Fund realizes a gain in the amount
of the premium on the option less the commission paid. Such a gain, however, may
be offset by depreciation in the market value of the underlying security during
the option period. If a call option is exercised, the Fund realizes a gain or
loss from the sale of the underlying security equal to the difference between
the purchase price of the underlying security and the proceeds of the sale of
the security plus the premium received for on the option less the commission
paid.
Options written by the Fund will normally have expiration dates of up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written. See "Risks of Options and Futures
Transactions," below.
COVERED PUT WRITING. As stated in the Prospectus, the Fund may write
covered put options on portfolio securities. As a writer of a covered put
option, the Fund incurs an obligation to buy the security underlying the option
from the purchaser of the put, at the option's exercise price at any time during
the option period, at the purchaser's election (certain listed and OTC put
options written by the Fund will be exercisable by the purchaser only on a
specific date). A put is "covered" if, at all times, the Fund maintains, in a
segregated account maintained on its behalf at the Fund's Custodian, cash, U.S.
Government securities or other high grade obligations in an amount equal to at
least the exercise price of the option, at all times during the option period.
Similarly, a short put position could be covered by the Fund by its purchase of
a put option on the same security as the underlying security of the written
option,
12
<PAGE>
where the exercise price of the purchased option is equal to or more than the
exercise price of the put written or less than the exercise price of the put
written if the marked to market difference is maintained by the Fund in cash,
U.S. Government securities or other high grade debt obligations which the Fund
holds in a segregated account maintained at its Custodian. In writing puts, the
Fund assumes the risk of loss should the market value of the underlying security
decline below the exercise price of the option (any loss being decreased by the
receipt of the premium on the option written). In the case of listed options,
during the option period, the Fund may be required, at any time, to make payment
of the exercise price against delivery of the underlying security. The operation
of and limitations on covered put options in other respects are substantially
identical to those of call options.
The Fund will write put options for three purposes: (1) to receive the
income derived from the premiums paid by purchasers; (2) when the Investment
Manager wishes to purchase the security underlying the option at a price lower
than its current market price, in which case it will write the covered put at an
exercise price reflecting the lower purchase price sought; and (3) to close out
a long put option position. The potential gain on a covered put option is
limited to the premium received on the option (less the commissions paid on the
transaction) while the potential loss equals the differences between the
exercise price of the option and the current market price of the underlying
securities when the put is exercised, offset by the premium received (less the
commissions paid on the transaction).
PURCHASING CALL AND PUT OPTIONS. As stated in the Prospectus, the Fund may
purchase listed and OTC call and put options in amounts equalling up to 10% of
its total assets. The Fund may purchase a call option in order to close out a
covered call position (see "Covered Call Writing" above), to protect against an
increase in price of a security it anticipates purchasing. The purchase of the
call option to effect a closing transaction on a call written over-the-counter
may be a listed or an OTC option. In either case, the call purchased is likely
to be on the same securities and have the same terms as the written option. If
purchased over-the-counter, the option would generally be acquired from the
dealer or financial institution which purchased the call written by the Fund.
The Fund may purchase put options on securities which it holds in its
portfolio only to protect itself against a decline in the value of the security.
If the value of the underlying security were to fall below the exercise price of
the put purchased in an amount greater than the premium paid for the option, the
Fund would incur no additional loss. The Fund may also purchase put options to
close out written put positions in a manner similar to call options closing
purchase transactions. In addition, the Fund may sell a put option which it has
previously purchased prior to the sale of the securities underlying such option.
Such a sale would result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the put option which is sold. Any such gain or loss could be
offset in whole or in part by a change in the market value of the underlying
security. If a put option purchased by the Fund expired without being sold or
exercised, the premium would be lost.
RISKS OF OPTIONS TRANSACTIONS. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price should the market price of the
underlying security increase, but has retained the risk of loss should the price
of the underlying security decline. The secured put writer also retains the risk
of loss should the market value of the underlying security decline below the
exercise price of the option less the premium received on the sale of the
option. In both cases, the writer has no control over the time when it may be
required to fulfill its obligation as a writer of the option. Once an option
writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must
deliver or receive the underlying securities at the exercise price.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction or to purchase
an offsetting OTC option, it cannot sell the underlying security until the
option expires or the option is exercised. Accordingly, a covered call option
writer may not be able to sell an underlying security at a time when it might
otherwise be advantageous to do so. A secured put option
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writer who is unable to effect a closing purchase transaction or to purchase an
offsetting OTC option would continue to bear the risk of decline in the market
price of the underlying security until the option expires or is exercised. In
addition, a secured put writer would be unable to utilize the amount held in
cash or U.S. Government or other high grade short-term obligations securities as
security for the put option for other investment purposes until the exercise or
expiration of the option.
As discussed in the Prospectus, the Fund's ability to close out its position
as a writer of an option is dependent upon the existence of a liquid secondary
market on Option Exchanges. There is no assurance that such a market will exist,
particularly in the case of OTC options, as such options will generally only be
closed out by entering into a closing purchase transaction with the purchasing
dealer. However, the Fund may be able to purchase an offsetting option which
does not close out its position as a writer but constitutes an asset of equal
value to the obligation under the option written. If the Fund is not able to
either enter into a closing purchase transaction or purchase an offsetting
position, it will be required to maintain the securities subject to the call, or
the collateral underlying the put, even though it might not be advantageous to
do so, until a closing transaction can be entered into (or the option is
exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an Exchange; (v) inadequacy of the facilities of an Exchange or
the Options Clearing Corporation ("OCC") to handle current trading volume; or
(vi) a decision by one or more Exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would generally continue to be
exercisable in accordance with their terms.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the Fund,
the Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by the Fund only with brokers or financial
institutions deemed creditworthy by the Investment Manager.
Each of the Exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different Exchanges or are held or written on
one or more accounts or through one or more brokers). An Exchange may order the
liquidation of positions found to be in violation of these limits and it may
impose other sanctions or restrictions. These position limits may restrict the
number of listed options which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
FUTURES CONTRACTS AND OPTIONS THEREON. As stated in the Prospectus, the
Fund may invest in futures contracts on precious metals ("futures contracts")
and related options thereon. These futures contracts and related options thereon
will be used only as a hedge against anticipated changes in the prices of
precious metals. A futures contract sale creates an obligation by the Fund, as
seller, to deliver cash or the specific type of instrument called for in the
contract at a specified future time for a specified price. A futures contract
purchase would create an obligation by the Fund, as purchaser, to take delivery
of cash or the specific type of financial instrument at a specified future time
at a specified price. The
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specific securities delivered or taken, respectively, at settlement date would
not be determined until or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was effected.
Although the terms of futures contracts specify actual delivery or receipt
of securities or specific instrument, in most instances the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out of a futures contract is usually effected by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale is effected
by the Fund entering into a futures contract purchase for the same aggregate
amount of the specific type of financial instrument and same delivery date. If
the price in the sale exceeds the price in the offsetting purchase, the Fund is
immediately paid the difference and thus realizes a gain. If the offsetting
purchase price exceeds the sale price, the Fund pays the difference and realizes
a loss. Similarly, the closing out of a futures contract purchase is effected by
the Fund entering into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the Fund realizes a gain, and if the offsetting sale
price is less than the purchase price, the Fund realizes a loss. Futures
contracts on indexes do not require the physical delivery of securities, but
provide for a final cash settlement on the expiration date which reflects
accumulated profits and losses credited or debited to each party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects futures contracts and options thereon. The initial
margin requirements vary according to the type of the underlying security. In
addition, due to current industry practice, daily variations in gains and losses
on open contracts are required to be reflected in cash in the form of variation
margin payments. The Fund may be required to make additional margin payments
during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may elect
to close the position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or gain.
OPTIONS ON FUTURES CONTRACTS. The writer of an option on a futures contract
is required to deposit initial and variation margin pursuant to requirements
similar to those applicable to futures contracts. Premiums received from the
writing of an option on a futures contract are included in initial margin
deposits.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. As stated
in the Prospectus, the Fund may sell a futures contract to protect against the
decline in the value of securities (or the currency in which they are
denominated) held by the Fund. However, it is possible that the futures market
may advance and the value of securities held in the portfolio of the Fund may
decline. If this occurred, the Fund would lose money on the futures contract and
also experience a decline in value of its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio will tend to move in the same direction as
the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of assets it intends to buy, and the value of such assets decreases, then
the Fund may determine not to invest in the securities as planned and will
realize a loss on the futures contract that is not offset by a reduction in the
price of the securities.
In order to assure that the Fund is entering into transactions in futures
contracts for hedging purposes as such is defined by the Commodity Futures
Trading Commission either: 1) a substantial majority (i.e., approximately 75%)
of all anticipatory hedge transactions (transactions in which the Fund does not
own at the time of the transaction, but expects to acquire, the securities
underlying the relevant futures contract) involving the purchase of futures
contracts will be completed by the purchase of securities which are the subject
of the hedge or 2) the underlying value of all long positions in futures
contracts will not exceed the total value of a) all short-term debt obligations
held by the Fund; b) cash held by the Fund; c) cash proceeds due to the Fund on
investments within thirty days; d) the margin deposited on the contracts; and e)
any unrealized appreciation in the value of the contracts.
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<PAGE>
If the Fund has sold a call option in a futures contract, it will cover this
position by holding, in a segregated account maintained at its Custodian, cash,
U.S. Government securities or other liquid assets, including high grade debt
securities, equal in value (when added to any initial or variation margin on
deposit) to the market value of the securities (currencies) underlying the
futures contract or the exercise price of the option. Such a position may also
be covered by owning the securities (currencies) underlying the futures
contract, or by holding a call option permitting the Fund to purchase the same
contract at a price no higher than the price at which the short position was
established.
In addition, if the Fund holds a long position in a futures contract or has
sold a put option on a futures contract, it will hold cash, U.S. Government
securities or other liquid assets, including high grade debt securities, equal
to the purchase price of the contract or the exercise price of the put option
(less the amount of initial or variation margin on deposit) in a segregated
account maintained for the Fund by its Custodian. Alternatively, the Fund could
cover its long position by purchasing a put option on the same futures contract
with an exercise price as high or higher than the price of the contract held by
the Fund.
Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to take or make delivery of the instruments underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
the Fund's ability to effectively hedge its portfolio.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by the Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by the Fund only with brokers
or financial institutions deemed creditworthy by the Investment Manager.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of Fund assets is that the prices subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Fund's assets. A correlation may
also be distorted by the fact that the futures market is dominated by short-term
traders seeking to profit from the difference between a contract or asset price
objective and their cost of borrowed funds. Such distortions are generally minor
and would diminish as the contract approached maturity.
As stated in the Prospectus, there may exist an imperfect correlation
between the price movements of futures contracts purchased by the Fund and the
movements in the prices of the assets which are the subject of the hedge. If
participants in the futures market elect to close out their contracts through
offsetting transactions rather than meet margin deposit requirements,
distortions in the normal relationship between the debt securities or currency
markets and futures markets could result. Price distortions could also result if
investors in futures contracts opt to make or take delivery of underlying assets
rather than engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, due to the fact that, from the
point of view of speculators, the deposit requirements in the futures markets
are less onerous than margin requirements in the cash market, increased
participation by speculators in the futures market could cause temporary price
distortions. Due to the possibility of
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<PAGE>
price distortions in the futures market and because of the imperfect correlation
between movements in the prices of securities and movements in the prices of
futures contracts, a correct forecast of interest rate trends by the Investment
Manager may still not result in a successful hedging transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which the Fund
may invest. In the event a liquid market does not exist, it may not be possible
to close out a futures position, and in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of variation
margin. In addition, limitations imposed by an exchange or board of trade on
which futures contracts are traded may compel or prevent the Fund from closing
out a contract which may result in reduced gain or increased loss to the Fund.
The absence of a liquid market in futures contracts might cause the Fund to make
or take delivery of the underlying assets at a time when it may be
disadvantageous to do so.
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund
notwithstanding that the purchase or sale of a futures contract would not result
in a loss, as in the instance where there is no movement in the prices of the
futures contract or underlying assets.
OTHER INVESTMENT POLICIES
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. The
collateral will be maintained in a segregated account and will be marked to
market daily to determine that the full value of the collateral, as specified in
the agreement, does not decrease below the purchase price plus accrued interest.
If such decrease occurs, additional collateral will be requested from the
counterparty and when reviewed added to maintain full collateralization. In the
event the original seller defaults on its obligations to repurchase, as a result
of its bankruptcy or otherwise, the Fund will seek to sell the collateral, which
action could involve costs or 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. During the fiscal year ended
October 31, 1993, the Fund did not enter into repurchase agreements in an amount
greater than 5% of the Fund's net assets.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. 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 and may purchase or sell securities on a forward commitment basis. When
such transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. The securities
17
<PAGE>
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
high grade debt 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 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. During the fiscal year ended October 31, 1993, the
Fund did not purchase any such securities.
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 high grade debt portfolio securities equal
in value to recognized commitments for such securities. Settlement of the trade
will occur within five business days of the occurrence of the subsequent event.
The value of the Fund's commitments to purchase the securities of any one
issuer, together with the value of all securities of such issuer owned by the
Fund, may not exceed 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made (see "Investment
Restrictions"). Subject to the foregoing restrictions, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value. The Investment
Manager and the Trustees do not believe that the net asset value of the Fund
will be adversely affected by its purchase of securities on such basis. The Fund
may also sell securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of the sale. During the
fiscal year ended October 31, 1993, the Fund did not purchase any when, as and
if issued 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 notice provisions described below), and are at all times
secured by cash or appropriate high-grade debt obligations, 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. The
advantage of such loans is that the Fund continues to receive the income on the
loaned securities while at the same time earning interest on the cash amounts
deposited as collateral, which will be invested in short-term obligations. The
Fund will not lend its portfolio securities if such loans are not permitted by
the laws or regulations of any state in which its shares are qualified for sale
and will not lend more than 25% of the value of its total assets. A loan may be
terminated by the borrower on one business days' notice, or by the Fund on two
business days' notice. If the borrower fails to deliver the loaned securities
within two days after receipt of notice, the Fund could use the collateral to
replace the securities while holding the borrower liable for any excess of
replacement cost over collateral. As with any extensions of credit, there are
risks of delay in recovery and in some cases even loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms deemed by the
Fund's management to be
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<PAGE>
creditworthy and when the income which can be earned from such loans justifies
the attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price during
the loan period would inure to the Fund. The creditworthiness of firms to which
the Fund lends its portfolio securities will be monitored on an ongoing basis by
the Investment Manager pursuant to procedures adopted and reviewed, on an
ongoing basis, by the Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative
and custodial fees in connection with a loan of its securities. During the
fiscal year ended October 31, 1993, the Fund did not loan any of its portfolio
securities and it has no intention of doing so in the foreseeable future.
WARRANTS. The Fund may acquire warrants attached to other securities and,
in addition may invest up to 5% of the value of its total assets in warrants,
including up to 2% of such assets in warrants not listed on the New York or
American Stock Exchanges or a recognized foreign stock exchange. Warrants are,
in effect, an option to purchase equity securities at a specific price,
generally valid for a specific period of time, and have no voting rights, pay no
dividends and have no rights with respect to the corporation issuing them.
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, or which are otherwise not
readily marketable. 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 recently adopted Rule 144A under
the Securities Act of 1933, which will permit the Fund to sell restricted
securities to qualified institutional buyers without limitation. The Trustees of
the Fund have adopted procedures for the Investment Manager to utilize in
determining the liquidity of securities which may be sold pursuant to Rule 144A.
In addition, the Trustees have determined that, where such securities are
determined to be liquid under these procedures, investment in such securities by
the Fund shall not be subject to the 5% limitation referred to above. The Rule
144A marketplace of sellers and qualified institutional buyers is new and still
developing and may take a period of time to develop into a mature liquid market.
As such, the market for certain private placements purchased pursuant to Rule
144A may be initially small or may, subsequent to purchase, become illiquid.
Futhermore, the Investment Manager may not be possessed of all the information
concerning an issue of securities that it wishes to purchase in a private
placement to which it would normally have had access, had the registration
statement necessitated by a public offering been filed with the Securities and
Exchange Commission. During the fiscal year ended October 31, 1993, the Fund did
not purchase any such restricted securities.
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.
