<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 30, 1996
FILE NOS.: 33-36217
811-06148
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 6 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 8 /X/
-------------------
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
(A MARYLAND CORPORATION)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
-------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after this
Post-Effective
Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
___ immediately upon filing pursuant to paragraph (b)
_X_ on February 1, 1996 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, 1995,
WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 1995.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
-------------------------------------------------------
-------------------------------------------------------
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<S> <C>
ITEM CAPTION
- ----------------------------------------------- -----------------------------------------------------------------------
PART A PROSPECTUS
1. .......................................... Cover Page
2. .......................................... Prospectus Summary
3. .......................................... Financial Highlights
4. .......................................... Investment Objective and Policies; The Fund and its Management, Cover
Page; Investment Restrictions; Prospectus Summary; Financial
Highlights
5. .......................................... The Fund and Its Management; Back Cover; Investment Objective and
Policies
6. .......................................... Dividends, Distributions and Taxes; Additional Information
7. .......................................... Purchase of Fund Shares; Shareholder Services; Prospectus Summary
8. .......................................... Redemptions and Repurchases; Shareholder Services
9. .......................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. .......................................... Cover Page
11. .......................................... Table of Contents
12. .......................................... The Fund and Its Management
13. .......................................... Investment Practices and Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. .......................................... The Fund and Its Management; Directors and Officers
15. .......................................... The Fund and Its Management; Directors and Officers
16. .......................................... The Fund and Its Management; The Distributor; Shareholder Services;
Custodian and Transfer Agent; Independent Accountants
17. .......................................... Portfolio Transactions and Brokerage
18. .......................................... Description of Shares of the Fund
19. .......................................... The Distributor; Redemptions and Repurchases; Financial Statements;
Shareholder Services
20. .......................................... Dividends, Distributions and Taxes
21. .......................................... Not applicable
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 1, 1996
Dean Witter Global Short-Term Income Fund Inc. (the "Fund") is an
open-end, non-diversified management investment company whose investment
objective is to achieve as high a level of current income as is consistent with
prudent investment risk. The Fund seeks to achieve this objective by investing
in high quality fixed-income securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, issued or guaranteed by foreign
governments, or issued by foreign or U.S. companies (including bank instruments
and commercial paper), which have remaining maturities at the time of purchase
of not more than three years. The Fund is designed for the investor who seeks a
higher yield than a money market fund and less fluctuation in net asset value
than a longer-term bond fund.
Shares of the Fund are continuously offered at net asset value.
However, redemptions and/or repurchases are subject in most cases to a
contingent deferred sales charge, scaled down from 3% to 1% of the amount
redeemed, if made within three 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 distribution fee pursuant to a Plan of Distribution at the annual
rate of 0.75% 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 1, 1996, 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 number listed on this page. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/3
Financial Highlights/4
The Fund and its Management/5
Investment Objective and Policies/5
Risk Considerations/9
Investment Restrictions/16
Purchase of Fund Shares/16
Shareholder Services/19
Redemptions and Repurchases/22
Dividends, Distributions and Taxes/24
Performance Information/25
Additional Information/26
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 Global
Short-Term Income Fund Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll free)
<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
The The Fund is an open-end, non-diversified management investment company investing in high quality fixed-income
Fund securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, issued or guaranteed
by foreign governments, or issued by foreign or U.S. companies, which have remaining maturities at the time of
purchase of not more than three years.
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Shares of common stock of $0.01 par value (see page 26).
Offered
- ------------------------------------------------------------------------------------------------------------------------------------
Offering At net asset value without sales charge (see page 16). Shares redeemed within three years of purchase are
Price subject to a contingent deferred sales charge under most circumstances (see page 22).
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum Minimum initial investment, $1,000 ($100 if account is opened through EasyInvest-SM-); minimum subsequent
Purchase investment, $100 (see page 16).
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Investment The investment objective of the Fund is to achieve as high a level of current income as is consistent with
Objective prudent investment risk (see page 5).
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund and its wholly-owned
Manager subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory, management and
administrative capacities to ninety-five investment companies and other portfolios with assets under management
of approximately $79.5 billion at December 31, 1995 (see page 5).
- ------------------------------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.55% of the Fund's daily net assets not
Fee exceeding $500 million and 0.50% of the Fund's daily net assets on the amount exceeding $500 million (see page
5).
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income are declared daily and paid monthly. Distributions from net short-term and
Distributions long-term capital gains are paid at least once per year (may be retained for reinvestment). Dividends and
capital gains distributions are automatically reinvested in additional shares at net asset value unless the
shareholder elects to receive cash (see page 24).
- ------------------------------------------------------------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor"). For its services as Distributor, which include payment of
sales commissions to account executives and various other promotional and sales related expenses, the
Distributor receives from the Fund a distribution fee accrued daily and payable monthly at the rate of 0.75% per
annum of the lesser of (i) the Fund's average daily aggregate net sales or (ii) the Fund's average daily net
assets. This fee compensates the Distributor for the services it provides in distributing shares of the Fund and
for its sales related expenses. The Distributor also receives the proceeds of any contingent deferred sales
charges (see page 16).