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The Fund may not:
1. Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or trustee of the Fund or any officer or director of the
Investment Manager owns more than 1/2 of 1% of the outstanding securities of
such issuer, and such officers, trustees and directors who own more than 1/2
of 1% own in the aggregate more than 5% of the outstanding securities of
such 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. 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. The
staff of the Securities and Exchange Commission ("SEC") has taken the
position that purchased OTC options and the assets used as "cover" for
written OTC options are illiquid securities. The Investment Manager
disagrees with this position. Nevertheless, the Fund has agreed to treat OTC
options and the covering assets thereon as illiquid securities for purposes
of this investment restriction.
4. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets or, by purchase in the open market of securities of closed-end
investment companies where no underwriter's or dealer's commission or
profit, other than customary broker's commissions, is involved and only if
immediately thereafter not more than 10% of the Trust's total assets would
be invested in such securities.
5. Purchase or sell commodities or commodities contracts (other than
precious metals or minerals commodities or contracts) provided however that
the Fund may invest in futures and related options thereon.
6. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the purchase
of a security on margin.
7. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement; (b) purchasing any securities on a
when-issued or delayed delivery basis; (c) purchasing or selling futures
contracts, forward foreign exchange contracts or options; (d) borrowing
money in accordance with restrictions described above; or (e) lending
portfolio securities.
8. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(6). For the purpose of this restriction, collateral arrangements with
respect to the writing of options and collateral arrangements with respect
to initial or variation margin for futures are not deemed to be pledges of
assets.
9. 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 objectives and policies; (b) by investment in
repurchase agreements; or (c) by lending its portfolio securities.
10. Make short sales of securities.
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.
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13. Invest in warrants (other than warrants acquired by the Fund as part
of a unit or attached to securities at the time of purchase) if, as a
result, the investments would exceed 5% of the value of the Fund's total
assets of which not more than 2% of the Fund's total assets may be invested
in warrants not listed on the New York or American Stock Exchange or a
recognized foreign stock exchange.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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Subject to the general supervision of the Board of Trustees, the Investment
Manager is responsible for decisions to buy and sell securities for the Fund,
the selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a stock exchange are effected through brokers who charge a commission for
their services. The Fund expects that the primary market for the securities in
which it intends to invest will generally be the over-the-counter market. In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. The
Fund expects that securities will be purchased at times in underwritten
offerings where the price includes a fixed amount of compensation, generally
referred to as the underwriter's concession or discount. Options and futures
transactions will usually be effected through a broker and a commission will be
charged. On occasion, the Fund may also purchase certain money market
instruments directly from an issuer, in which case no commissions or discounts
are paid. During the fiscal years ended October 31, 1993, October 31, 1992 and
October 31, 1991, the Fund paid $160,768, $39,296 and $19,939 in brokerage
commissions respectively.
The Investment Manager currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, the main
factors considered are the respective investment objectives, the relative size
of portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of the Fund and
other client accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager from obtaining a high quality of
brokerage and research services. In seeking to determine the reasonableness of
brokerage commissions paid in any transaction, the Investment Manager relies
upon its experience and knowledge regarding commissions generally charged by
various brokers and on its judgment in evaluating the brokerage and research
services received from the broker effecting the transaction. Such determinations
are necessarily subjective and imprecise, as in most cases an exact dollar value
for those services is not ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on securities exchanges. Fixed commissions on such
transactions are generally higher than negotiated commissions on domestic
transactions. There is also generally less government supervision and regulation
of foreign securities exchanges and brokers than in the United States.
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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 the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the management fee paid to the Investment
Manager is not reduced by any amount that may be attributable to the value of
such services. During the fiscal year ended October 31, 1993 the Fund did not
direct any brokerage commissions in connection with transactions because of
research services provided.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR. In order for DWR to effect any portfolio transactions for
the Fund, the commissions, fees or other remuneration received by DWR must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow DWR to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Board of Trustees of the
Fund, including a majority of the Trustees who are not "interested" persons of
the Fund, as defined in the Act, have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to DWR
are consistent with the foregoing standard. The Fund does not reduce the
management fee it pays to the Investment Manager by the amount of brokerage
commissions it may pay to DWR. During the fiscal years ended October 31, 1993,
October 31, 1992 and October 31, 1991, the Fund paid a total of $10,015, $6,450,
and $4,825 respectively in brokerage commissions to DWR. During the fiscal year
ended October 31, 1993 the brokerage commissions paid to DWR represented
approximately 16.23% of the total brokerage commissions paid by the Fund during
the year and were paid on account of transactions having an aggregate dollar
value equal to approximately 10.08% of the aggregate dollar value of all
portfolio transactions of the Fund during the year for which commissions were
paid.
Section 11(a) of the Securities Exchange Act of 1934 generally prohibits
members of the United States national securities exchanges from executing
exchange transactions for their affiliates and institutional accounts which they
manage, permits such exchange members to execute such securities transactions on
an exchange only if the affiliate or account expressly consents. To the extent
Section 11(a) would apply to DWR acting as a broker for the Fund in any of its
portfolio transactions executed on any such securities exchange of which it is a
member, appropriate written consents have been given.
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PORTFOLIO TRADING
It is anticipated that the Fund's portfolio turnover rate will not exceed
100% in any one year. A 100% turnover rate would occur, for example, if 100% of
the securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced within
one year. During the fiscal years ended October 31, 1993, October 31, 1992 and
October 31, 1991, the Fund's portfolio turnover rates were 25%, 9%, and 11%
respectively.
THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of DWDC. The Trustees of the
Fund, including a majority of the Trustees who are not, and were not at the time
they voted, interested persons of the Fund, as defined in the Act (the
"Independent Trustees"), approved, at their meeting held on October 30, 1992,
approved the current Distribution Agreement appointing the Distributor as
exclusive distributor of the Fund's shares and providing for the Distributor to
bear distribution expenses not borne by the Fund. By its terms, the Distribution
Agreement will continue in effect until April 30, 1994, and 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 to prospective Shareholders. The Fund bears
the costs of initial typesetting, printing and distribution of prospectuses and
supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws. The
Fund and the Distributor have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Under the Distribution Agreement, the Distributor uses its best efforts in
rendering services to the Fund, but in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations, the
Distributor is not liable to the Fund or any of its shareholders for any error
of judgment or mistake of law or for any act or omission or for any losses
sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan") pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at the annual rate of 1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or (b)
the Fund's average daily net assets. The Distributor also receives the proceeds
of contingent deferred sales charges imposed on certain redemptions of shares,
which are separate and apart from payments made pursuant to the Plan (see
"Redemptions and Repurchases -- Contingent Deferred Sales Charge" in the
Prospectus. The Distributor, has informed the Fund that for the fiscal years
ended October 31, 1993, October 31, 1992 and October 31, 1991, it and/or DWR
received approximately $101,000, $39,000 and $35,000, respectively in contingent
deferred sales charges none of which was retained by the Distributor.
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<PAGE>
The Distributor has informed the Fund that a portion of the fees payable by
the Fund each year pursuant to the Plan equal to 0.25% of the Fund's average
daily net assets is characterized as a "service fee" under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (of which the
Distributor is a member). Such portion of the fee is a payment made for personal
service and/or the maintenance of shareholder accounts. The remaining portion of
the Plan fees payable by the Fund is characterized as an "asset-based sales
charge" as such is defined by the aforementioned Rules of Fair Practice.
The Plan was adopted by a vote of the Trustees of the Fund on February 15,
1990, and on April 12, 1990, 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 the then sole shareholder of the Fund,
approved the Plan on June 7, 1990, whereupon the Plan went into effect.The
shareholders of the Fund, holding a majority, as defined in the Act, of the
outstanding voting securities of the Fund, approved the Plan at a Special
Meeting of Shareholders held on September 20, 1991.
Under its terms, the Plan had an initial term ending April 30, 1991 and
provides that it will remain in effect from year to year thereafter, provided
such continuance is approved annually by a vote of the Trustees in the manner
described above. The most recent continuance of the Plan for one year, until
April 30, 1994, was approved by the Board of Trustees of the Fund, including a
majority of the Independent 12b-1 Trustees, at a meeting of the Trustees held on
April 28, 1993. At that meeting, the Trustees, including a majority of the
Independent 12b-1 Trustees, also approved certain technical amendments to the
Plan in connection with recent amendments adopted by the National Association of
Securities Dealers, Inc. to its Rules of Fair Practice. Prior to approving the
continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated; (2)
the benefits the Fund had obtained, was obtained and would be likely to obtain
under the Plan; and (3) what services had been provided and were continuing to
be provided under the Plan to the Fund and its shareholders. Based upon their
review, the Trustees of the Fund, including each of the Independent 12b-1
Trustees, determined that continuation of the Plan would be in the best interest
of the Fund and would have a reasonable likelihood of continuing to benefit the
Fund and its shareholders. In the Trustee's quarterly review of the Plan, they
will consider its continued appropriateness and the level of compensation
provided herein.
At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved certain amendments to
the Plan which took effect in January, 1993 and were designed to reflect the
fact that upon the reorganization described above the share distribution
activities theretofore performed for the Fund by DWR were assumed by the
Distributor and DWR's sales activities are now being performed pursuant to the
terms of a selected dealer agreement between the Distributor and DWR. The
amendments provide that payments under the Plan will be made to the Distributor
rather than to DWR as before the amendment, and that the Distributor in turn is
authorized to make payments to DWR, its affiliates or other selected
broker-dealers (or direct that the Fund pay such entities directly). The
Distributor is also authorized to retain part of such fee as compensation for
its own distribution-related expenses.
Pursuant to the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. The Fund accrued amounts payable to DWR under
the Plan, during the fiscal year ended October 31, 1993, of $264,356. This
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<PAGE>
amount is equal to payments required to be paid monthly by the Fund which were
computed at the annual rate of 1.0% of the average daily net assets of the Fund
and was calculated pursuant to clause (b) of the compensation formula under the
Plan. This amount is treated by the Fund as an expense in the year it is
accrued.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method shares of the Fund are
sold without a sales load being deducted at the time of purchase, so that the
full amount of an investor's purchase payment will be invested in shares without
any deduction for sales charges. Shares of the Fund may be subject to a
contingent deferred sales charge, payable to the Distributor, if redeemed during
the six years after their purchase. DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of the Fund's shares,
currently a gross sales credit of up to 5% of the amount sold and an annual
residual commission of up to .25 of 1% of the current value of the amount sold
(not including reinvested dividends and distributions). 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. The distribution fee that the Distributor receives
from the Fund under the Plan, in effect, offsets distribution expenses incurred
under the Plan on behalf of the Fund and DWR's opportunity costs, such as the
gross sales credit and an assumed interest charge thereon ("carrying charge").
In the Distributor's reporting of the distribution expenses to the Fund, such
assumed interest (computed at the "broker's call rate") has been calculated on
the gross sales credit as it is reduced by amounts received by the Distributor
under the Plan and any contingent deferred sales 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 $246,356 accrued under the Plan for the fiscal
year ended October 31, 1993 to the Distributor and DWR. The Distributor and DWR
estimate that they have spent, pursuant to the Plan, $2,590,278 on behalf of the
Fund since the inception of the Fund. It is estimated that this amount was spent
in approximately the following ways; (i) 25.31% ($655,547)--advertising and
promotional expenses; (ii) 2.65% ($68,811)--printing of prospectuses for
distribution to other than current shareholders; and (iii) 72.04%
($1,865,920)--other expenses, including the gross sales credit and the carrying
charge, of which 3.57% ($66,551) represents carrying charges, 37.74% ($704,273)
represents commission credits to DWR branch offices for payments of commissions
to account executives and 58.69% ($1,095,096) represents overhead and other
branch office distribution-related expenses.
At any given time, the expenses of distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to the
Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. The Distributor has advised the Fund that
the excess expenses, including the carrying charge designed to approximate the
opportunity costs incurred by DWR which arise from it having advanced monies
without having received the amount of any sales charges imposed at the time of
the sale of Fund's shares, totalled $1,922,320 as of October 31, 1993. Because
there is no requirement under the Plan that the Distributor be reimbursed for
all distribution expenses or any requirement that the Plan be continued from
year to year, this excess amount does not constitute a liability of the Fund.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. Any cumulative expenses
incurred, but not yet recovered through distribution fees or contingent deferred
sales charges, may or may not be recovered through future distribution fees or
contingent deferred sales charges.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or indirect
financial interest in the operation of the Plan except
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<PAGE>
to the extent that the Distributor, InterCapital, DWR or certain of their
employees may be deemed to have such an interest as a result of benefits derived
from the successful operation of the Plan or as a result of receiving a portion
of the amounts expended thereunder by the Fund.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of the
Fund, and all material amendments of the Plan must also be approved by the
Trustees in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent 12b-1
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the Act) on not more than thirty days' written notice to any
other party to the Plan. So long as the Plan is in effect, the election and
nomination of Independent Trustees shall be committed to the discretion of the
Independent Trustees.
DETERMINATION OF NET ASSET VALUE
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The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (which corresponds to the closing time on various options
exchanges) on each day that the New York Stock Exchange is open by taking the
value of all assets of the Fund, subtracting its liabilities, dividing by the
number of shares outstanding and adjusting to the nearest cent. The New York
Stock Exchange currently observes the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Short-term debt securities with remaining maturities of 60 days or less to
maturity at the time of purchase are valued at amortized cost, unless the
Trustees determine such does not reflect the securities' fair value, in which
case these securities will be valued at their fair value as determined by the
Trustees. Other short-term debt securities will be valued on a mark to market
basis until such time as they reach a remaining maturity of 60 days, whereupon
they will be valued at amortized cost using their value on the 61st day unless
the Trustees determine such does not reflect the securities' fair value, in
which case these securities will be valued at their fair value as determined by
the Trustees. Options are valued at the mean between their latest bid and asked
prices. Futures are valued at the last sale price as of the close of the
commodities exchange on which they trade unless the Trustees determine that such
price does not reflect their market value, in which case they will be valued at
their fair value as determined by the Trustees. All other securities and other
assets are valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds, United
States government securities and money market instruments, is substantially
completed each day at various times prior to 4:00 p.m., New York time. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to 4:00 p.m., New York time. Occasionally, events
which affect the values of such securities and such exchange rates may occur
between the times at which they are determined and 4:00 p.m., New York time, and
will therefore not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
SHAREHOLDER SERVICES
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Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund and maintained by the Fund's
Transfer Agent, Dean Witter Trust Company (the "Transfer Agent"). This is an
open account in which shares owned by the investor are credited by the Transfer
Agent in lieu of issuance of a share certificate. If a share certificate is
desired, it must be requested in writing for each transaction. Certificates are
issued only for full shares and may be
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<PAGE>
redeposited in the account at any time. There is no charge to the investor for
issuance of a certificate. Whenever a transaction takes place in the Shareholder
Investment Account, the shareholder will be mailed a confirmation of the
transaction from the Fund or from DWR or other selected broker-dealer.
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of the
Fund is made upon the condition that the Transfer Agent is thereby automatically
appointed as agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and distributions
will be paid, at the net asset value per share, in shares of the Fund (or in
cash if the shareholder so requests) as of the close of business on the record
date. At any time an investor may request the Transfer Agent, in writing, to
have subsequent dividends and/or capital gains distributions paid to him or her
in cash rather than shares. To assure sufficient time to process the change,
such request should be received by the Transfer Agent at least five business
days prior to the record date of the dividend or distribution. In the case of
recently purchased shares for which registration instructions have not been
received on the record date, cash payments will be made to DWR or other selected
broker-dealer, and will be forwarded to the shareholder, upon the receipt of
proper instructions.
TARGETED DIVIDENDS.-TM- In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of an open-end Dean Witter Fund other than Dean
Witter Convertible Securities Trust. Such investment will be made as described
above for automatic investment in shares of the Fund, at the net asset value per
share of the selected Dean Witter Fund as of the close of business on the
payment date of the dividend or distribution and will begin to earn dividends,
if any, in the selected Dean Witter Fund the next business day. To participate
in the Targeted Dividends program, shareholders should contact their DWR or
other selected broker-dealer account executive or the Transfer Agent.
Shareholders of the Fund must be shareholders of the Dean Witter Fund targeted
to receive investments from dividends at the time they enter the Targeted
Dividends program. Investors should review the prospectus of the targeted Dean
Witter Fund before entering the program.