- ------------------------------------------------------------------------------------------------------------------------------------
Redemption-- At net asset value; redeemable involuntarily if total value of the account is less than $100 or, if the account
Contingent was opened through EasyInvest, if after twelve months the shareholder has invested less than $1,000 in the
Deferred account. Although no commission or sales load is imposed upon the purchase of shares, a contingent deferred
Sales sales charge (scaled down from 3% to 1%) is imposed on any redemption of shares if after such redemption the
Charge aggregate current value of an account with the Fund falls below the aggregate amount of the investor's purchase
payments made during the three years preceding the redemption. However, there is no charge imposed on redemption
of shares purchased through reinvestment of dividends or distributions (see page 22).
- ------------------------------------------------------------------------------------------------------------------------------------
Special The net asset value of the Fund's shares will fluctuate with changes in the market value of its portfolio
Risk securities. It should be noted, for example, that, generally, when the level of prevailing interest rates rises,
Considerations the values of the outstanding fixed-income securities fall and when such rates fall their values rise. The Fund
is a non-diversified investment company and, as such, is not subject to the diversification requirements of the
Investment Company Act of 1940, as amended (the "Act") (see page 9). The Fund will concentrate its investments
in securities issued by companies engaged in the banking industry. This concentration will increase the Fund's
exposure to certain risks associated with the banking industry such as adverse changes in economic and
regulatory developments affecting the banking industry, sustained interest rate increases and concentration of a
bank's loan portfolios in particular businesses undergoing economic hardship (see page 7). It should be
recognized that the foreign securities and markets in which the Fund will invest pose different and greater
risks than those customarily associated with domestic securities and their markets. Furthermore, investors
should consider other risks associated with a portfolio of international securities, including fluctuations in
foreign currency exchange rates (i.e., if a substantial portion of the Fund's assets are denominated in foreign
currencies which decrease in value with respect to the U.S. dollar, the value of the investor's shares and the
distributions made on those shares will, likewise, decrease in value), foreign securities exchange controls and
foreign tax rates, as well as investments in forward foreign currency contracts, options and futures contracts
(see pages 9-15). The Fund may also invest in fixed-income securities which may be denominated in a currency of
a nation other than the nation in which the issuer of such fixed-income securities is domiciled.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS AND IN THE
STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended October 31, 1995.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
- ---------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases.............................................. None
Maximum Sales Charge Imposed on Reinvested Dividends................................... None
Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds).... 3.0%
</TABLE>
A contingent deferred sales charge is imposed at the following declining
rates:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT MADE PERCENTAGE
- -------------------------------------------------------------------------------------------- ---------------
<S> <C>
First....................................................................................... 3.0%
Second...................................................................................... 2.0%
Third....................................................................................... 1.0%
Fourth and thereafter....................................................................... None
</TABLE>
<TABLE>
<S> <C>
Redemption Fees....................................................................... None
Exchange Fee.......................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------------
Management Fees....................................................................... 0.55%
12b-1 Fees*........................................................................... 0.75%
Other Expenses........................................................................ 0.38%
Total Fund Operating Expenses......................................................... 1.68%
<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 ("NASD") GUIDELINES (SEE "PURCHASE OF FUND
SHARES").
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- -------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each
time period:....................................................... $ 47 $ 63 $ 91 $ 199
You would pay the following expenses on the same investment,
assuming no redemption:............................................ $ 17 $ 53 $ 91 $ 199
</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."
3
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following per share data and ratios for a share of capital stock
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The per share data and ratios should be read in
conjunction with the financial statements and the notes thereto and the
unqualified report of independent accountants which are contained in the
Statement of Additional Information. Further information about the performance
of the Fund is contained in the Fund's Annual Report to Shareholders, which may
be obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $ 8.73 $ 9.23 $ 9.41 $ 9.77 $ 10.00
--------- --------- --------- --------- ---------
Net investment income...................... 0.54 0.72 0.70 0.82 0.95
Net realized and unrealized gain (loss).... 0.16 (0.66) (0.27) (0.46) (0.23)
--------- --------- --------- --------- ---------
Total from investment operations........... 0.70 0.06 0.43 0.36 0.72
--------- --------- --------- --------- ---------
Less dividends and distributions from:
Net investment income.................... (0.44) (0.13) (0.61) (0.72) (0.95)
Paid-in-capital.......................... (0.10) (0.43) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions.......... (0.54) (0.56) (0.61) (0.72) (0.95)
--------- --------- --------- --------- ---------
Net asset value, end of period............. $ 8.89 $ 8.73 $ 9.23 $ 9.41 $ 9.77
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+................... 8.27% 0.65% 4.72% 3.76% 7.49%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................... 1.68% 1.63% 1.55% 1.55% 1.61%
Net investment income...................... 6.17% 6.36% 6.97% 8.43% 9.49%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.... $106,939 $170,117 $305,278 $441,191 $462,263
Portfolio turnover rate.................... 188% 123% 221% 149% 8%
<FN>
- --------------------------
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE.
</TABLE>
4
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter Global Short-Term Income Fund Inc. (the "Fund") is an open-end,
non-diversified management investment company incorporated in the state of
Maryland on August 2, 1990.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a
balanced financial services organization providing a broad range of nationally
marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to ninety-five investment companies, thirty of which
are listed on the New York Stock Exchange, with combined assets of approximately
$76.9 billion at December 31, 1995. The Investment Manager also manages and
advises portfolios of pension plans, other institutions and individuals which
aggregated approximately $2.6 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund.
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 0.55% to the Fund's net assets not exceeding $500 million and
0.50% to the Fund's net assets exceeding $500 million. For the fiscal year ended
October 31, 1995, the Fund accrued total compensation to the Investment Manager
amounting to 0.55% of the Fund's average daily net assets and the Fund's total
expenses amounted to 1.68% of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to achieve as high a level of
current income as is consistent with prudent investment risk. There is no
assurance that the objective will be achieved. The investment objective is a
fundamental policy of the Fund and cannot be changed without the approval of the
shareholders of the Fund. The following policies may be changed by the Board of
Directors without shareholder approval.
The Fund seeks to achieve its investment objective by investing at least 65%
of its total assets in high quality fixed-income securities issued or guaranteed
by foreign governments, issued by foreign or U.S. companies, or issued or
guaranteed by the U.S. Government, its agencies and instrumentalities which have
remaining maturities at the time of purchase of not more than three years (i.e.,
the average weighted maturity of the Fund's portfolio will be under three
years). In addition to securities issued by the U.S. Government, its agencies
and instrumentalities, the Fund may invest in obligations issued or guaranteed
by a foreign government or any of its political subdivisions, authorities,
agencies or instrumentalities, or by supranational organizations, or
fixed-income securities issued by a corporation, all of which are rated AAA or
AA by Standard & Poor's Corporation ("S&P") or Aaa or Aa by Moody's Investors
Services, Inc. ("Moody's") or, if unrated, are determined by the Investment
Manager to be of equivalent quality; in certificates of deposit and bankers'
acceptances issued or guaranteed by,
5
<PAGE>
or time deposits maintained at, banks (including foreign branches of U.S. banks
or U.S. or foreign branches of foreign banks) having total assets of more than
$500 million and deemed by the Investment Manager to be of high
creditworthiness; and commercial paper rated A-1 or A-2 by S&P, Prime-1 or
Prime-2 by Moody's or Duff 1 or Duff 2 by Duff & Phelps Inc. or, if unrated,
issued by U.S. or foreign companies having outstanding debt securities rated A
or higher by S&P or Moody's and in loan participation interests having a
remaining term not exceeding one year in loans extended by banks to such
companies. The Fund will have at least 65% of its total assets invested in
fixed-income securities, as described above, of issuers located in at least
three different countries.
Certain foreign securities purchased by the Fund will not have received
ratings by a recognized U.S. rating agency. In such cases the Investment Manager
will review the issuers of such securities with respect to the quality of their
management, balance sheet and financial ratios, cash flows and earnings to
establish that the securities purchased by the Fund are of a comparable quality
to issuers receiving high quality ratings by a recognized U.S. rating agency.
In attempting to achieve its investment objective, the Investment Manager
will actively manage the Fund's assets in accordance with a global market
strategy which seeks to exploit spreads among short-term instruments worldwide.
As such, the Fund may experience high portfolio turnover rates (see "Portfolio
Management," page 15). Consistent with such a strategy, the Investment Manager
intends to allocate the Fund's investments among securities denominated in the
currencies of a number of foreign countries and, within each such country, among
different types of debt securities. The Investment Manager will adjust the
Fund's exposure to different currencies based on its perception of the most
favorable markets and issuers. In allocating the Fund's assets among various
markets, the Investment Manager will assess the relative yield and anticipated
direction of interest rates in particular markets, the level of inflation,
liquidity and financial soundness of each market, and the general market and
economic conditions existing in each market as well as the relationship of
currencies of various countries to the U.S. dollar and to each other. In its
evaluations, the Investment Manager will utilize its internal financial,
economic and credit analysis resources as well as information obtained from
other sources.
Under normal conditions, a significant percentage of the short-term
investments in the Fund's portfolio may be money market securities. Money market
securities include short-term obligations issued or guaranteed by the U.S.
Government or foreign governments issued by such governments' respective
agencies and instrumentalities, bank money market instruments including
certificates of deposit, bankers' acceptances, time deposits and deposit notes
and certain other short-term obligations such as short-term commercial paper.
With respect to bank money instruments, the obligations may be issued by U.S. or
foreign depository institutions, foreign branches or subsidiaries of U.S.
depository institutions ("Eurodollar" obligations), U.S. branches or
subsidiaries of foreign depository institutions ("Yankeedollar" obligations) or
foreign branches or subsidiaries of foreign depository institutions. Eurodollar
and Yankeedollar obligations and obligations of branches or subsidiaries of
foreign depository institutions may be general obligations of the parent bank or
may be limited to the issuing branch or subsidiary by the terms of the specific
obligations or by government regulation.
The Fund will invest at least 25% of its assets in securities issued by
issuers located in the U.S. As such, the Fund will have a greater exposure than
other "global" mutual funds to economic and political events occurring in the
U.S. Changes in prevailing U.S. interest rates, federal tax rate increases, or
adverse changes in federal or state regulations or exchange rules may all have a
disproportionate impact upon the Fund as a result of its concentration policy.
Moreover, the Fund's concentration in securities of U.S. issuers will mean that
the Fund's
6
<PAGE>
investments are more likely to be responsive, both positively and negatively, to
declines or advances in the U.S. dollar with respect to foreign currencies.