EASYINVEST.-TM- Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected. For further information or to subscribe to
EasyInvest, shareholders should contact their DWR or other selected
broker-dealer account executive or the Transfer Agent.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or distribution may invest
such dividend or distribution at the net asset value per share, without the
imposition of a contingent deferred sales charge upon redemption, by returning
the check or the proceeds to the Transfer Agent within thirty days after the
payment date. If the shareholder returns the proceeds of a dividend or
distribution, such funds must be accompanied by a signed statement indicating
that the proceeds constitute a dividend or distribution to be invested. Such
investment will be made at the net asset value per share next determined after
receipt of the check or proceeds by the Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a withdrawal
plan (the "Withdrawal Plan") is available for shareholders who own or purchase
shares of the Fund having a minimum value of $10,000 based upon the then current
net asset value. The Withdrawal Plan provides for monthly or quarterly (March,
June, September and December) checks in any dollar amount, not less than $25, or
in any whole percentage of the account balance, on an annualized basis. Any
applicable contingent deferred sales charge will be imposed on shares redeemed
under the Withdrawal Plan (see "Redemptions and Repurchases--Contingent Deferred
Sales Charge"). Therefore, any shareholder participating
27
<PAGE>
in the Withdrawal Plan will have sufficient shares redeemed from his or her
account so that the proceeds (net of any applicable contingent deferred sales
charge) to the shareholder will be the designated monthly or quarterly amount.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be mailed
by the Transfer Agent, or amounts credited to a shareholder's DWR or other
selected broker-dealer brokerage account, within five business days after the
date of redemption. The Withdrawal Plan may be terminated at any time by the
Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic Withdrawal Plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six years
(see "Redemptions and Repurchases--Contingent Deferred Sales Charge").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her account executive or by written notification to the Transfer Agent.
In addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature guarantees
required in the manner described above. The shareholder may also terminate the
Withdrawal Plan at any time by written notice to the Transfer Agent. In the
event of such termination, the account will be continued as a regular
shareholder investment account.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Dean Witter
Precious Metals and Minerals Trust, directly to the Fund's Transfer Agent. Such
amounts will be applied to the purchase of Fund shares at the net asset value
per share next computed after receipt of the check or purchase payment by the
Transfer Agent. The shares so purchased will be credited to the investor's
account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of the Fund may exchange their shares
for shares of other Dean Witter Funds sold with a contingent deferred sales
charge ("CDSC funds"), for shares of Dean Witter Short-Term U.S. Treasury Trust,
Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund and
five Dean Witter Funds which are money market funds (the foregoing eight
non-CDSC funds are hereinafter collectively referred to as the "Exchange
Funds"). Exchanges may be made after the shares of the Fund acquired by purchase
(not by exchange or dividend reinvestment) have been held for 30 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.
28
<PAGE>
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the captions "Exchange
Privilege" and "Contingent Deferred Sales Charge", a contingent deferred sales
charge ("CDSC") may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of the Fund or any
other CDSC fund are exchanged for shares of an Exchange Fund, the exchange is
executed at no charge to the shareholder, without the imposition of the CDSC at
the time of the exchange. During the period of time the shareholder remains in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired), the holding period or "year since purchase
payment made" is frozen. When shares are redeemed out the Exchange Fund, they
will be subject to a CDSC which would be based upon the period of time the
shareholder held shares in a CDSC fund. However, in the case of shares of the
Fund exchanged into an Exchange Fund, upon a redemption of shares which results
in a CDSC being imposed, a credit (not to exceed the amount of the CDSC) will be
given in an amount equal to the Exchange Fund 12b-1 distribution fees incurred
on or after that date which are attributable to those shares. Shareholders
acquiring shares of an Exchange Fund pursuant to this exchange privilege may
exchange those shares back into a CDSC fund from an Exchange Fund, with no CDSC
being imposed on such exchange. The holding period previously frozen when shares
were first exchanged for shares of the Exchange Fund resumes on the last day of
the month in which shares of a CDSC fund are reacquired. A CDSC is imposed only
upon an ultimate redemption, based upon the time (calculated as described above)
the shareholder was invested in a CDSC fund.
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund, or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon redemption,
will be the last day of the month in which the shares being exchanged were
originally purchased. In allocating the purchase payments between funds for
purposes of the CDSC, the amount which represents the current net asset value of
shares at the time of the exchange which were (i) purchased more than three or
six years (depending on the CDSC schedule applicable to the shares) prior to the
exchange, (ii) originally acquired through reinvestment of dividends or
distributions and (iii) acquired in exchange for shares of front-end sales
charge funds, or for shares of other Dean Witter Funds for which shares of
front-end sales charge funds have been exchanged (all such shares called "Free
Shares"), will be exchanged first. Shares of Dean Witter American Value Fund
acquired prior to April 30, 1984, shares of Dean Witter Dividend Growth
Securities Inc. and Dean Witter Natural Resource Development Securities Inc.
acquired prior to July 2, 1984, and Dean Witter Strategist Fund acquired prior
to November 8, 1989, are also considered Free Shares and will be the first Free
Shares to be exchanged. After an exchange, all dividends earned on shares in an
Exchange Fund will be considered Free Shares. If the exchanged amount exceeds
the value of such Free Shares, an exchange is made, on a block-by-block basis,
of non-Free Shares held for the longest period of time (except that if shares
held for identical periods of time but subject to different CDSC schedules are
held in the same Exchange Privilege account the shares of that block that are
subject to a lower CDSC rate will be exchanged prior to the shares of that block
that are subject to a higher CDSC rate). Shares equal to any
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<PAGE>
appreciation in the value of non-Free Shares exchanged will be treated as Free
Shares, and the amount of the purchase payments for the non-Free Shares of the
fund exchanged into will be equal to the lesser of (a) the purchase payments
for, or (b) the current net asset value of, the exchanged non-Free Shares. If an
exchange between funds would result in exchange of only part of a particular
block of non-Free Shares, then shares equal to any appreciation in the value of
the block (up to the amount of the exchange) will be treated as Free Shares and
exchanged first, and the purchase payment for that block will be allocated on a
pro rata basis between the non-Free Shares of that block to be retained and the
non-Free Shares to be exchanged. The prorated amount of such purchase payment
attributable to the retained non-Free Shares will remain as the purchase payment
for such shares, and the amount of purchase payment for the exchanged non-Free
Shares will be equal to the lesser of (a) the prorated amount of the purchase
payment for, or (b) the current net asset value of, those exchanged non-Free
Shares. Based upon the procedures described in the Prospectus under the caption
"Contingent Deferred Sales Charge", any applicable CDSC will be imposed upon the
ultimate redemption of shares of any fund, regardless of the number of exchanges
since those shares were originally purchased.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of other
fund shares. In the absence of negligence on its part, neither the Transfer
Agent nor the Fund shall be liable for any redemption of Fund shares caused by
unauthorized telephone instructions. Accordingly, in such event, the investor
shall bear the risk of loss. The staff of the Securities and Exchange Commission
is currently considering the propriety of such a policy.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
fund and the general administration of the Exchange Privilege. No commission or
discounts will be paid to the Distributor or any selected broker-dealer for any
transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000 for
Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income Trust,
Dean Witter California Tax-Free Daily Income Trust and Dean Witter New York
Municipal Money Market Trust although those funds may, at their discretion,
accept initial investments of as low as $1,000. The minimum investment for Dean
Witter Short-Term U.S. Treasury Trust is $10,000, although that fund, in its
discretion, may accept initial purchases as low as $5,000. The minimum initial
investment for all other Dean Witter Funds for which the Exchange Privilege is
available is $1,000.) Upon exchange into an Exchange Fund, the shares of that
fund will be held in a special Exchange Privilege Account separately from
accounts of those shareholders who have acquired their shares directly from that
fund. As a result, certain services normally available to shareholders of those
funds, including the check writing feature, will not be available for funds held
in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days' prior written notice for
termination or material revision), provided that six months' prior written
notice of termination will be given to the shareholders who hold shares of
Exchange Funds pursuant to this Exchange Privilege, and provided further that
the Exchange Privilege may be terminated or materially revised without notice at
times (a) when the New York Stock Exchange is closed for other than customary
30
<PAGE>
weekends and holidays, (b) when trading on that Exchange is restricted, (c) when
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, (d) during any
other period when the Securities and Exchange Commission by order so permits
(provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist) or (e) if the Fund would be unable to invest amounts effectively in
accordance with its investment objective, policies and restrictions.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss. However, the ability to deduct capital losses on
an exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
For further information regarding the Fund's Exchange Privilege,
shareholders should contact their DWR or other selected broker-dealer account
executive or the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. As stated in the Prospectus, shares of the Fund can be redeemed
for cash at any time at the net asset value per share next determined; however,
such redemption proceeds may be reduced by the amount of any applicable
contingent deferred sales charges (see below). If shares are held in a
shareholder's account without a share certificate, a written request for
redemption to the Fund's Transfer Agent at P.O. Box 983, Jersey City, NJ 07303
is required. If certificates are held by the shareholder, the shares may be
redeemed by surrendering the certificates with a written request for redemption.
The share certificate, or an accompanying stock power, and the request for
redemption must be signed by the shareholder or shareholders exactly as the
shares are registered. Each request for redemption, whether or not accompanied
by a share certificate, must be sent to the Fund's Transfer Agent, which will
redeem the shares at their net asset value next computed (see "Purchase of Fund
Shares" in the Prospectus) after it receives the request, and certificate, if
any, in good order. Any redemption request received after such computation will
be redeemed at the next determined net asset value. The Term "good order" means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent. If
redemption is requested by a corporation, partnership, trust or fiduciary, the
Transfer Agent may require that written evidence of authority acceptable to the
Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a new
prospectus.
CONTINGENT DEFERRED SALES CHARGE. As stated in the Prospectus, a contingent
deferred sales charge ("CDSC") will be imposed on any redemption by an investor
if after such redemption the current value of the investor's shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Fund shares during the preceding six years. However, no CDSC will be
imposed to the extent that the net asset value of the shares redeemed does not
exceed: (a) the current net asset value of shares purchased more than six years
prior to the redemption, plus (b) the current net
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<PAGE>
asset value of shares purchased through reinvestment of dividends or
distributions of the Fund or another Dean Witter Fund (see "Shareholder
Services--Targeted Dividends"), plus (c) the current net asset value of shares
acquired in exchange for (i) shares of Dean Witter front-end sales charge funds,
or (ii) shares of other Dean Witter Funds for which shares of front-end sales
charge funds have been exchanged (see "Shareholder Services--Exchange
Privilege"), plus (d) increases in the net asset value of the investor's shares
above the total amount of payments for the purchase of Fund shares made during
the preceding six years. The CDSC will be paid to the Distributor. In addition,
no CDSC will be imposed on redemptions of shares which were purchased by certain
Unit Investment Trusts (on which a sales charge has been paid) or which are
attributable to reinvestment of dividends or distributions from, or the proceeds
of, such Unit Investment Trusts.
In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will be
the amount which represents the net asset value of the investor's shares
purchased more than six years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions and/or shares acquired in
exchange for shares of Dean Witter front-end sales charge funds, or for the
shares of other Dean Witter funds for which shares of front-end sales charge
funds have been exchanged. A portion of the amount redeemed which exceeds an
amount which represents both such increase in value and the value of shares
purchased more than six years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions and/or shares acquired in the
above-described exchanges will be subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years from
the time of any payment for the purchase of shares, all payments made during a
month will be aggregated and deemed to have been made on the last day of the
month. The following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
------------------------------- --------------------
<S> <C>
First................................................................... 5.0%
Second.................................................................. 4.0%
Third................................................................... 3.0%
Fourth.................................................................. 2.0%
Fifth................................................................... 2.0%
Sixth................................................................... 1.0%
Seventh and thereafter.................................................. None
</TABLE>
In determining the rate of the CDSC it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable six-year period. This will result in any such CDSC being imposed at
the lowest possible rate. Accordingly, shareholders may redeem, without
incurring any CDSC, amounts equal to any net increase in the value of their
shares above the amount of their purchase payments made within the past six
years and amounts equal to the current value of shares purchased more than six
years prior to the redemption and shares purchased through reinvestment of
dividends or distributions or acquired in exchange for shares of Dean Witter
front-end sales charge funds, or for shares of other Dean Witter Funds for which
shares of front-end sales charge funds have been exchanged. The CDSC will be
imposed, in accordance with the table shown above, on any redemptions within six
years of purchase which are in excess of these amounts and which redemptions are
not (a) requested within one year of death or initial determination of
disability of a shareholder, or (b) made pursuant to certain taxable
distributions from retirement plans or retirement accounts, as described in the
Prospectus.
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<PAGE>
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. As discussed in the Prospectus,
payment for shares presented for repurchase or redemption will be made by check
within seven days after receipt by the Transfer Agent of the certificate and/or
written request in good order. The term good order means that the share
certificate, if any, and request for redemption are properly signed, accompanied
by any documentation required by the Transfer Agent, and bear signature
guarantees when required by the Fund or the Transfer Agent. Such payment may be
postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the Securities
and Exchange Commission by order so permits; provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist. If the shares to be redeemed have
recently been purchased by check (including a certificate or bank cashier's
check), payment of redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of investment of the check by the Transfer
Agent). Shareholders maintaining margin accounts with DWR or another selected
broker-dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the contingent deferred sales charge or free of such charge
(and with regard to the length of time shares subject to the charge have been
held), any transfer involving less than all of the shares in an account will be
made on a pro-rata basis (that is, by transferring shares in the same proportion
that the transferred shares bear to the total shares in the account immediately
prior to the transfer). The transferred shares will continue to be subject to
any applicable contingent deferred sales charge as if they had not been so
transferred.
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within thirty days after the date of
redemption or repurchase reinstate any portion of all of the proceeds of such
redemption or repurchase in shares of the Fund at the net asset value next
determined after a reinstatement request, together with such proceeds, is
received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes,
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment. If any such gains are retained, the Fund will pay federal income
tax thereon, and will notify shareholders that, following an election by the
Fund, the shareholders will be required to include such undistributed gains in
their taxable income and will be able to claim their share of the tax paid by
the Fund as a credit against their individual federal income tax.
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
share-
33
<PAGE>
holder as ordinary income regardless of whether the shareholder receives such
payments in additional shares or in cash. Any dividends declared in the last
quarter of any year which are paid in the following year prior to February 1
will be deemed received by the shareholder in the prior year.
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 one
year. Gains or losses on the sale of securities held for one year or less will
be short-term capital gains or losses.
The Fund has qualified and intends to remain qualified as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986 (the
"Code"). If so qualified, the Fund will not be subject to federal income tax on
its net investment income and capital gains, if any, realized during any fiscal
year to the extent that it distributes such income and capital gains to its
shareholders. 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.
During the year ended October 31, 1993, the Fund utilized all of the net
capital loss carryovers of approximately $109,000.
Current federal tax law requires that a holder (such as the Fund) of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the Fund receives no interest payment
in cash on the security during the year. As an investment company, the Fund must
pay out substantially all of its net investment income each year. Accordingly,
the Fund, to the extent it invests in zero coupon Treasury securities, may be
required to pay out as an income distribution each year an amount which is
greater than the total amount of cash receipts of interest the Fund actually
received. Such distributions will be made from the available cash of the Fund or
by liquidation of portfolio securities if necessary. If a distribution of cash
necessitates the liquidation of portfolio securities, the Investment Manager
will select which securities to sell. The Fund may realize a gain or loss from
such sales. In the event the Fund realizes net capital gains from such
transactions, its shareholders may receive a larger capital gain distribution,
if any, than they would in the absence of such transactions.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or the distribution of realized long-term capital gains, such
payment or distribution would be in part a return of the shareholder's
investment to the extent of such reduction below the shareholder's cost, but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
dividend or distribution record date.
Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent the
aggregate dividends received by the Fund would be eligible for the deduction if
the Fund were the shareholder claiming the dividends received deduction. The
amount of dividends paid by the Fund which may qualify for the dividends
received deduction is limited to the aggregate amount of qualifying dividends
which the Fund derives from its portfolio investments which the Fund had held to
a minimum period, usually 46 days. Any distributions made by the Fund will not
be eligible for the dividends received deduction with respect to shares which
are held by the shareholder for 45 days or less. Any long-term capital gain
distributions will also not be eligible for the dividends received deduction.
The ability to take the dividends received deduction will also be limited in the
case of a Fund shareholder which incurs or continues indebtedness which is
directly attributable to its investment in the Fund.
After the end of the year, shareholders will be sent full information on
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the portion eligible for the dividends received
deduc-
34
<PAGE>
tion. To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy.
Dividends, interest and capital gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Investors may be entitled to claim United States foreign tax credits with
respect to such taxes, subject to certain provisions and limitations contained
in the Code. If more than 50% of the Fund's total assets at the close of its
fiscal year consist of securities of foreign corporations, the Fund will be
eligible to file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their respective pro rata
portions of such withholding taxes in their United States income tax returns as
gross income, treat such respective pro rata portions as taxes paid by them, and
deduct such respective pro rata portions in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their United States
income taxes. The Fund will report annually to its shareholders the amount per
share of such withholding.
If the Fund invests in an entity which is classified as a "passive foreign
investment company" ("PFIC") for U.S. tax purposes, the application of certain
technical tax provisions applying to such companies could result in the
imposition of federal income tax with respect to such investments at the Fund
level which could not be eliminated by distributions to shareholders. The U.S.
Treasury is currently considering various solutions to this problem and, in any
event, it is not anticipated that any taxes on the Fund with respect to
investments in PFIC's would be significant.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS. In general, gains
from "foreign currencies" and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in stock,
securities or foreign currencies will be qualifying income for purposes of
determining whether the Fund qualifies as a regulated investment company. It is
currently unclear, however, who will be treated as the issuer of a foreign
currency instrument or how foreign currency options, futures, or forward foreign
currency contracts will be valued for purposes of the regulated investment
company diversification requirements applicable to the Fund. The Fund may
request a private letter ruling from the Internal Revenue Service on some or all
of these issues.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (I.E.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from forward contracts, from futures
contracts that are not "regulated futures contracts", and from unlisted options
will be treated as ordinary income or loss under Code Section 988. Also, certain
foreign exchange gains derived with respect to foreign fixed-income securities
are also subject to Section 988 treatment. In general, Code Section 988 gains or
losses will increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to shareholders as ordinary income,
rather than increasing or decreasing the amount of the Fund's net capital gain.
Additionally, if Code Section 988 losses exceed other investment company taxable
income during a taxable year, the Fund would not be able to make any ordinary
dividend distributions.
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. The
Fund's "average annual total return" represents an annualization of the Fund's
total return over a particular period and is computed by finding the annual
percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. The ending redeemable value is
reduced by any contingent deferred sales charge at the end of the one, five or
ten year or other period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula
35
<PAGE>
for computing the average annual total return involves a percentage obtained by
dividing the ending redeemable value by the amount of the initial investment,
taking a root of the quotient (where the root is equivalent to the number of
years in the period) and subtracting 1 from the result.
The average annual total return of the Fund for the period August 6, 1990
(commencement of operations) through October 31, 1993 and for the fiscal year
ended October 31, 1993 was 2.28% and 32.23% respectively. During the period
August 6, 1990 through October 31, 1993, the Investment Manager assumed certain
expenses and waived the compensation provided for in its Management Agreement
for a portion of this period. Had the Fund borne these expenses for the entire
period, the total return would have been 2.07%.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculations may or may not reflect the
deduction of the contingent deferred sales charge which, if reflected, would
reduce the performance quoted. For example, the average annual total return of
the Fund may be calculated in the manner described above, but without deduction
for any applicable contingent deferred sales charge. Based on this calculation,
the average annual total return of the Fund for the fiscal years ended October
31, 1993 and for the period August 6, 1990 through October 31, 1993 was 2.86%
and 37.23% respectively.
In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value (without the
reduction for any contingent deferred sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing calculation
the Fund's total return for the fiscal years ended October 31, 1993 and for the
period August 6, 1990 through October 31, 1993 was 9.56% and 37.23%
respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a decimal and without taking into
account the effect of any applicable CDSC) and multiplying by $10,000, $50,000
or $100,000 as the case may be. Investments of $10,000, $50,000 and $100,000 in
the Fund at inception would have grown to $10,956, $54,780 and $109,560
respectively at October 31, 1993.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
of beneficial interest held.
The Trustees have been elected by the shareholders of the Fund, most
recently at a Special Meeting of Shareholders held on January 12, 1993. 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 Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances). However, the Trustees have not authorized
any such additional series or classes of shares.
36
<PAGE>
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, nor is any Trustee,
officer, employee or agent liable to any third persons in connection with the
affairs of the Fund, except as such liability may arise from his/her or its own
bad faith, willful misfeasance, gross negligence, or reckless disregard of his
duties. It also provides that all third persons shall look solely to the Fund
property for satisfaction of claims arising in connection with the affairs of
the Fund. With the exceptions stated above, 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 Trust 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, 110 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager and Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts; disbursing
cash dividends and reinvesting dividends; processing account registration
changes; handling purchase and redemption transactions; mailing prospectuses and
reports; mailing and tabulating proxies; processing share certificate
transactions; and maintaining shareholder records and lists. For these services
Dean Witter Trust Company receives a per shareholder account fee from the Fund.
The Chase Manhattan Bank, One Chase Plaza, New York, New York 10005 acts as
Sub-custodian for portfolio securities held outside of the U.S. and has
contracted with various foreign banks and depositors to hold such portfolio
securities on behalf of the Fund.
Wilmington Trust Company, Rodney Square North, Wilmington, Delaware 19890
acts as Sub-Custodian for the storing, transferring and delivering of the
precious metals owned by the Fund.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on October 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.
37
<PAGE>
VALIDITY OF SHARES OF BENEFICIAL INTEREST
- --------------------------------------------------------------------------------
The validity of shares offered by the Prospectus will be passed upon for the
Fund by Sheldon Curtis, Esq., who is an officer and General Counsel of the
Investment Manager and an officer and General Counsel of the Fund.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund included in this Statement of
Additional Information and incorporated by reference in the Prospectus have been
so included and incorporated in reliance on the report of Price Waterhouse,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
38
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (92.8%)
AUSTRALIA (14.2%)
DIAMOND MINING
50,000 Ashton Mining Ltd. ......... $ 85,709
------------
GOLD
193,500 Delta Gold*................. 489,154
610,000 Dominion Mining Ltd. ....... 154,610
572,385 Gold Mines of Kalgoorlie
Ltd. ...................... 427,595
500,000 Highlands Gold Ltd. ........ 403,535
290,000 Homestake Gold of Australia
Ltd.*...................... 367,517
232,300 Kidston Gold Mines Ltd. .... 410,602
290,000 Macreas Mining Co. Ltd.* ... 441,020
145,000 Newcrest Mining Ltd. ....... 475,838
140,000 Niugini Mining Ltd.* ....... 462,231
443,300 Pancontinental Mining*...... 446,478
190,000 Placer Pacific Ltd. ........ 399,200
160,000 Poseidon Gold Ltd. ......... 411,939
450,000 Resolute Resources*......... 393,197
89,300 Sons of Gwalia Ltd. ........ 533,090
140,000 Western Mining Corp.
Holdings Ltd. ............. 521,994
------------
6,338,000
------------
TOTAL AUSTRALIA............. 6,423,709
------------
CANADA (41.9%)
GOLD
60,000 Agnico Eagle Mines Ltd. .... 915,000
88,000 American Barrick Resources
Corp. ..................... 2,387,000
75,000 Cambior, Inc................ 938,567
100,000 Echo Bay Mines Ltd. ........ 1,237,500
137,000 Glamis Gold Ltd. ........... 856,250
36,600 Golden Knight Resources,
Inc.*...................... 301,950
98,000 Hemlo Gold Mines, Inc. ..... 994,122
100,000 Horsesham Corp. ............ 1,337,500
135,000 Lac Minerals Limited Co. ... 995,625
100,450 New Royal Oak Mines,
Inc.*...................... 485,680
80,000 Pegasus Gold, Inc. ......... 1,720,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ------------
<C> <S> <C>
GOLD (CONTINUED)
98,000 Placer Dome, Inc. .......... $ 2,388,750
160,500 Prime Resources Group
Inc.* ..................... 1,065,131
90,000 Rayrock Yellowknife
Resources, Inc.* .......... 1,032,423
103,000 Teck Corp. (B Shares)....... 1,474,498
145,000 TVX Gold, Inc.*............. 815,624
------------
TOTAL CANADA................ 18,945,620
------------
UNITED STATES (36.7%)
ALUMINUM
10,000 Reynolds Metals Co. ........ 422,500
------------
COPPER
15,000 Phelps Dodge................ 639,375
------------
GOLD
85,000 Amax Gold, Inc. ............ 616,250
10,000 Asarco Inc. ................ 183,750
173,000 Battle Mountain Gold Co.
(Class A).................. 1,643,500
45,000 Canyon Resources Corp.* .... 157,500
17,000 Crown Resources Corp.*...... 82,875
25,000 Cyprus Mineral Group........ 612,500
105,000 Freeport -- McMoran Copper &
Gold (Class A)............. 2,008,125
52,200 Handy & Harman.............. 678,600
90,000 Homestake Mining Co.* ...... 1,732,500
42,000 Newmont Gold Co. ........... 1,779,750
43,000 Newmont Mining Corp. ....... 2,252,125
30,000 OroAmerica*................. 367,500
------------
12,114,975
------------
RAILROADS
50,000 Santa Fe Pacific............ 943,750
------------
SILVER
65,000 Coeur D'Alene Mines
Corp. ..................... 1,308,125
110,000 Hecla Mining Co.*........... 1,168,750
------------
2,476,875
------------
TOTAL UNITED STATES......... 16,597,475
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST
$37,072,431)............... 41,966,804
------------
</TABLE>
39
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS) VALUE
- ----------- ----------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS (5.1%)
$500 U.S. Treasury Bond, 6.875% due
4/30/97...................... $ 538,125
700 U.S. Treasury Bond, 7.25% due
8/15/22...................... 793,844
325 U.S. Treasury Note, 7.875% due
11/15/99..................... 372,480
500 U.S. Treasury Note, 8.75% due
8/15/00...................... 601,016
----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS (IDENTIFIED COST
$2,067,527).................. 2,305,465
----------
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS) VALUE
- ----------- ----------
<C> <S> <C>
COMMERCIAL PAPER (A) (2.7%)
FINANCIAL SERVICES
$1,200 Exxon Credit Corp. 2.951% due
11/01/93 (Amortized Cost
$1,200,000).................. $1,200,000
----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (IDENTIFIED COST
$40,339,958)(B).................................. 100.6% 45,472,269
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS.... (0.6 ) (268,414)
----- -------------
NET ASSETS........................................ 100.0% $45,203,855
----- -------------
----- -------------
<FN>
- ------------------------------
* NON-INCOME PRODUCING SECURITY
(A) COMMERCIAL PAPER WAS PURCHASED ON A DISCOUNT BASIS. THE RATE SHOWN
REFLECTS THE BOND EQUIVALENT INTEREST RATE.
(B) THE AGGREGATE COST OF INVESTMENTS FOR FEDERAL INCOME TAX PURPOSES IS
$40,547,166; THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $6,290,524 AND
THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $1,365,421 RESULTING IN NET
UNREALIZED APPRECIATION OF $4,925,103.
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 1993:
<TABLE>
<CAPTION>
GROSS
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION/
TO DELIVER FOR DATE (DEPRECIATION)
- ---------------- ---------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
US $179,548 AUD 268,584 11/1/93 $ (403)
AUD 224,225 US $149,895 11/1/93 336
------
Net Unrealized Depreciation.... $ (67)
------
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1993
- ---------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (identified
cost $40,339,958) (Note 1)...................... $ 45,472,269
Cash............................................. 3,139
Receivable for:
Investments sold............................... 149,895
Shares of beneficial interest sold............. 145,753
Interest....................................... 48,421
Dividends...................................... 30,366
Deferred organizational expenses (Note 1)........ 42,324
Prepaid expenses and other assets................ 12,154
-------------
TOTAL ASSETS............................. 45,904,321
-------------
LIABILITIES:
Payable for:
Investments purchased.......................... 481,447
Shares of beneficial interest repurchased...... 77,012
Plan of distribution fee (Note 3).............. 37,442
Investment management fee (Note 2)............. 29,953
Accrued expenses and other payables (Note 4)..... 74,612
-------------
TOTAL LIABILITIES........................ 700,466
-------------
NET ASSETS:
Paid in capital.................................. 40,556,707
Accumulated net realized loss.................... (105,548)
Accumulated net investment loss.................. (379,884)
Net unrealized appreciation...................... 5,132,580
-------------
NET ASSETS............................... $ 45,203,855
-------------
-------------
NET ASSET VALUE PER SHARE, 4,186,537 shares
outstanding (unlimited authorized shares of $.01
par value)...................................... $10.80
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1993
- ---------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME
Dividends (net of $21,146 in foreign
withholding tax)............................. $ 232,418
Interest...................................... 219,955
------------
TOTAL INCOME.............................. 452,373
------------
EXPENSES
Plan of distribution fee (Note 3)............. 264,356
Investment management fee (Note 2)............ 211,463
Professional fees............................. 55,350
Transfer agent fees and expenses (Note 4)..... 40,411
Registration fees............................. 40,275
Custodian fees................................ 37,538
Shareholder reports and notices............... 37,329
Organizational expenses (Note 1).............. 23,987
Trustees' fees and expenses................... 22,309
Other......................................... 3,431
------------
TOTAL EXPENSES............................ 736,449
------------
NET INVESTMENT LOSS................... (284,076)
------------
NET REALIZED AND UNREALIZED GAIN (Note 1):
Net realized gain on:
Investments................................... 67,005
Foreign exchange transactions................. 1,437
------------
68,442
------------
Net change in unrealized appreciation or
depreciation on:
Investments................................... 6,947,376
Translation of other assets and liabilities
denominated in foreign currencies............ 269
------------
6,947,645
------------
NET GAIN.................................. 7,016,087
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... $ 6,732,011
------------
------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, OCTOBER 31,
1993 1992
--------------------- ---------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss.......................................................... $ (284,076) $ (96,261)
Net realized gain (loss)..................................................... 68,442 (138,976)
Net change in unrealized appreciation or depreciation........................ 6,947,645 (852,058)
--------------------- ---------------------
Net increase (decrease) in net assets resulting from operations............ 6,732,011 (1,087,295)
--------------------- ---------------------
Dividends and distributions to shareholders from:
Net investment income.......................................................... - 0 - (53,036)
Net realized gain on investments and foreign exchange transactions............. - 0 - (8,750)
--------------------- ---------------------
- 0 - (61,786)
--------------------- ---------------------
Net increase from transactions in shares of beneficial interest (Note 5)......... 23,336,779 5,038,310
--------------------- ---------------------
Total increase................................................................. 30,068,790 3,889,229
NET ASSETS:
Beginning of period.............................................................. 15,135,065 11,245,836
--------------------- ---------------------
END OF PERIOD (including accumulated net investment loss of $379,884 and $95,808,
respectively).................................................................. $ 45,203,855 $ 15,135,065
--------------------- ---------------------
--------------------- ---------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--Dean Witter Precious Metals and
Minerals Trust (the "Fund") is registered under the Investment Company Act of
1940, as amended (the "Act"), as a diversified, open-end management investment
company. It was organized on December 28, 1989 as a Massachusetts business trust
and commenced operations on August 6, 1990.
The following is a summary of the 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 stock exchange is valued at its latest sale price on that exchange
prior to the time when assets are valued; if there were no sales that day,
the security is valued at the latest bid price. In cases where securities
are traded on more than one exchange, the securities are valued on the
exchange designated as the primary market by the Trustees; (2) all other
portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest bid price; (3) when market
quotations are not readily available, portfolio securities are valued at
their fair value as determined in good faith under procedures established by
and under the general supervision of the Trustees (valuation of debt
securities for which market quotations are not readily available may be
based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors); and (4) the fair value of short-term debt securities which mature
at a date less than sixty days subsequent to the valuation date are
determined on an amortized cost or amortized value basis.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date. Realized gains and losses on security transactions are
determined on the identified cost method. Dividend income and other
distributions are recorded on the ex-dividend date, except for certain
dividends from foreign securities which are recorded as soon as the Fund is
informed after the ex-dividend date. Interest income is accrued daily.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value
of investment securities, other assets and liabilities and forward contracts
stated in foreign currencies are translated at the exchange rates at the end
of the period; and (2) purchases, sales, income and expenses are translated
at the rate of exchange prevailing on the respective dates of such
transactions. The resultant exchange gains and losses are included in the
Statement of Operations.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date.
42
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
F. ORGANIZATIONAL EXPENSES -- The Fund's Investment Manager paid the
organizational expenses of the Fund in the amount of approximately $120,000.