A substantial portion of the Fund's investments in securities of U.S.
issuers are likely to be in commercial paper, bankers acceptances and other
short-term debt instruments issued by U.S. corporations. However, at times
during which there exists large-scale political or economic uncertainty, the
Fund is likely to increase its investments in U.S. government securities. In
such cases, the securities which the Fund is most likely to purchase are U.S.
Treasury bills and U.S. Treasury notes with remaining maturities of under three
years, both of which are direct obligations of the U.S. Government. The Fund may
also purchase securities issued by various agencies and instrumentalities of the
U.S. Government. These will include obligations backed by the full faith and
credit of the United States (such as those issued by the Government National
Mortgage Association); obligations 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 (such as those issued by the Federal National Mortgage
Association); and obligations backed by the credit of the issuing agency or
instrumentality (such as those issued by the Federal Farm Credit System).
The securities in which the Fund will be investing may be denominated in any
currency or multinational currency. Under normal circumstances, the Fund will
invest its assets in securities denominated in at least three different
currencies, including the U.S. dollar. In addition to the U.S. dollar, such
currencies will include, among others: the Australian dollar; Deutsche mark;
Japanese yen; French franc; British pound; Canadian dollar; Swiss franc; Italian
Lira; Dutch guilder; Austrian schilling; Spanish Peseta; Swedish Krona; Mexican
peso; Thai bhat; and European Currency Unit ("ECU"). The Fund will not invest
more than 25% of its total assets in securities denominated in a single currency
or currency unit with the exception of the U.S. dollar.
The Fund may invest without limitation in notes and commercial paper, the
principal amount of which is indexed to certain specific foreign currency
exchange rates. Indexed notes and commercial paper typically provide that their
principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect fluctuations in the exchange rate between two currencies
during the period the obligation is outstanding, depending on the terms of the
specific security. In selecting the two currencies, the Investment Manager will
consider the correlation and relative yields of various currencies. The Fund
will purchase an indexed obligation using the currency in which it is
denominated and, at maturity, will receive interest and principal payments
thereon in that currency. The amount of principal payable by the issuer at
maturity, however, will vary (i.e., increase or decrease) in response to the
change (if any) in the exchange rates between the two specified currencies
during the period from the date the instrument is issued to its maturity date.
The potential for realizing gains as a result of changes in foreign currency
exchange rates may enable the Fund to hedge the currency in which the obligation
is denominated (or to effect cross-hedges against other currencies) against a
decline in the U.S. dollar value of investments denominated in foreign
currencies, while providing an attractive money market rate of return. The Fund
will purchase such indexed obligations to generate current income or for hedging
purposes and will not speculate in such obligations.
Under normal circumstances, the Fund will invest at least 25% of its total
assets in debt instruments issued by U.S. and foreign companies engaged in the
banking industry, including bank holding companies. Such investments may include
certificates of deposit, time deposits, bankers' acceptances, and obligations
issued by bank holding companies, as well as repurchase agreements entered into
with banks. For temporary defensive purposes, however, the Fund may reduce its
investments in the banking industry to less than 25% of its total assets. The
Fund's policy as to concentrating its investments in the banking industry is
7
<PAGE>
fundamental and may not be changed without the approval of a majority of the
Fund's voting securities.
The Fund's policy of concentrating its investments in the banking industry
will cause the Fund to have greater exposure to certain risks associated with
the banking industry. In particular, economic or regulatory developments in or
related to the banking industry will affect the value of and investment return
on the Fund's shares. Sustained increases in interest rates may adversely affect
the availability and cost of funds for a bank's lending activities;
deterioration in general economic conditions may increase a bank's exposure to
credit losses. The banking industry also is subject to the effects of the
concentration of loan portfolios in particular businesses that may be adversely
affected by economic conditions, such as real estate, energy, agriculture or
high technology-related companies. In addition, the banking industry is subject
to national and local regulation and competition among banks as well as with
other types of financial institutions. Also, the Fund's investments in
commercial banks located in several foreign countries are subject to additional
risks due to the combination in such banks of commercial banking and diversified
securities activities. As discussed above, however, the Fund will seek to
minimize its exposure to such risks by investing only in debt securities which
are determined by the Investment Manager, acting under the general supervision
of the Board of Directors, to be high quality.
As indicated above, the Fund may invest in securities denominated in a
multi-national currency unit. An illustration of a multi-national currency unit
is the ECU, which is a "basket" consisting of specified amounts of the
currencies of the member states of the European Community, a Western European
economic cooperative organization that includes France, Germany, The Netherlands
and the United Kingdom. The specific amounts of currencies comprising the ECU
may be adjusted by the Council of Ministers of the European Community to reflect
changes in relative values of the underlying currencies. The Investment Manager
does not believe that such adjustments will adversely affect holders of
ECU-denominated obligations or the marketability of such securities. European
supranational entities, in particular, issue ECU-denominated obligations. The
Fund may invest in securities denominated in the currency of one nation although
issued by a governmental entity, corporation or financial institution of another
nation. For example, the Fund may invest in a British pound-denominated
obligation issued by a United States corporation. Such investments involve
credit risks associated with the issuer and currency risks associated with the
currency in which the obligation is denominated.