The Fund has reimbursed the Investment Manager for these costs. These
reimbursed expenses have been deferred and are being amortized by the Fund
by the straight-line method over a period not to exceed five years from the
commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT--Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc., (the "Investment
Manager"), the Fund pays its Investment Manager a management fee, accrued daily
and payable monthly, by applying the annual rate of 0.80% to the net assets of
the Fund determined as of the close of each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes office space and facilities, equipment, clerical,
bookkeeping and certain legal services, and pays the salaries of all personnel,
including officers of the Fund who are employees of the Investment Manager. The
Investment Manager also bears the cost of telephone services, heat, light, power
and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION--Shares of the Fund are distributed by Dean Witter
Distributors Inc., (the "Distributor"), an affiliate of the Investment Manager.
The Fund 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 the annual rate of 1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or (b)
the Fund's average daily net assets. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services it provides 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. and others who
engage in or support distribution of the Fund's shares or who service
shareholders' accounts, including overhead and telephone expenses, printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares, and preparation, printing and distribution of sales
literature and advertising materials.
Provided that the Plan continues in effect, any cumulative expenses incurred
by the Distributor, but not yet recovered, may be recovered through future
distribution fees from the Fund and contingent deferred sales charges from the
Fund's shareholders.
The Distributor has informed the Fund that for the year ended October 31,
1993, it received approximately $101,000 in contingent deferred sales charges
from redemptions of the Fund's shares. The Fund's shareholders pay such charges
which are not an expense of the Fund.
43
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES--The cost of purchases
and the proceeds from sales of portfolio securities (excluding short-term
investments) for the year ended October 31, 1993, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- ----------
<S> <C> <C>
Common Stocks................................... $28,032,678 $4,283,149
U.S. Government Obligations..................... 1,970,250 1,993,756
</TABLE>
For the year ended October 31, 1993, the Fund paid Dean Witter Reynolds Inc.
$10,015 in brokerage commissions for portfolio transactions executed on behalf
of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and the
Distributor, is the Fund's transfer agent. For the year ended October 31, 1993,
the Fund incurred transfer agent fees and expenses of $40,411 of which $7,140
was payable at October 31, 1993.
5. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 1993 OCTOBER 31, 1992
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold................................... 7,460,741 $ 73,891,501 2,168,034 $17,991,111
Reinvestment of dividends and
distributions......................... - 0- - 0- 6,650 53,665
---------- ------------ ---------- -----------
7,460,741 73,891,501 2,174,684 18,044,776
Repurchased............................ (5,197,418) (50,554,722) (1,559,998) (13,006,466)
---------- ------------ ---------- -----------
Net increase........................... 2,263,323 $ 23,336,779 614,686 $ 5,038,310
---------- ------------ ---------- -----------
---------- ------------ ---------- -----------
</TABLE>
6. FEDERAL INCOME TAX STATUS--During the year ended October 31, 1993, the Fund
utilized all of the net capital loss carryovers of approximately $109,000.
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK--As of October 31, 1993,
the Fund had outstanding forward foreign currency exchange contracts ("forward
contracts") as a hedge against changes in future foreign exchange rates. Forward
contracts involve elements of market risk in excess of the amount reflected in
the Statement of Assets and Liabilities. The Fund bears the risk of an
unfavorable change in the foreign exchange rate underlying the forward contract.
44
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data and ratios for a share of beneficial interest outstanding
throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 6,
FOR THE YEAR ENDED 1990*
OCTOBER 31, THROUGH
------------------------------------------- OCTOBER 31,
1993 1992 1991 1990
--------- --------- ----------- --------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $ 7.87 $ 8.59 $ 8.57 $ 10.00
--------- --------- ----------- -------
Net investment (loss) income............. (0.04) (0.05) 0.06 0.05
Net realized and unrealized gain
(loss).................................. 2.97 (0.62) 0.03 (1.48)
--------- --------- ----------- -------
Total from investment operations........... 2.93 (0.67) 0.09 (1.43)
--------- --------- ----------- -------
Less dividends and distributions:
Dividends from net investment income..... - 0 - (0.04) (0.07) - 0 -
Distributions from capital gains......... - 0 - (0.01) - 0 - - 0 -
--------- --------- ----------- -------
Total dividends and distributions.......... - 0 - (0.05) (0.07) - 0 -
--------- --------- ----------- -------
Net asset value, end of period............. $ 10.80 $ 7.87 $ 8.59 $ 8.57
--------- --------- ----------- -------
--------- --------- ----------- -------
TOTAL INVESTMENT RETURN+..................... 37.23% (7.97)% 1.23% (14.30)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)... $45,204 $15,135 $11,246 $5,843
Ratio of expenses to average net assets.... 2.79% 3.30% 2.18%(4) 1.49%(2)(3)
Ratio of net investment (loss) income to
average net assets........................ (1.07)% (0.74)% 0.93%(4) 2.99%(2)(3)
Portfolio turnover rate.................... 25 % 9 % 11 % 0 %
<FN>
- --------------------------
* DATE OF COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE ANNUALIZED EXPENSE RATIO, AFTER APPLICATION
OF THE FUND'S EXPENSE LIMITATION, WOULD HAVE BEEN 3.50% AND THE ABOVE
ANNUALIZED NET INVESTMENT INCOME RATIO WOULD HAVE BEEN .98%.
(4) IF THE FUND HAD BORNE ALL EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE EXPENSE RATIO, AFTER APPLICATION OF THE
FUND'S EXPENSE LIMITATION, WOULD HAVE BEEN 3.50% AND THE ABOVE NET
INVESTMENT INCOME (LOSS) RATIO WOULD HAVE BEEN (.39)%.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter Precious Metals and Minerals
Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Precious Metals and
Minerals Trust (the "Fund") at October 31, 1993, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the three
years in the period then ended and for the period August 6, 1990 (commencement
of operations) through October 31, 1990, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at October 31, 1993 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE
New York, New York
December 3, 1993
46
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
----------
Financial highlights from the period
August 6, 1990 through October 31, 1990 and for
the years ended October 31, 1991, 1992 and 1993.... 4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
---
Portfolio of Investments at October 31, 1993....... 38
Statement of assets and liabilities at
October 31, 1993................................... 40
Statement of operations for the year
ended October 31, 1993............................. 40
Statement of changes in net assets for the years
ended October 31, 1992 and 1993.................... 40
Notes to Financial Statements ..................... 41
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
5. - Form of Investment Management Agreement between
Registrant and Dean Witter InterCapital Inc.
6. - Form of Distribution Agreement between
Registrant and Dean Witter Distributors Inc.
8. - Amended and Restated Transfer Agency and
Service Agreement
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services
Company Inc.
1
<PAGE>
11. - Consent of Independent Accountants
15. - Amended and Restated Plan of Distribution
pursuant to Rule 12b-1 between the Registrant and
Dean Witter Distributors Inc.
16. - Schedules for Computation of Performance
Quotations
All other exhibits previously filed and incorporated
by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
(1) (2)
Number of Record Holders
Title of Class at February 24, 1994
-------------- ------------------------
<S> <C>
Shares of Beneficial Interest 6,933
</TABLE>
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
2
<PAGE>
Agreement, neither the Investment Manager nor any trustee, officer, employee
or agent of the Registrant shall be liable for any action or failure to act,
except in the case of bad faith, willful misfeasance, gross negligence or
reckless disregard of duties to the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the Registrant
by such trustee, officer or controlling person in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company
Act of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such
Act remains in effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was
a Trustee, officer, employee, or agent of Registrant, or who is or was serving
at the request of Registrant as a trustee, director, officer, employee or
agent of another trust or corporation, against any liability asserted against
him and incurred by him or arising out of his position. However, in no event
will Registrant maintain insurance to indemnify any such person for any act
for which Registrant itself is not permitted to indemnify him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the business of
the investment adviser. The following information is given regarding officers
of Dean Witter InterCapital Inc.
3
<PAGE>
Information regarding the other officers of InterCapital is included in Item
29(b) below. The term "Dean Witter Funds" used below refers to the following
Funds: (1) InterCapital Income Securities Inc., (2) High Income Advantage
Trust, (3) High Income Advantage Trust II, (4) High Income Advantage Trust
III, (5) Municipal Income Trust, (6) Municipal Income Trust II, (7) Municipal
Income Trust III, (8) Dean Witter Government Income Trust, (9) Municipal
Premium Income Trust, (10) Municipal Income Opportunities Trust, (11)
Municipal Income Opportunities Trust II, (12) Municipal Income Opportunities
Trust III, (13) Prime Income Trust, (14) InterCapital Insured Municipal Bond
Trust, (15) InterCapital Quality Municipal Income Trust, (16) InterCapital
Quality Municipal Investment Trust, (17) InterCapital Insured Municipal Income
Trust, (18) InterCapital California Insured Municipal Income Trust, (19)
InterCapital Insured Municipal Trust, (20) InterCapital Quality Municipal
Securities (21) InterCapital New York Quality Municipal Securities, (22)
InterCapital California Municipal Securities, (23) InterCapital Insured
Municipal Securities and (24) InterCapital Insured California Municipal
Securities, registered closed-end investment companies, and (1) Dean Witter
Equity Income Trust, (2) Dean Witter Tax-Exempt Securities Trust, (3) Dean
Witter Tax-Free Daily Income Trust, (4) Dean Witter Dividend Growth Securities
Inc., (5) Dean Witter Convertible Securities Trust, (6) Dean Witter Liquid
Asset Fund Inc., (7) Dean Witter Developing Growth Securities Trust, (8) Dean
Witter Retirement Series, (9) Dean Witter Federal Securities Trust, (10) Dean
Witter World Wide Investment Trust, (11) Dean Witter U.S. Government
Securities Trust, (12) Dean Witter Select Municipal Reinvestment Fund, (13)
Dean Witter High Yield Securities Inc., (14) Dean Witter Intermediate Income
Securities, (15) Dean Witter New York Tax-Free Income Fund, (16) Dean Witter
California Tax-Free Income Fund, (17) Dean Witter Health Sciences Trust, (18)
Dean Witter California Tax-Free Daily Income Trust, (19) Dean Witter Managed
Assets Trust, (20) Dean Witter American Value Fund, (21) Dean Witter
Strategist Fund, (22) Dean Witter Utilities Fund, (23) Dean Witter World Wide
Income Trust, (24) Dean Witter New York Municipal Money Market Trust, (25)
Dean Witter Capital Growth Securities, (26) Dean Witter Precious Metals and
Minerals Trust, (27) Dean Witter European Growth Fund Inc., (28) Dean Witter
Global Short-Term Income Fund Inc., (29) Dean Witter Pacific Growth Fund Inc.,
(30) Dean Witter Multi-State Municipal Series Trust, (31) Dean Witter Premier
Income Trust, (32) Dean Witter Short-Term U.S. Treasury Trust, (33) Dean
Witter Diversified Income Trust, (34) Dean Witter U.S. Government Money Market
Trust, (35) Dean Witter Global Dividend Growth Securities, (36) Active Assets
California Tax-Free Trust, (37) Dean Witter Natural Resource Development
Securities Inc., (38) Active Assets Government Securities Trust, (39) Active
Assets Money Trust, (40) Active Assets Tax-Free Trust, (41) Dean Witter
Limited Term Municipal Trust, (42) Dean Witter Variable Investment Series,
(43) Dean Witter Value-Added Market Series and (44) Dean Witter Short-Term
Bond Fund, registered open-end investment companies. InterCapital is a
wholly-owned subsidiary
4
<PAGE>
of Dean Witter, Discover & Co. The principal address of the Dean Witter Funds
is Two World Trade Center, New York, New York 10048. The term "TCW/DW Funds"
refers to the following Funds: (1) TCW/DW Core Equity Trust, (2) TCW/DW North
American Government Income Trust, (3) TCW/DW Latin American Growth Fund, (4)
TCW/DW Income and Growth Fund, (5) TCW/DW Small Cap Growth Fund, (6) TCW/DW
Balanced Fund, registered open-end investment companies and (7) TCW/DW Term
Trust 2000, (8) TCW/DW Term Trust 2002 and (9) TCW/DW Term Trust 2003,
registered closed-end investment companies.
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------- -----------------------
<C> <C> <S>
Charles A. Chairman, Chief Executive Vice
Fiumefreddo Executive Officer President and Director
and Director of Dean Witter
Reynolds Inc.
("DWR"); Chairman,
Director or Trustee,
President and Chief
Executive Officer of
the Dean Witter Funds;
Chairman, Chief
Executive Officer and
Trustee of the TCW/DW
Funds; Chairman and
Director of Dean Witter
Trust Company ("DWTC");
Chairman, Chief Executive
Officer and Director of
Dean Witter Distributors
Inc. ("Distributors") and
Dean Witter Services
Company Inc. ("DWSC");
Formerly Executive Vice
President and Director of
Dean Witter, Discover & Co.
("DWDC"); Director
and/or officer of DWDC
subsidiaries.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------ -----------------------
<C> <C> <S>
Philip J. Director Chairman, Chief
Purcell Executive Officer and
Director of DWDC and
DWR; Director of
DWSC and Distributors.
Richard M. Director President and Chief
DeMartini Operating Officer of
Dean Witter Capital
and Director of DWDC,
DWR, DWSC and
Distributors.
James F. Director President and Chief
Higgins Operating Officer of
Dean Witter Financial;
Director of DWDC, DWR,
DWSC and Distributors.
Thomas C. Executive Vice Executive Vice
Schneider President, Chief President, Chief
Financial Officer Financial Officer
and Director and Director of
DWDC, DWR, DWSC
and Distributors.
Christine A. Director Executive Vice
Edwards President, Secretary,
General Counsel and
Director of DWDC, DWR,
DWSC and Distributors.
Robert M. Scanlan President and Vice President of
Chief Operating the Dean Witter Funds
Officer and the TCW/DW Funds;
President of DWSC;
Executive Vice
President of
Distributors;
Executive Vice
President and
Director of DWTC.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------- -----------------------
<C> <C> <S>
David A. Hughey Executive Vice Vice President of the
President and Dean Witter Funds and
Chief Administrative the TCW/DW Funds;
Officer Executive Vice
President, Chief
Administrative Officer
and Director of DWTC;
Executive Vice
President and Chief
Administrative Officer
of DWSC and
Distributors.
Edmund C. Executive Vice Vice President of the
Puckhaber President Dean Witter Funds.
John Van Heuvelen Executive Vice President and Chief
President Executive Officer of
DWTC.
Sheldon Curtis Senior Vice Vice President,
President, Secretary and
General Counsel General Counsel of the
and Secretary Dean Witter Funds and the
TCW/DW Funds; Senior Vice
President
and Secretary of
DWTC; Assistant Secretary
of DWR and
DWDC; Senior Vice
President, General
Counsel and Secretary
of DWSC; Senior Vice
President, Assistant
General Counsel and
Assistant Secretary of
Distributors.
Peter M. Avelar Senior Vice Vice President of
President various Dean Witter
Funds.
Mark Bavoso Senior Vice Vice President of
President various Dean Witter
Funds.
Thomas H. Connelly Senior Vice Vice President of
President various Dean Witter
Funds.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------- -----------------------
<C> <C> <S>
Edward Gaylor Senior Vice Vice President of
President various Dean Witter
Funds.
Rajesh K. Gupta Senior Vice Vice President of
President various Dean Witter
Funds.
Kenton J. Senior Vice Vice President of
Hinchliffe President various Dean Witter
Funds.
John B. Kemp, III Senior Vice Director of the
President Provident Savings
Bank, Jersey City,
New Jersey.
Anita Kolleeny Senior Vice Vice President of
President various Dean Witter
Funds.
Jonathan R. Page Senior Vice Vice President of
President various Dean Witter
Funds.
Ira Ross Senior Vice Vice President of
President various Dean Witter
Funds.
Rochelle G. Siegel Senior Vice Vice President of
President various Dean Witter
Funds.
Paul D. Vance Senior Vice Vice President of
President various Dean Witter
Funds.
Elizabeth A. Senior Vice
Vetell President
James F. Willison Senior Vice Vice President of
President various Dean Witter
Funds.
Ronald Worobel Senior Vice Vice President of
President various Dean Witter
Funds.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------- -----------------------
<C> <C> <S>
Thomas F. Caloia First Vice Treasurer of the
President and Dean Witter Funds
Assistant Treasurer and the TCW/DW Funds;
First Vice President
and Assistant Treasury
of DWSC; Assistant
Treasurer of
Distributors.