The Fund also may invest in bonds and notes backed by pools of mortgage,
credit card, automobile or other types of receivables with remaining maturities
of three years or less. These structured financings will be supported by
sufficient collateral, and other credit enhancements, including letters of
credit, insurance, reserve funds and guarantees by third parties, to enable such
instruments to obtain a high quality rating by a nationally recognized
statistical rating agency or be of comparable quality as determined by the
Investment Manager. Generally, the issuers of mortgage-backed and receivable-
backed bonds, notes or pass-through certificates are special purpose entities
and do not have any significant assets other than the assets securing such
obligations. Such special-purpose entities are typically created by the
underwriters of such securities or the entity to which the receivables are
payable.
Instruments backed by pools of mortgages and receivables may be subject to
unscheduled prepayments of principal prior to maturity. When the obligations are
prepaid, the Fund must reinvest the prepaid amounts in securities the yields of
which reflect interest rates prevailing at the time. Therefore, the Fund's
ability to maintain a portfolio which includes high-yielding asset-backed
securities will be adversely affected to the extent that pre-payments of
principal must be reinvested in securities which have lower yields than the
prepaid obligations.
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Moreover, prepayments of securities purchased at a premium could result in a
realized loss. In addition, certain asset-backed and receivable-backed
securities may be illiquid. As such, the Fund may be limited in its ability to
invest in such securities (see Investment Restriction Number 3 on page 16).
RISK CONSIDERATIONS
All fixed-income securities are subject to two types of risks: the credit
risk and the interest rate risk. The credit risk relates to the ability of the
issuer to meet interest or principal payments or both as they come due. The
interest rate risk refers to the fluctuations in the net asset value of any
portfolio of fixed-income securities resulting from the inverse relationship
between price and yield of fixed-income securities; that is, when the general
level of interest rates rises, the prices of outstanding fixed-income securities
decline, and when interest rates fall, prices rise.
NON-DIVERSIFIED STATUS. The Fund is a non-diversified investment company
and, as such, is not subject to the diversification requirements of the Act. As
a non-diversified investment company, the Fund may invest a greater portion of
its assets in the securities of a single issuer and thus is subject to greater
exposure to risks such as a decline in the credit rating of that issuer.
However, the Fund has in the past qualified and anticipates that it will qualify
in the future as a regulated investment company under the federal income tax
laws and, to the extent so qualified, is subject to the applicable
diversification requirements of the Internal Revenue Code, as amended (the
"Code"). As a regulated investment company under the Code, the Fund may not, as
of the end of any of its fiscal quarters, have invested more than 25% of its
total assets in the securities of any one issuer (including a foreign
government), or as to 50% of its total assets, have invested more than 5% of its
total assets in the securities of a single issuer.
FOREIGN SECURITIES. Investors should carefully consider the risks of
investing in securities of foreign issuers and securities denominated in
non-U.S. currencies. Fluctuations in the relative rates of exchange between the
currencies of different nations will affect the value of the Fund's investments.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and thereby impact upon the Fund's yield on such assets and the net asset value
of a share of the Fund as well as the amount of the Fund's distributions. For
example, if a substantial portion of the Fund's assets is denominated in
Japanese yen and the relative exchange rate of the yen falls with respect to the
U.S. dollar (i.e., a yen is worth a smaller fraction of a dollar than it had
been) then the Fund will be receiving a lesser amount of interest on its
fixed-income securities denominated in yen (when converted into U.S. dollars)
and when the Fund's assets are valued for purposes of determining the net asset
value per share of the Fund, the net assets of the Fund reflected by the
yen-denominated securities will have declined in U.S. dollar value and the net
asset value of the Fund (always stated in U.S. dollars) may have also declined.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade. The foreign currency transactions of
the Fund will be conducted on a spot basis or through forward contracts or
futures contracts (see below). The Fund may incur certain costs in connection
with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory
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requirements of U.S. companies and, as such, there may be less publicly
available information about such companies. Moreover, foreign companies are not
subject to uniform accounting, auditing and financial standards and requirements
comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of Fund trades effected in such markets. Inability to dispose of
portfolio securities due to settlement delays could result in losses to the Fund
due to subsequent declines in value of such securities and the inability of the
Fund to make intended security purchases due to settlement problems could result
in a failure of the Fund to make potentially advantageous investments.
------------
To hedge against adverse price movements in the securities held in its
portfolio and the currencies in which they are denominated (as well as in the
securities it might wish to purchase and their denominated currencies) the Fund
may engage in transactions in forward foreign currency contracts, options on
securities and currencies, and futures contracts and options on futures
contracts on securities, currencies and indexes. The Fund may also purchase
options on securities to facilitate its participation in the potential
appreciation of the value of the underlying securities. A discussion of these
transactions follows and is supplemented by further disclosure in the Statement
of Additional Information.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract ("forward contract") involves an obligation to purchase or
sell a currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances. When
the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in" the
price of the security in U.S. dollars or some other foreign currency which the
Fund is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying security
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar or
other currency which is being used for the security purchase and the foreign
currency in which the security is denominated during the period between the date
on which the security is purchased or sold and the date on which payment is made
or received.
At other times, when, for example, the Fund's Investment Manager believes
that the currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar or some other foreign currency, the Fund may
enter into a forward contract to sell, for a fixed amount of dollars or other
currency, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio securities (or securities which the Fund has purchased
for its portfolio) denominated in such foreign currency. Under identical
circumstances, the Fund may enter into a forward contract to sell, for a fixed
amount of U.S. dollars or other currency, an amount of foreign currency other
than the currency in which the securities to be hedged are denominated
approximating the value of some or all of the portfolio securities to be hedged.
This method of hedging, called "cross-hedging," will be selected
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by the Investment Manager when it is determined that the foreign currency in
which the portfolio securities are denominated has insufficient liquidity or is
trading at a discount as compared with some other foreign currency with which it
tends to move in tandem.
In addition, when the Fund's Investment Manager anticipates purchasing
securities at some time in the future, and wishes to lock in the current
exchange rate of the currency in which those securities are denominated against
the U.S. dollar or some other foreign currency, the Fund may enter into a
forward contract to purchase an amount of currency equal to some or all of the
value of the anticipated purchase, for a fixed amount of U.S. dollars or other
currency. The Fund may, however, close out the forward contract without
purchasing the security which was the subject of the "anticipatory" hedge.
Lastly, the Fund is permitted to enter into forward contracts with respect
to currencies in which certain of its portfolio securities are denominated and
on which options have been written (see "Options and Futures Transactions").
In all of the above circumstances, if the currency in which the Fund's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Fund will have realized fewer gains than had the Fund not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible,
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The Fund is
not required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Investment Manager.
The Fund generally will not enter into a forward contract with a term of
greater than one year, although it may enter into forward contracts for periods
of up to five years. To the extent that the Fund enters into forward foreign
currency contracts to hedge against a decline in the value of portfolio holdings
denominated in a particular foreign currency resulting from currency
fluctuations, there is a risk that the Fund may nevertheless realize a gain or
loss as a result of currency fluctuations after such portfolio holdings are sold
if the Fund is unable to enter into an "offsetting" forward foreign currency
contract with the same party or another party. The Fund may be limited in its
ability to enter into hedging transactions involving forward contracts by the
Code requirements relating to qualifications as a regulated investment company
(see "Dividends, Distributions and Taxes").
OPTIONS AND FUTURES TRANSACTIONS. The Fund may purchase and sell (write)
call and put options on U.S. Treasury notes, bonds and bills and on various
foreign currencies which are listed on several U.S. and foreign securities
exchanges or are written in over-the-counter transactions ("OTC Options").
Listed options are issued or guaranteed by the exchange on which they trade or
by a clearing corporation such as the Options Clearing Corporation ("OCC").
Ownership of a listed call option gives the Fund the right to buy from the OCC
(in the U.S.) or other clearing corporation or exchange, the underlying security
or currency covered by the option at the stated exercise price (the price per
unit of the underlying security or currency) by filing an exercise notice prior
to the expiration date of the option. Ownership of a listed put option would
give the Fund the right to sell the underlying security or currency to the OCC
(in the U.S.) or other clearing corporation or exchange at the stated exercise
price. OTC options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with the Fund. With OTC
options, such variables as expiration date, exercise price and premium will be
agreed upon
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<PAGE>
between the Fund and the transacting dealer, without the intermediation of a
third party such as the OCC.
COVERED CALL WRITING. The Fund is permitted to write covered call options
on portfolio securities which are denominated in either U.S. dollars or foreign
currencies and on the U.S. dollar and foreign currencies, without limit, in
order to hedge against the decline in the value of a security or currency in
which such security is denominated and to close out long call option positions.
As a writer of a call option, the Fund has the obligation, upon notice of
exercise of the option, to deliver the security or amount of currency underlying
the option (certain listed and OTC call options written by the Fund will be
exercisable by the purchaser only on a specific date).
COVERED PUT WRITING. As a writer of covered put options, the Fund incurs an
obligation to buy the security (or currency) 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 excercisable by the purchaser only on a specific
date). The Fund will write put options for three purposes: (1) to receive the
premiums paid by purchasers; (2) when the Investment Manager wishes to purchase
the security underlying the option (or a security denominated in the currency
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
aggregate value of the obligations underlying the puts determined as of the date
the options are sold will not exceed 50% of the Fund's net assets.
PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC call
and put options in amounts equalling up to 5% of its total assets. The Fund may
purchase call options to close out a written call position (see "Covered Call
Writing" above) or to protect against an increase in the price of a security it
anticipates purchasing or, in the case of call options on a foreign currency, to
hedge against an adverse exchange rate change of the currency in which the
security it anticipates purchasing is denominated vis-a-vis the currency in
which the exercise price is denominated. The Fund may purchase put options on
securities which it holds in its portfolio only to protect itself against a
decline in the value of the security. The Fund may also purchase put options to
close out written put positions in a manner similar to call option closing
purchase transactions. There are no other limits on the Fund's ability to
purchase call and put options.
FUTURES CONTRACTS. The Fund may purchase and sell futures contracts that
are currently traded, or may in the future be traded, on U.S. and foreign
commodity exchanges on common stocks, such underlying fixed-income securities as
U.S. Treasury bonds, notes, and bills and/or any foreign government fixed-income
security ("interest rate" futures), on various currencies ("currency" futures)
and on such indexes of U.S. or foreign fixed-income securities as may exist or
come into being, such as the Moody's Investment Grade Corporate Bond Index
("index" futures). As a futures contract purchaser, the Fund incurs an
obligation to take delivery of a specified amount of the obligation underlying
the contract at a specified time in the future for a specified price. As a
seller of a futures contract, the Fund incurs an obligation to deliver the
specified amount of the underlying obligation at a specified time in return for
an agreed upon price.