Barry Fink First Vice Assistant Secretary
President of the Dean Witter
Funds and TCW/DW
Funds; First Vice
President and
Assistant Secretary of
DWSC.
Michael First Vice First Vice President
Interrante President and and Controller of
Controller DWSC; Assistant
Treasurer of
Distributors.
Robert Zimmerman First Vice
President
Joseph Arcieri Vice President
Douglas Brown Vice President
Rosalie Clough Vice President
B. Catherine Vice President
Connelly
Marilyn K. Cranney Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC;
Assistant
Secretary of DWR and
DWDC.
Salvatore DeSteno Vice President Vice President of
DWSC.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Commection
---- ------------- -----------------------
<C> <C> <S>
Dwight Doolan Vice President
Bruce Dunn Vice President
Geoffrey D. Flynn Vice President Vice President of
DWSC.
Bette Freedman Vice President
Deborah Genovese Vice President
Peter W. Gurman Vice President
Shant Harootunian Vice President
John Hechtlinger Vice President
David Johnson Vice President
Christopher Jones Vice President
Stanley Kapica Vice President
Paula LaCosta Vice President Vice President of
various Dean Witter
Funds.
Lawrence S. Lafer Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
Thomas Lawlor Vice President
Lou Anne D. McInnis Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
James Mulcahy Vice President
James Nash Vice President
Hugh Rose Vice President
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------- -----------------------
<C> <C> <S>
Ruth Rossi Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
Howard A. Schloss Vice President
Rose Simpson Vice President
Diane Lisa Sobin Vice President Vice President of
various Dean Witter
Funds.
Kathleen Stromberg Vice President Vice President of
various Dean Witter
Funds.
Vinh Q. Tran Vice President Vice President of
various Dean Witter
Funds.
Alice Weiss Vice President Vice President of
various Dean Witter
Funds.
Marianne Zalys Vice President
</TABLE>
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware corporation,
is the principal underwriter of the Registrant. Distributors is also the
principal underwriter of the following investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Equity Income Trust
(15) Dean Witter Federal Securities Trust
11
<PAGE>
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Short-Term Bond Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of the
following persons has any position or office with the Registrant.
<TABLE>
<CAPTION>
Positions and
Office with
Name Distributors
- ---- -------------
<C> <S>
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Edward C. Oelsner III Vice President of Distributors.
Samuel Wolcott III Vice President of Distributors.
</TABLE>
12
<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.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State of
New York on the 28th day of February, 1994.
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
By /s/ Sheldon Curtis
----------------------------------
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 4 has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 02/28/94
--------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 02/28/94
--------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Edward R. Telling
By /s/ Sheldon Curtis 02/28/94
---------------------------
Sheldon Curtis
Attorney-in-Fact
Jack F. Bennett Paul Kolton
John R. Haire Michael E. Nugent
John E. Jeuck
Manuel H. Johnson Edwin J. Garn
By /s/ David M. Butowsky 02/28/94
---------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
5. - Form of Investment Management Agreement between
Registrant and Dean Witter InterCapital Inc.
6. - Form of Distribution Agreement between Registrant and
Dean Witter Distributors Inc.
8. - Amended and Restated Transfer Agency and Service
Agreement
9. - Form of Services Agreement between Dean Witter InterCapital
Inc. and Dean Witter Services Company Inc.
11. - Consent of Independent Accountants
15. - Amended and Restated Plan of Distribution
pursuant to Rule 12b-1 between the Registrant
and Dean Witter Distributors Inc.
16. - Schedules for Computation of Performance
Quotations
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of June, 1993 by and between Dean Witter
Precious Metals and Minerals Trust, 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
<PAGE>
and such clerical help and bookkeeping services as the Fund shall reasonably
require in the conduct of its 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 annual rate of 0.80% to
the Fund's daily net assets. 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, 1994 and from
year to year thereafter provided such continuance is approved at least annually
by the vote of holders of a majority, as defined in the Investment Company Act
of 1940, as amended (the "Act"), of the outstanding voting securities of the
Fund or by the Trustees of the Fund; provided that in either event such
continuance is also approved annually by the vote of a majority of the Trustees
of the Fund who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party, which vote must be cast in person at a
meeting called for the purpose of voting on such approval; provided, however,
that (a) the Fund may, at any time and without the payment of any penalty,
terminate this Agreement upon thirty days' written notice to the Investment
Manager, either by majority vote of the Trustees of the Fund or by the vote of a
majority of the outstanding voting securities of the Fund; (b) this Agreement
shall immediately terminate in the event of its assignment (to the extent
required by the Act and the rules thereunder) unless such automatic terminations
shall be prevented by an exemptive order of the Securities and Exchange
Commission; and (c) the Investment Manager may terminate this Agreement without
payment of penalty on thirty days' written notice to the Fund. Any notice under
this Agreement shall be given in writing, addressed and delivered, or mailed
post-paid, to the other party at the principal office of such party.
11. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure, correct
or supplement any ambiguous, defective or inconsistent provision hereof, or if
they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund nor the Investment
Manager shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the laws of
the State of New York and the applicable provisions of the Act. To the extent
the applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.
13. The Investment Manager and the Fund each agree that the name "Dean
Witter", which comprises a component of the Fund's name, is a property right
of Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will only
use the name "Dean Witter" as a component of its name and for no other purpose,
(ii) it will not purport to grant to any third party the right to use the name
"Dean Witter" for any purpose, (iii) the Investment Manager or its parent, Dean
Witter Reynolds Inc., or any corporate affiliate of the Investment Manager's
parent, may use or grant to others the right to use the name "Dean Witter", or
any
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combination or abbreviation thereof, as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of such right to
any other investment company, (iv) at the request of the Investment Manager or
its parent, the Fund will take such action as may be required to provide its
consent to the use of the name "Dean Witter", or any combination or abbreviation
thereof, by the Investment Manager or its parent or any corporate affiliate of
the Investment Manager's parent, or by any person to whom the Investment Manager
or its parent or any corporate affiliate of the Investment Manager's parent
shall have granted the right to such use, and (v) upon the termination of any
investment advisory agreement into which the Investment Manager and the Fund may
enter, or upon termination of affiliation of the Investment Manager with its
parent, the Fund shall, upon request by the Investment Manager or its parent,
cease to use the name "Dean Witter" as a component of its name, and shall not
use the name, or any combination or abbreviation thereof, as a part of its name
or for any other commercial purpose, and shall cause its officers, Trustees and
shareholders to take any and all actions which the Investment Manager or its
parent may request to effect the foregoing and to reconvey to the Investment
Manager or its parent any and all rights to such name.
14. The Declaration of Trust establishing Dean Witter Precious Metals
and Minerals Trust, dated December 27, 1989, 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 Precious Metals and Minerals Trust refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of Dean Witter Precious
Metals and Minerals Trust shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim or otherwise, in connection with the affairs of said Dean Witter
Precious Metals and Minerals Trust, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
<TABLE>
<S> <C>
DEAN WITTER PRECIOUS METALS
AND MINERALS TRUST
By
.................................................................
Attest:
................................................................
DEAN WITTER INTERCAPITAL INC.
By
.................................................................
Attest:
................................................................
</TABLE>
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<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 30th day of June, 1993, between Dean Witter
Precious Metals and Minerals Trust, an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts (the "Trust"), and Dean
Witter Distributors Inc., a Delaware corporation (the "Distributor");
W I T N E S S E T H:
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a diversified open-end investment company and it
is in the interest of the Trust to offer its shares for sale continuously; and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Trust's transferable
shares of beneficial interest, of $.01 par value ("Shares"), in order to promote
the growth of the Trust and facilitate the distribution of its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR. (a) The Trust hereby appoints
the Distributor as the principal underwriter of the Trust to sell Shares to the
public on the terms set forth in this Agreement and the Trust's Prospectus and
the Distributor hereby accepts such appointment and agrees to act hereunder. The
Trust, during the term of this Agreement, shall sell Shares to the Distributor
upon the terms and conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from the Trust and to sell Shares as principal to investors and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in the Trust's prospectus
(the "Prospectus") and statement of additional information included in the
Trust's registration statement (the "Registration Statement") most recently
filed from time to time with the Securities and Exchange Commission (the "SEC")
and effective under the Securities Act of 1933, as amended (the "1933 Act"), and
1940 Act or as said Prospectus may be otherwise amended or supplemented and
filed with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of the Trust, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by the Trust: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Trust or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Trust; or
(ii) pursuant to reinvestment of dividends or capital gains distributions; or
(iii) pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM THE TRUST. (a) The Distributor shall
have the right to buy from the Trust the Shares needed, but not more than the
Shares needed (except for clerical errors in transmission), to fill
unconditional orders for Shares placed with the Distributor by investors and
securities dealers. The price which the Distributor shall pay for the Shares so
purchased from the Trust shall be the net asset value, determined as set forth
in the Prospectus.
(b) The Shares are to be resold by the Distributor at the net asset value
per share, as set forth in the Prospectus, to investors or to securities
dealers, including DWR, who have entered into selected dealer agreements with
the Distributor pursuant to Section 7 ("Selected Dealers").
(c) The Trust shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(d) hereof. The Trust shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of the Trust, makes it impracticable to sell the Shares.
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(d) The Trust, or any agent of the Trust designated in writing by the
Trust, shall be promptly advised of all purchase orders for Shares received by
the Distributor. Any order may be rejected by the Trust; provided, however, that
the Trust will not arbitrarily or without reasonable cause refuse to accept
orders for the purchase of Shares. The Distributor will confirm orders upon
their receipt, and the Trust (or its agent) upon receipt of payment therefor and
instructions will deliver share certificates for such Shares or a statement
confirming the issuance of Shares. Payment shall be made to the Trust in New
York Clearing House funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Trust (or its agent).
With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Trust's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to the Trust's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES. (a) Any of the outstanding
Shares may be tendered for redemption at any time, and the Trust agrees to
redeem the Shares so tendered in accordance with the applicable provisions set
forth in the Prospectus. The price to be paid to redeem the Shares shall be
equal to the net asset value determined as set forth in the Prospectus less any
applicable contingent deferred sales charge. All payments by the Trust hereunder
shall be made in the manner set forth below.
The proceeds of any redemption of Shares shall be paid by the Trust as
follows: (i) any applicable contingent deferred sales charge shall be paid to
the Distributor or to the Selected Dealer, or, when applicable, pursuant to the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
("NASD"), retained by the Fund and (ii) the balance shall be paid to the
redeeming shareholders, in each case in accordance with applicable provisions of
the Prospectus, in New York Clearing House funds. The Distributor is authorized
to direct the Trust to pay directly to any Selected Dealer any contingent
deferred sales charges payable by the Trust to the Distributor in respect of
Shares sold by the Selected Dealer to the redeeming shareholders.
(b) The Distributor is authorized, as agent for the Trust, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in the
Prospectus. The Distributor shall promptly transmit to the transfer agent of the
Trust for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Trust's transfer
agent in connection with all such repurchases.
(c) The Distributor is authorized, as agent for the Trust, to repurchase
Shares held in a share holder's account with the Trust for which no share
certificate has been issued, upon the telephonic or telegraphic request of the
shareholder, or at the discretion of the Distributor. The Distributor shall
promptly transmit to the transfer agent of the Trust, for redemption, all such
orders for repurchase of shares. Payment for shares repurchased may be made by
the Trust to the Distributor for the account of the shareholder. The Distributor
shall be responsible for the accuracy of instructions transmitted to the Trust's
transfer agent in connection with all such repurchases.
With respect to Shares tendered for redemption or repuchase by any Selected
Dealer on behalf of its customers, the Distributor is authorized to instruct the
transfer agent of the Trust to accept orders for redemption or repurchase
directly from the Selected Dealer on behalf of the Distributor and to instruct
the Trust to transmit payments for such redemptions and repurchases directly to
the Selected Dealer on behalf of the Distributor for the account of the
shareholder. The Distributor shall obtain from the Selected Dealer and maintain
a record of such orders. The Distributor is further authorized to obtain from
the Trust; and shall maintain, a record of payments made directly to the
Selected Dealer on behalf of the Distributor.
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(d) Redemption of Shares or payment by the Trust may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by the Trust
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange Commission, by order,
so permits.
SECTION 5. DUTIES OF THE TRUST. (a) The Trust shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use in connection with the
distribution of the Shares, including one certified copy, upon request by the
Distributor, of all financial statements prepared by the Trust and examined by
independent accountants. The Trust shall, at the expense of the Distributor,
make available to the Distributor such number of copies of the Prospectus as the
Distributor shall reasonably request.
(b) The Trust shall take, from time to time, but subject to the necessary
approval of its share holders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) The Trust shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Shares for sale under the
securities laws of such states as the Distributor and the Trust may approve. Any
such qualification may be withheld, terminated or withdrawn by the Trust at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Trust. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Trust in connection with such
qualification.
(d) The Trust shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of annual and
interim reports by the Trust.
SECTION 6. DUTIES OF THE DISTRIBUTOR. (a) The Distributor shall sell Shares
of the Trust through DWR, and may sell Shares through other securities dealers
and its own Account Executives, if any, and shall devote reasonable time and
effort to promote sales of the Shares, but shall not be obligated to sell any
specific number of Shares. The services of the Distributor hereunder are not
exclusive and it is understood that the Distributor may act as principal
underwriter for other registered investment companies. It is also understood
that Selected Dealers, including DWR, may also sell shares for other registered
investment companies.
(b) The Distributor and any Selected Dealers shall not give any information
or make any representations, other than those contained in the Registration
Statement or related Prospectus and any sales literature specifically approved
by the Trust.
(c) The Distributor agrees that it will comply with the terms and
limitations of the Rules of Fair Practice of the NASD.
SECTION 7. SELECTED DEALERS AGREEMENTS. (a) The Distributor shall have the
right to enter into selected dealers agreements with Selected Dealers for the
sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Trust. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public offering
price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by the
Trust, for the confirmation of sales of Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
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<PAGE>
SECTION 8. PAYMENT OF EXPENSES. (a) The Distributor shall bear all expenses
incurred by it in connection with its duties and activities under this Agreement
including the payment to Selected Dealers of any sales commissions service fees,
and other expenses for sales of the Trust's shares (except such expenses as are
specifically undertaken herein by the Trust) incurred or paid by Selected
Dealers, including DWR. It is understood and agreed that, so long as the Trust's
Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act continues in
effect, any expenses incurred by the Distributor hereunder and by DWR under the
Distribution Agreement previously in effect between DWR and the Trust may be
paid from amounts the Distributor and DWR are entitled to receive from the Trust
under such Plan. It is further understood and agreed that expenses for which the
Distributor and DWR or any other Selected Dealer may be paid under said Plan
include opportunity costs, which may be calculated as a carrying charge on the
excess of distribution expenses, incurred by the Distributor and/or the Selected
Dealer over distribution revenues received by each of them, respectively, under
this Agreement and the Distribution Agreement previously in effect with DWR.
(b) The Trust shall bear all costs and expenses of the Trust, including
payment of contingent deferred sales charges, fees and disbursements of legal
counsel including counsel to the Trustees of the Trust who are not interested
persons (as defined in the 1940 Act) of the Trust or the Distributor, and
independent accountants, in connection with the preparation and filing of any
required Registration Statements and Prospectuses and all amendments and
supplements thereto, and the expense of preparing, printing, mailing and
otherwise distributing prospectuses and statements of additional information,
annual or interim reports or proxy materials to shareholders.
(c) The Trust shall bear the cost and expenses of qualification of the
Shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Trust as a broker or dealer, in such states of the United States
or other jurisdictions as shall be selected by the Trust and the Distributor
pursuant to Section 5(c) hereof and the cost and expenses payable to each such
state for continuing qualification therein until the Trust decides to
discontinue such qualification pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION. (a) The Trust shall indemnify and hold harmless
the Distributor and each person, if any, who controls the Distributor against
any loss, liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith), arising by reason
of any person acquiring any Shares, which may be based upon the 1933 Act, or on
any other statute or at common law, on the ground that the Registration
Statement or related Prospectus and Statements of Additional Information, as
from time to time amended and supplemented, or the annual or interim reports to
shareholders of the Trust, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Trust in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the
Trust in favor of the Distributor and any such controlling persons to be deemed
to protect the Distributor or any such controlling persons thereof against any
liability to the Trust or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement; or (ii) is the Trust to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any such
controlling persons, as the case may be, shall have notified the Trust in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Trust of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense, of any suit brought to
enforce any such liability, but if the Trust elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to
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the Distributor or such controlling person or persons, defendant or defendants
in the suit. In the event the Trust elects to assume the defense of any such
suit and retain such counsel, the Distributor or such controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Trust does not
elect to assume the defense of any such suit, it will reimburse the Distributor
or such controlling person or persons, defendant or defendants in the suit, for
the reasonable fees and expenses of any counsel retained by them. The Trust
shall promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or trustees in connection with the
issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless the Trust and
each of its trustees and officers and each person, if any, who controls the
Trust against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Trust in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus and Statement of Additional Information, as from time to time
amended, or the annual or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless the Trust and the
Trust's transfer agent, individually and in its capacity as the Trust's transfer
agent, from and against any claims, damages and liabilities which arise as a
result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Trust
pursuant to subsection 4(c) hereof and pay the proceeds to, or as directed by,
the Distributor for the account of each shareholder whose Shares are so
redeemed; and (2) register Shares in the names of investors, confirm the
issuance thereof and receive payment therefor pursuant to subsection 3(d).
(iii) In case any action shall be brought against the Trust or any person
so indemnified by this subsection 9(b) in respect of which indemnity may be
sought against the Distributor, the Distributor shall have the rights and duties
given to the Trust, and the Trust and each person so indemnified shall have the
rights and duties given to the Distributor by the provisions of subsection (a)
of this Section 8.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Trust on the one hand and the Distributor on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Trust on the one hand and
the Distributor on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Trust on the one hand and
the Distributor on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Trust bear to the total compensation received by the Distributor, in each case
as set forth in the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Trust or the Distributor and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Trust and the Distributor agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such claim.
Notwithstanding the provisions of this subsection (c), the Distributor shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Shares distributed by it to the public were
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<PAGE>
offered to the public exceeds the amount of any damages which it has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective as of the date first above written and shall remain in
force until April 30, 1994, and thereafter, but only so long as such continuance
is specifically approved at least annually by (i) the Board of Trustees of the
Trust, or by the vote of a majority of the outstanding voting securities of the
Trust, cast in person or by proxy, and (ii) a majority of those Trustees who are
not parties to this Agreement or interested persons of any such party and who
have no direct or indirect financial interest in this Agreement or in the
operation of the Trust's Rule 12b-1 Plan or in any agreement related thereto,
cast in person at a meeting called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Trustees of the Trust, by a majority of the Trustees of the
Trust who are not interested persons of the Trust and who have no direct or
indirect financial interest in this Agreement, or by vote of a majority of the
outstanding voting securities of the Trust, or by the Distributor, on sixty
days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Trustees
of the Trust, or by the vote of a majority of outstanding voting securities of
the Trust, and (ii) a majority of those Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party and who have
no direct or indirect financial interest in this Agreement or in any Agreement
related to the Trust's Plan of Distribution pursuant to Rule 12b-1 under the
1940 Act, cast in person at a meeting called for the purpose of voting on such
approval.
SECTION 12. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
SECTION 13. PERSONAL LIABILITY. The Declaration of the Trust establishing
Dean Witter Precious Metals and Minerals Trust, dated December 27, 1989, 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 Precious Metals and Minerals Trust refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of Dean
Witter Precious Metals and Minerals Trust shall be held to any personal
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Dean Witter Precious Metals and Minerals Trust, but the Trust
Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
DEAN WITTER PRECIOUS METALS AND
MINERALS TRUST
By: . . . . . . . . . . . . . . . . . . . .
DEAN WITTER DISTRIBUTORS INC.
By: . . . . . . . . . . . . . . . . . . . .
6
<PAGE>
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
DEAN WITTER TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article 1 Terms of Appointment; Duties of DWTC. . . . . . . . . . . . . 2
Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 6
Article 3 Representations and Warranties of DWTC. . . . . . . . . . . . 7
Article 4 Representations and Warranties of the
Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Article 5 Duty of Care and Indemnification. . . . . . . . . . . . . . . 9
Article 6 Documents and Covenants of the Fund and
DWTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Article 7 Duration and Termination of Agreement . . . . . . . . . . . . 16
Article 8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 16
Article 9 Affiliations. . . . . . . . . . . . . . . . . . . . . . . . . 17
Article 10 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Article 11 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . 18
Article 12 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 18
Article 13 Merger of Agreement . . . . . . . . . . . . . . . . . . . . . 20
Article 14 Personal Liability. . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 1st day of August, 1993
by and between each of the Dean Witter Funds listed on the signature pages
hereof, each of such Funds acting severally on its own behalf and not jointly
with any of such other Funds (each such Fund hereinafter referred to as the
"Fund"), each such Fund having its principal office and place of business at Two
World Trade Center, New York, New York, 10048, and DEAN WITTER TRUST COMPANY, a
trust company organized under the laws of New Jersey, having its principal
office and place of business at Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 ("DWTC").
WHEREAS, the Fund desires to appoint DWTC as its transfer agent,
dividend disbursing agent and shareholder servicing agent and DWTC desires to
accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
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<PAGE>
Article 1 TERMS OF APPOINTMENT; DUTIES OF DWTC
1.1 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints DWTC to act as, and DWTC agrees
to act as, the transfer agent for each series and class of shares of the Fund,
whether now or hereafter authorized or issued ("Shares"), dividend disbursing
agent and shareholder servicing agent in connection with any accumulation, open-
account or similar plans provided to the holders of such Shares ("Shareholders")
and set out in the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 DWTC agrees that it will perform the following services:
(a) In accordance with procedures established from time to time
by agreement between the Fund and DWTC, DWTC shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
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<PAGE>
(ii) Pursuant to purchase orders, issue the appropriate number
of Shares and issue certificates therefor or hold such Shares in book form in
the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and
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<PAGE>
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding. DWTC
shall also provide to the Fund on a regular basis the total number of Shares
which are authorized, issued and outstanding and shall notify the Fund in case
any proposed issue of Shares by the Fund would result in an overissue. In case
any issue of Shares would result in an overissue, DWTC shall refuse to issue
such Shares and shall not countersign and issue any certificates requested for
such Shares. When recording the issuance of Shares, DWTC shall have no
obligation to take cognizance of any Blue Sky laws relating to the issue of sale
of such Shares, which functions shall be the sole responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in
the above paragraph (a), DWTC shall: (i) perform all of the customary services
of a transfer agent, dividend disbursing agent and, as relevant, shareholder
servicing agent in connection with dividend reinvestment, accumulation, open-
account or similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to, maintaining
all Shareholder accounts, preparing Shareholder meeting lists,
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<PAGE>
mailing proxies, receiving and tabulating proxies, mailing shareholder reports
and prospectuses to current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing appropriate forms required
with respect to dividends and distributions by federal tax authorities for all
Shareholders, preparing and mailing confirmation forms and statements of account
to Shareholders for all purchases and redemptions of Shares and other confirm-
able transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders and providing Shareholder account information; (ii)
open any and all bank accounts which may be necessary or appropriate in order to
provide the foregoing services; and (iii) provide a system which will enable the
Fund to monitor the total number of Shares sold in each State or other
jurisdiction.
(c) In addition, the Fund shall (i) identify to DWTC in writing
those transactions and assets to be treated as exempt from Blue Sky reporting
for each State and (ii) verify the establishment of transactions for each State
on the system prior to activation and thereafter monitor the daily activity for
each State. The responsibility of DWTC for the Fund's registration status under
the Blue Sky or securities laws of any State or other jurisdiction is solely
limited to the initial establishment of transactions subject to Blue Sky
compliance by the Fund and the reporting of such transactions
-5-
<PAGE>
to the Fund as provided above and as agreed from time to time by the Fund and
DWTC.
(d) DWTC shall provide such additional services and functions
not specifically described herein as may be mutually agreed between DWTC and
the Fund. Procedures applicable to such services may be established from time
to time by agreement between the Fund and DWTC.
Article 2 FEES AND EXPENSES
2.1 For performance by DWTC pursuant to this Agreement, each
Fund agrees to pay DWTC an annual maintenance fee for each Shareholder account
and certain transactional fees, if applicable, as set out in the respective fee
schedule attached hereto as Schedule A. Such fees and out-of-pocket expenses
and advances identified under Section 2.2 below may be changed from time to time
subject to mutual written agreement between the Fund and DWTC.
2.2 In addition to the fees paid under Section 2.1 above, the
Fund agrees to reimburse DWTC in connection with the services rendered by DWTC
hereunder. In addition, any other expenses incurred by DWTC at the request or
with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses
within a reasonable period of time
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<PAGE>
following the mailing of the respective billing notice. Postage for mailing of
dividends, proxies, Fund reports and other mailings to all Shareholder accounts
shall be advanced to DWTC by the Fund upon request prior to the mailing date of
such materials.
Article 3 REPRESENTATIONS AND WARRANTIES OF DWTC
DWTC represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in
good standing under the laws of New Jersey and it is duly qualified to carry on
its business in New Jersey.
3.2 It is and will remain registered with the U.S. Securities
and Exchange Commission ("SEC") as a Transfer Agent pursuant to the requirements
of Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and
By-Laws to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
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<PAGE>
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to DWTC that:
4.1 It is a corporation duly organized and existing and in good
standing under the laws of Delaware or Maryland or a trust duly organized and
existing and in good standing under the laws of Massachusetts, as the case may
be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its By-Laws
to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to
enter into and perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under
the Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933
(the "1933 Act") is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale.
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<PAGE>
Article 5 DUTY OF CARE AND INDEMNIFICATION
5.1 DWTC shall not be responsible for, and the Fund shall
indemnify and hold DWTC harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTC or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by DWTC or its agents or subcontractors of
information, records and documents which (i) are received by DWTC or its agents
or subcontractors and furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other person or firm on
behalf of the Fund.
(d) The reliance on, or the carrying out by DWTC or its agents or
subcontractors of, any instructions or requests
-9-
<PAGE>
of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities or Blue Sky laws of
any State or other jurisdiction that such Shares be registered in such State or
other jurisdiction or in violation of any stop order or other determination or
ruling by any federal agency or any State or other jurisdiction with respect to
the offer or sale of such Shares in such State or other jurisdiction.
5.2 DWTC shall indemnify and hold the Fund harmless from or
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by DWTC as a result of the lack of good faith, negligence or
willful misconduct of DWTC, its officers, employees or agents.
5.3 At any time, DWTC may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by DWTC under
this Agreement, and DWTC and its agents or subcontractors shall not be liable
and shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. DWTC, its
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<PAGE>
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided to DWTC or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. DWTC, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signature of the officers of the
Fund, and the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
5.4 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.
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<PAGE>
5.5 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.
5.6 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 DOCUMENTS AND COVENANTS OF THE FUND AND DWTC
6.1 The Fund shall promptly furnish to DWTC the following:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of DWTC and the execution and delivery of
this Agreement;
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<PAGE>
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the Secretary of the
Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of DWTC and the execution and delivery of
this Agreement;
(ii) A certified copy of the Declaration of Trust and By-laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
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<PAGE>
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the Secretary of the
Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the 1933
Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered or
to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTC deems to
be appropriate or necessary for the proper performance of its duties.
6.2 DWTC hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of Share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.3 DWTC shall prepare and keep records relating to the services
to be performed hereunder, in the form and manner as it may deem advisable and
as required by applicable laws and regulations. To the extent required by
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<PAGE>
Section 31 of the 1940 Act, and the rules and regulations thereunder, DWTC
agrees that all such records prepared or maintained by DWTC relating to the
services performed by DWTC hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section 31 of
the 1940 Act, and the rules and regulations thereunder, and will be surrendered
promptly to the Fund on and in accordance with its request.
6.4 DWTC and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to any other person
except as may be required by law or with the prior consent of DWTC and the Fund.
6.5 In case of any request or demands for the inspection of the
Shareholder records of the Fund, DWTC will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. DWTC reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
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<PAGE>
Article 7 DURATION AND TERMINATION OF AGREEMENT
7.1 This Agreement shall remain in full force and effect until
July 31, 1996 and from year-to-year thereafter unless terminated by either party
as provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days
written notice, and by DWTC on 90 days written notice, to the other party
without payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and other materials will
be borne by the Fund. Additionally, DWTC reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 ASSIGNMENT
8.1 Except as provided in Section 8.3 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.2 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
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<PAGE>
8.3 DWTC may, in its sole discretion and without further consent
by the Fund, subcontract, in whole or in part, for the performance of its
obligations and duties hereunder with any person or entity including but not
limited to companies which are affiliated with DWTC; PROVIDED, HOWEVER, that
such person or entity has and maintains the qualifications, if any, required to
perform such obligations and duties, and that DWTC shall be as fully responsible
to the Fund for the acts and omissions of any agent or subcontractor as it is
for its own acts or omissions under this Agreement.
Article 9 AFFILIATIONS
9.1 DWTC may now or hereafter, without the consent of or notice
to the Fund, function as transfer agent and/or shareholder servicing agent for
any other investment company registered with the SEC under the 1940 Act and for
any other issuer, including without limitation any investment company whose
adviser, administrator, sponsor or principal underwriter is or may become
affiliated with Dean Witter, Discover & Co. or any of its direct or indirect
subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees
(as the case may be), officers, employees, agents and shareholders of the Fund,
and the directors, officers, employees, agents and shareholders of the
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Fund's investment adviser and/or distributor, are or may be interested in DWTC
as directors, officers, employees, agents and shareholders or otherwise, and
that the directors, officers, employees, agents and shareholders of DWTC may be
interested in the Fund as Directors or Trustees (as the case may be), officers,
employees, agents and shareholders or otherwise, or in the investment adviser
and/or distributor as directors, officers, employees, agents, shareholders or
otherwise.
Article 10 AMENDMENT
10.1 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Board of Directors or the Board of Trustees (as the case may be) of the
Fund.
Article 11 APPLICABLE LAW
11.1 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
York.
Article 12 MISCELLANEOUS
12.1 In the event that one or more additional investment
companies managed or administered by Dean Witter InterCapital Inc. or any of its
affiliates ("Additional Funds") desires to retain DWTC to act as transfer agent,
dividend disbursing agent and/or shareholder servicing agent,
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<PAGE>
and DWTC desires to render such services, such services shall be provided
pursuant to a letter agreement, substantially in the form of Exhibit A hereto,
between DWTC and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to DWTC an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or destroyed,
supported by an appropriate bond satisfactory to DWTC and the Fund issued by a
surety company satisfactory to DWTC, except that DWTC may accept an affidavit of
loss and indemnity agreement executed by the registered holder (or legal
representative) without surety in such form as DWTC deems appropriate
indemnifying DWTC and the Fund for the issuance of a replacement certificate, in
cases where the alleged loss is in the amount of $1000 or less.
12.3 In the event that any check or other order for payment of
money on the account of any Shareholder or new investor is returned unpaid for
any reason, DWTC will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTC
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may, in its sole discretion, deem appropriate or as the Fund and, if applicable,
the Distributor may instruct DWTC.
12.4 Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or to DWTC shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTC:
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 MERGER OF AGREEMENT
13.1 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
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Article 14 PERSONAL LIABILITY
14.1 In the case of a Fund organized as a Massachusetts business
trust, a copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Agreement to be executed in their names and on their behalf by and
through their duly authorized officers, as of the day and year first above
written.
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Equity Income Trust
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
-22-
<PAGE>
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Select Municipal Reinvestment Fund
(44) Dean Witter Variable Investment Series
By:/s/ Sheldon Curtis
-------------------------------------
Sheldon Curtis
Vice President and General Counsel
ATTEST:
/s/ Barry Fink
- ----------------------------
Barry Fink
Assistant Secretary
DEAN WITTER TRUST COMPANY
By:/s/ Charles A. Fiumefreddo
------------------------------------
Charles A. Fiumefreddo
Chairman
ATTEST:
/s/ David A. Hughey
- --------------------------
David A. Hughey
Executive Vice President
-23-
<PAGE>
EXHIBIT A
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned,( Name of Fund ) a (Massachusetts
business trust/Maryland Corporation) (the "Fund"), desires to employ and appoint
Dean Witter Trust Company ("DWTC") to act as transfer agent for each series and
class of shares of the Fund, whether now or hereafter authorized or issued
("Shares"), dividend disbursing agent and shareholder servicing agent, registrar
and agent in connection with any accumulation, open-account or similar plan
provided to the holders of Shares, including without limitation any periodic
investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the
Fund to DWTC of fees as set out in the fee schedule attached hereto as Schedule
A, DWTC shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
-24-
<PAGE>
Please indicate DWTC's acceptance of employment and appointment by the
Fund in the capacities set forth above by so indicating in the space provided
below.
Very truly yours,
[ Fund Name ]
By:__________________________________
Sheldon Curtis
Vice President and General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST COMPANY
By:_______________________
Its:______________________
Date:_____________________
-25-
<PAGE>
SCHEDULE A
<TABLE>
<S> <C>
Fund: Dean Witter Precious Metals and Minerals Trust
Fees: (1) Annual maintenance fee of $11.00 per shareholder account,
payable monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
</TABLE>
-26-
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 31st day of December, 1993 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a New Jersey corporation
(herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement") with
certain investment companies as set forth on Schedule A (each such investment
company being herein referred to as a "Fund" and, collectively, as the "Funds")
pursuant to which InterCapital is to perform, or supervise the performance of,
among other services, administrative services for the Funds (and, in the case of
Funds with multiple portfolios, the Series or Portfolios of the Funds (such
Series and Portfolio being herein individually referred to as "a Series" and,
collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice); (ii)
provide the Fund with full administrative services, including the maintenance of
certain books and records, such as journals, ledger accounts and other records
required under the Investment Company Act of 1940, as amended (the"Act"), the
notification to the Fund and InterCapital of available funds for investment, the
reconciliation of account information and balances among the Fund's custodian,
transfer agent and dividend disbursing agent and InterCapital, and the
calculation of the net asset value of the Fund's shares; (iii) provide the Fund
with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary to provide effective
operation of the Fund; (iv) oversee the performance of administrative and
professional services rendered to the Fund by others, including its custodian,
transfer agent and dividend disbursing agent, as well as accounting, auditing
and other services; (v) provide the Fund with adequate general office space and
facilities; (vi) assist in the preparation and the printing of the periodic
updating of the Fund's registration statement and prospectus (and, in the case
of an open-end Fund, the statement of additional information), tax returns,
proxy statements, and reports to its shareholders and the Securities and
Exchange Commission; and (vii) monitor the compliance of the Fund's investment
policies and restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to perform
administrative services hereunder, it shall notify DWS in writing. If DWS is
willing to render such services, it shall notify InterCapital in writing,
whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to time
determine to be necessary or useful to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, the staff and
personnel of DWS shall be deemed to include officers of DWS and persons employed
or otherwise retained by DWS (including officers and employees of InterCapital,
with the consent of InterCapital) to furnish services, statistical and other
factual data, information with respect to technical and scientific developments,
and such other information, advice and assistance as DWS may desire. DWS shall
maintain each Fund's records and books of account (other than those maintained
by the Fund's transfer agent, registrar, custodian and other agencies). All such
books and records so maintained shall be the property of the Fund and, upon
request therefor, DWS shall surrender to InterCapital or to the Fund such of the
books and records so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other information
relating to the business and affairs of the Fund as DWS may
1
<PAGE>
reasonably require in order to discharge its duties and obligations to the Fund
under this Agreement or to comply with any applicable law and regulation or
request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or
weekly (in the case of a closed-end Fund) by applying the annual rate or rates
set forth on Schedule B to the net assets of each Fund. Except as hereinafter
set forth, (i) in the case of an open-end Fund, compensation under this
Agreement shall be calculated by applying 1/365th of the annual rate or rates to
the Fund's or the Series' daily net assets determined as of the close of
business on that day or the last previous business day and (ii) in the case of a
closed-end Fund, compensation under this Agreement shall be calculated by
applying the annual rate or rates to the Fund's average weekly net assets
determined as of the close of the last business day of each week. If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth on Schedule B. Subject to the
provisions of paragraph 5 hereof, payment of DWS' compensation for the preceding
month shall be made as promptly as possible after completion of the computations
contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund and/or any Series thereof imposed by
state securities laws or regulations thereunder, as such limitations may be
raised or lowered from time to time, or, in the case of InterCapital Income
Securities Inc. or Dean Witter Variable Investment Series or any Series thereof,
the expense limitation specified in the Fund's Investment Management Agreement,
the fee payable hereunder shall be reduced on a pro rata basis in the same
proportion as the fee payable by the Fund under the Investment Management
Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by DWS,
and such clerical help and bookkeeping services as DWS shall reasonably require
in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations hereunder,
DWS shall not be liable to the Fund or any of its investors for any error of
judgment or mistake of law or for any act or omission by DWS or for any losses
sustained by the Fund or its investors. It is understood that, subject to the
terms and conditions of the Investment Management Agreement between each Fund
and InterCapital, InterCapital shall retain ultimate responsibility for all
services to be performed hereunder by DWS. DWS shall indemnify InterCapital and
hold it harmless from any liability that InterCapital may incur arising out of
any act or failure to act by DWS in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person controlling,
controlled by or under common control with DWS, and that DWS and any person
controlling, controlled by or under common control with DWS may have an interest
in the Fund. It is also understood that DWS and any affiliated persons thereof
or any persons controlling, controlled by or under common control with DWS have
and may have advisory, management, administration service or other contracts
with other organizations and persons, and may have other interests and
businesses, and further may purchase, sell or trade any securities or
commodities for their own accounts or for the account of others for whom they
may be acting.
9. This Agreement shall continue until April 30, 1994, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the
2
<PAGE>
event that the Investment Management Agreement between any Fund and InterCapital
is terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any manner
by mutual written agreement executed by each of the parties hereto.
11. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By: ............................
Attest:
..........................
DEAN WITTER SERVICES COMPANY INC.
By: .............................
Attest:
..........................
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
at December 31, 1993
Open-End Funds
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter California Tax-Free Daily Income Trust
7. Dean Witter California Tax-Free Income Fund
8. Dean Witter Capital Growth Securities
9. Dean Witter Convertible Securities Trust
10. Dean Witter Developing Growth Securities Trust
11. Dean Witter Diversified Income Trust
12. Dean Witter Dividend Growth Securities Inc.
13. Dean Witter Equity Income Trust
14. Dean Witter European Growth Fund Inc.
15. Dean Witter Federal Securities Trust
16. Dean Witter Global Dividend Growth Securities
17. Dean Witter Global Short-Term Income Fund Inc.
18. Dean Witter Health Sciences Trust
19. Dean Witter High Yield Securities Inc.
20. Dean Witter Intermediate Income Securities
21. Dean Witter Limited Term Municipal Trust
22. Dean Witter Liquid Asset Fund Inc.
23. Dean Witter Managed Assets Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter Natural Resource Development Securities Inc.
26. Dean Witter New York Municipal Money Market Trust
27. Dean Witter New York Tax-Free Income Fund
28. Dean Witter Pacific Growth Fund Inc.
29. Dean Witter Precious Metals and Minerals Trust
30. Dean Witter Premier Income Trust
31. Dean Witter Retirement Series
32. Dean Witter Select Municipal Reinvestment Fund
33. Dean Witter Short-Term U.S. Treasury Trust
34. Dean Witter Strategist Fund
35. Dean Witter Tax-Exempt Securities Trust
36. Dean Witter Tax-Free Daily Income Trust
37. Dean Witter U.S. Government Money Market Trust
38. Dean Witter U.S. Government Securities Trust
39. Dean Witter Utilities Fund
40. Dean Witter Value-Added Market Series
41. Dean Witter Variable Investment Series
42. Dean Witter World Wide Income Trust
43. Dean Witter World Wide Investment Trust
Closed-End Funds
44. High Income Advantage Trust
45. High Income Advantage Trust II
46. High Income Advantage Trust III
47. InterCapital Income Securities Inc.
48. Dean Witter Government Income Trust
49. InterCapital Insured Municipal Bond Trust
50. InterCapital Insured Municipal Trust
51. InterCapital Insured Municipal Income Trust
52. InterCapital California Insured Municipal Income Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. InterCapital Quality Municipal Securities
56. InterCapital California Quality Municipal Securities
57. InterCapital New York Quality Municipal Securities
4
<PAGE>
DEAN WITTER SERVICES COMPANY
SCHEDULE OF ADMINISTRATIVE FEES - JANUARY 1, 1994
MONTHLY COMPENSATION CALCULATED DAILY BY APPLYING THE FOLLOWING ANNUAL RATES TO
THE FUND'S NET ASSETS.
Dean Witter Precious Metals 0.080% to the net assets.
and Minerals Trust
5
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 4 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
December 3, 1993 relating to the financial statements and financial highlights
of Dean Witter Precious Metals and Minerals Trust, which appears in such
Statement of Additional Information, and to the incorporation by reference of
such report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the reference to us under the heading "Financial
Highlights" in the Prospectus and to the references to us under the headings
"Independent Accountants" and "Experts" in the Statement of Additional
Information.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York
February 25, 1993
<PAGE>
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
OF
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
WHEREAS, Dean Witter Precious Metals and Minerals Trust (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, June 26, 1990, the Fund adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Act, and the Trustees then determined that there was a
reasonable likelihood that adoption of the Plan of Distribution would benefit
the Fund and its shareholders; and
WHEREAS, the Trustees believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to continue
to benefit the Fund and its shareholders; and
WHEREAS, on June 26, 1990, the Fund and Dean Witter Reynolds Inc. ("DWR")
entered into a Distribution Agreement pursuant to which the Fund employed DWR as
distributor of the Fund's shares; and
WHEREAS, on January 4, 1993, the Fund and DWR substituted Dean Witter
Distributors Inc. (the "Distributor") in the place of DWR as distributor of the
Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will continue to
promote the sale of Fund shares and provide personal services to Fund
shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor have entered into a separate
Distribution Agreement dated as of January 4, 1993, pursuant to which the Fund
has employed the Distributor in such capacity during the continuous offering of
shares of the Fund.
NOW, THEREFORE, the Fund hereby amends the Plan of Distribution previously
adopted and amended and restated, and the Distributor hereby agrees to the terms
of said Plan of Distribution (the "Plan"), as amended herein, in accordance with
Rule 12b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of securities
of which the Fund is the issuer, compensation for distribution of its shares at
the rate of the lesser of (i) 1.0% per annum of the average daily aggregate
sales of the shares of the Fund since its inception (not including reinvestment
of dividends and capital gains distributions from the Fund) less the average
daily aggregate net asset value of the shares of the Fund redeemed since the
Fund's inception upon which a contingent deferred sales charge has been imposed
or upon which such charge has been waived, or (ii) 1.0% per annum of the Fund's
average daily net assets. Such compensation shall be calculated and accrued
daily and paid monthly or at such other intervals as the Trustees shall
determine. The Distributor may direct that all or any part of the amounts
receivable by it under this Plan be paid directly to DWR, its affiliates or
other broker-dealers who provide distribution and shareholder services. All
payments made hereunder pursuant to the Plan shall be in accordance with the
terms and limitations of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc.
2. The amount set forth in paragraph 1 of this Plan shall be paid for
services of the Distributor, DWR, its affiliates and other broker-dealers it may
select in connection with the distribution of the Fund's shares, including
personal services to shareholders with respect to their holdings of Fund shares,
and may be spent by the Distributor, DWR, its affiliates and such broker-dealers
on any activities or expenses related to the distribution of the Fund's shares
or services to shareholders, including, but not limited to: compensation to, and
expenses of, account executives or other employees of the Distributor, DWR, its
affiliates or other broker-dealers; overhead and other branch office
distribution-related expenses and telephone expenses of persons who engage in or
support distribution of shares or who provide personal services to shareholders;
printing of prospectuses and reports for other than existing shareholders;
preparation, printing and distribution of sales literature and advertising
materials and opportunity costs in incurring the foregoing expenses (which may
be calculated as a carrying charge on the excess of the distribution expenses
incurred by the Distributor, DWR, its affiliates or other broker-dealers over
distribution revenues received by them). The overhead and other branch office
distribution-related expenses referred to in this paragraph 2 may include: (a)
the expenses of operating the branch offices of the Distributor or other
broker-dealers, including DWR, in connection with the sale of Fund shares,
including lease costs, the salaries and employee benefits of operations and
sales support personnel, utility costs, communications costs and the costs of
stationery and supplies; (b) the costs of client sales seminars; (c) travel
expenses of mutual fund sales coordinators to promote the sale of Fund shares;
and (d) other expenses relating to branch promotion of Fund sales.
1
<PAGE>
3. This Plan, as amended and restated, shall not take effect until it has
been approved, together with any related agreements, by votes of a majority of
the Board of Trustees of the Fund and of the Trustees who are not "interested
persons" of the Fund (as defined in the Act) and have no direct or indirect
financial interest in the operation of this Plan or any agreements related to it
(the "Rule 12b-1 Trustees"), cast in person at a meeting (or meetings) called
for the purpose of voting on this Plan and such related agreements.
4. This Plan shall continue in effect until April 30, 1993, and from year
to year thereafter, provided such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 3 hereof.
5. The Distributor shall provide to the Trustees of the Fund and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made. In this regard,
the Trustees shall request the Distributor to specify such items of
expenses as the Trustees deem appropriate. The Trustees shall consider such
items as they deem relevant in making the determinations required by paragraph 4
hereof.
6. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. In the event of any such termination or in the event of
nonrenewal, the Fund shall have no obligation to pay expenses which have been
incurred by the Distributor, DWR, its affiliates or other broker-dealers in
excess of payments made by the Fund pursuant to this Plan. However, this shall
not preclude consideration by the Trustees of the manner in which such excess
expenses shall be treated.
7. This Plan may not be amended to increase materially the amount the
Fund may spend for distribution provided in paragraph 1 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the Act)
of the outstanding voting securities of the Fund, and no material amendment to
the Plan shall be made unless approved in the manner provided for approval in
paragraph 3 hereof.
8. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Trustees who are not interested persons.
9. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 5 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible place.
10. The Declaration of Trust establishing Dean Witter Precious Metals and
Minerals Trust, dated December 27, 1989, 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 Precious Metals and Minerals Trust refers to the Trustees under the
Declaration collectively as Trustees but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of Dean Witter Precious
Metals and Minerals Trust shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim or otherwise, in connection with the affairs of said Dean Witter
Precious Metals and Minerals Trust, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
amended and restated Plan of Distribution, as amended, as of the day and year
set forth below in New York, New York.
<TABLE>
<S> <C>
Date: June 26, 1990 DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
As amended on January 4, 1993
and April 28, 1993
By
.....................................................
Attest:
....................................................
DEAN WITTER DISTRIBUTORS INC.
By
.....................................................
Attest:
....................................................
DEAN WITTER REYNOLDS INC.
By
.....................................................
Attest:
....................................................
</TABLE>
2
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
PRECIOUS METALS AND MINERALS TRUST
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ----------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-93 TOTAL RETURN YEARS - n TOTAL RETURN - T
- -------------- ----------------------------- --------------------------------
<S> <C> <C> <C> <C>
31-Oct-92 $1,322.30 32.23% 1.00 32.23%
06-Aug-90 $1,075.60 7.56% 3.24 2.28%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS WITH DEDUCTION FOR APPLICABLE
SALES CHARGE AND ADJUSTED TO REFLECT EXPENSES ABSORBED BY
INVESTMENT MANAGER. (STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVE |
TE = | \ | ------------------ | - 1
| \ | P |
| \| |
|_ _|
TE = AVERAGE ANNUAL COMPOUND RETURN (DEDUCTION FOR APPLICABLE SALES
CHARGE AND REFLECTING EXPENSES ASSUMED BY INVESTMENT MANAGER)
n = NUMBER OF YEARS
EVE = ENDING VALUE (DEDUCTION FOR APPLICABLE SALES CHARGE AND
REFLECTING EXPENSES ASSUMED BY INVESTMENT MANAGER)
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(B)
$1,000 EVE AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-93 YEARS - n TOTAL RETURN - TE
- -------------- ------------- -------------- ----------------------------
<S> <C> <C> <C>
06-Aug-90 $1,068.50 3.24 2.07%
</TABLE>
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (D)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-93 RETURN - TR YEARS - n TOTAL RETURN - t
- -------------- ------------ ------------------------------------------------
<S> <C> <C> <C> <C>
31-Oct-92 $1,372.30 37.23% 1.00 37.23%
06-Aug-90 $1,095.60 9.56% 3.24 2.86%
</TABLE>
(E) GROWTH OF $10,000
(F) GROWTH OF $50,000
(G GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
(E) (F) (G)
$10,000 TOTAL GROWTH OF GROWTH OF GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- -------------- -------------- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
06-Aug-90 9.56 $10,956 $54,780 $109,560
</TABLE>