The Fund will purchase or sell interest rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
The Fund will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such
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<PAGE>
options to terminate an existing position. An option on a futures contract gives
the purchaser the right (in return for the premium paid) to assume a position in
a futures contract (a long position if the option is a call and a short position
if the option is a put) at a specified exercise price at any time during the
term of the option. The Fund will purchase and write options on futures
contracts for identical purposes to those set forth above for the purchase of a
futures contract (purchase of a call option or sale of a put option) and the
sale of a futures contract (purchase of a put option or sale of a call option),
or to close out a long or short position in futures contracts.
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.
Exchanges may limit the amount by which the price of many futures contracts
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk is that the Fund's Investment Manager could be incorrect in its
expectations as to the direction or extent of various interest rate or price
movements or the time span within which the movements take place. For example,
if the Fund sold futures contracts for the sale of securities in anticipation of
an increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the Fund would lose money on the sale.
Another risk which may arise in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities, currencies and indexes subject to futures contracts (and thereby the
futures contract prices) may correlate imperfectly with the behavior of the U.S.
dollar cash prices of the Fund's portfolio securities and their denominated
currencies. Another such risk is that prices of interest rate futures contracts
may not move in tandem with the changes in prevailing interest rates against
which the Fund seeks a hedge. A correlation may also be distorted by the fact
that the futures market is dominated by short-term traders seeking to profit
from the difference between a contract or security price objective and their
cost of borrowed funds. Such distortions are generally minor and would diminish
as the contract approached maturity.
The Fund, by entering into transactions in foreign futures and options
markets, will also incur risks similar to those discussed above under the
section entitled "Foreign Securities."
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, including the risks of default or
bankruptcy of the selling financial institution, the Fund follows procedures to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
and maintaining adequate collateralization.
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<PAGE>
REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase
agreements as part of its investment strategy. Reverse repurchase agreements
involve sales by the Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed price. Reverse
repurchase agreements involve the risk that the market value of the securities
the Fund is obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive their
full value at maturity. The interest earned on such securities is, implicitly,
automatically compounded and paid out at maturity. While such compounding at a
constant rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received on interest-paying securities if prevailing interest rates
rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.
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.
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
regula-
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tions and that are at least equal to the market value, determined daily, of the
loaned securities.
PRIVATE PLACEMENTS. The Fund may invest up to 10% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A of the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of such
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale and the risk of
substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Directors 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.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. The Fund is managed within
InterCapital's Taxable Fixed-Income Group, which manages twenty-five funds and
fund portfolios, with approximately $13.5 billion in assets at December 31,
1995. Vinh Q. Tran, Vice President of InterCapital and Anne Pickrell, Assistant
Vice President of InterCapital, each a member of InterCapital's Corporate Bond
Group, have been the Fund's primary portfolio managers since its inception and
December, 1994, respectively. Mr. Tran has been managing portfolios comprised of
global fixed-income securities at InterCapital since February, 1989. Ms.
Pickrell has been a portfolio manager at InterCapital since July, 1991, prior to
which time she was a portfolio manager with Harvard Management Co. Inc. In
determining which securities to purchase for the Fund or hold in the Fund's
portfolio, the Investment Manager will rely on information from various sources,
including research, analysis and appraisals of brokers and dealers, the views of
Directors of the Fund and others regarding economic developments and interest
rate trends, and the Investment Manager's own analysis of factors it deems
relevant.
Personnel of the Investment Manager have substantial experience in the use
of the investment techniques described above under the heading "Options and
Futures Transactions," which techniques require skills different from those
needed to select the portfolio securities underlying various options and futures
contracts.
Securities purchased by the Fund are generally sold by dealers acting as
principal for their own accounts. 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 InterCapital. Pursuant to an order of the Securities and Exchange Commission,
the Fund may effect principal transactions in certain money market instruments
with DWR. In addition, the Fund may incur brokerage commissions on transactions
conducted through DWR.
The Fund may sell portfolio securities without regard to the length of time
that they have been held, in order to take advantage of new investment
opportunities or yield differentials, or because the Fund desires to preserve
gains or limit losses due to changing economic conditions, interest rate trends,
or the financial condition of the issuer. It is not anticipated that the Fund's
portfolio turnover rate will
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exceed 200% in any one year. The Fund will incur underwriting discount costs (on
underwritten securities) and brokerage costs commensurate with its portfolio
turnover rate. Short term gains and losses may result from such portfolio
transactions. See "Dividends, Distributions and Taxes" for a discussion of the
tax implications of the Fund's transactions.
The expenses of the Fund relating to its portfolio management are likely to
be greater than those incurred by other investment companies investing primarily
in securities issued by domestic issuers, as custodial costs, brokerage
commissions and other transaction charges related to investing in foreign
markets are generally higher than in the United States.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. For purposes
of the following limitations: (i) all percentage limitations apply immediately
after a purchase or initial investment, and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry, except that the Fund will concentrate in the
banking industry.
2. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years of
continuous operation. This restriction shall not apply to any obligation issued
or guaranteed by the United States Government, its agencies or
instrumentalities.
3. Invest more than 10% of its total assets in "illiquid securities"
(securities for which no active and substantial secondary market exists) and
repurchase agreements which have a maturity of longer than seven days.
Generally, OTC options and the assets used as "cover" for written OTC
options are "illiquid securities" (securities for which no active and
substantial secondary market exists). However, the Fund is permitted to treat
the securities it uses as cover for written OTC options as liquid provided it
follows a procedure whereby it will sell OTC options only to qualified dealers
who agree that the Fund may repurchase such options at a maximum price to be
calculated pursuant to a predetermined formula set forth in the option
agreement. The formula may vary from agreement to agreement, but is generally
based on a multiple of the premium received by the Fund for writing the option
plus the amount, if any, of the option's intrinsic value. An OTC option is
considered an illiquid asset only to the extent that the maximum repurchase
price under the formula exceeds the intrinsic value of the option.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers which have entered into selected dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000. Subsequent purchases of $100 or more
may be made by
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<PAGE>
sending a check, payable to Dean Witter Global Short-Term Income Fund Inc.,
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. The minimum initial purchase, in the case of investments
through EasyInvest, an automatic purchase plan (see "Shareholder Services"), is
$100, provided that the schedule of automatic investments will result in
investments totalling at least $1,000 within the first twelve months. In the
case of investments pursuant to Systematic Payroll Deduction Plans (including
Individual Retirement Plans), the Fund, in its discretion, may accept
investments without regard to any minimum amounts which would otherwise be
required, if the Fund has reason to believe that additional investments will
increase the investment in all accounts under such Plans to at least $1,000.
Certificates for shares purchased will not be issued unless a request is made by
the shareholder in writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment generally is due on or before
the third business day (settlement date) after the order is placed with the
Distributor. Shares 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. Shares purchased through the Transfer Agent are entitled to dividends
beginning on the next business day following receipt of an order. As noted
above, orders placed directly with the Transfer Agent must be accompanied by
payment. Investors will be entitled to receive capital gains distributions if
their order is received by the close of business on the day prior to the record
date for such distributions. The offering price will be the net asset value per
share next determined following receipt of an order (see "Determination of Net
Asset Value" below).
While no sales charge is imposed at the time shares are purchased, a
contingent deferred sales charge may be imposed at the time of redemption (see
"Redemptions and Repurchases"). Sales personnel are compensated for selling
shares of the Fund at the time of their sale by the Distributor or any of its
affiliates and/or the Selected Broker-Dealer. In addition, some sales personnel
of the Selected Broker-Dealer will receive various types of non-cash
compensation as special sales incentives, including trips, educational and/or
business seminars and merchandise. The Fund and the Distributor reserve the
right to reject any purchase orders.
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 0.75% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the Fund's average daily net
assets. This fee is treated by the Fund as an expense in the year it is accrued.
A portion of the fee payable pursuant to the Plan, equal to 0.25% of the Fund's
average daily net assets, is characterized as a service fee within the meaning
of NASD guidelines. The service fee is a payment made for personal service
and/or the maintenance of shareholder accounts.
Amounts paid under the Plan are paid to the Distributor to compensate it for
the services provided and the expenses borne by the Distributor and others in
the distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to and expenses of DWR
account executives and others who engage in or support distribution of shares or
who service
17
<PAGE>
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, 1995, the Fund accrued payments under
the Plan amounting to $977,657, which amount is equal to 0.75% of the Fund's
average daily net assets for the fiscal year. The payments accrued under the
Plan were calculated pursuant to clause (b) of the compensation formula under
the Plan.
At any given time, the Distributor may incur expenses in distributing shares
of the Fund which may be in excess of the total of (i) the payments made by the
Fund pursuant to the Plan, and (ii) the proceeds of contingent deferred sales
charges paid by investors upon the redemption of shares (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). For example, if the Distributor
incurred $1 million in expenses in distributing shares of the Fund and $750,000
had been received by the Distributor as described in (i) and (ii) above, the
excess expense would amount to $250,000. The Distributor has advised the Fund
that such excess amounts, including the carrying charge described above,
totalled $6,822,993 at October 31, 1995, which equalled 6.38% of the Fund's net
assets at such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, such excess amount does not constitute a liability
of the Fund. Although there is no legal obligation for the Fund to pay expenses
incurred by the Distributor 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
Directors 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 (or, on days when the New York Stock Exchange closes prior
to 4:00 p.m., at such earlier time), on each day that the New York Stock
Exchange is open by taking the value of all assets of the Fund, subtracting all
its liabilities, dividing by the number of shares outstanding and adjusting to
the nearest cent. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by the
New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange or quoted by NASDAQ is valued at its latest
sale price on that exchange or quotation service 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 pursuant to procedures adopted by the Directors); and (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest available bid price prior to the time of
valuation. When market quotations are not readily available, including
circumstances under which it is determined by the Investment Manager that sale
and bid prices are not reflective of a security's market value, portfolio
securities are valued at
18
<PAGE>
their fair value as determined in good faith under procedures established by and
under the general supervision of the Fund's Directors. For valuation purposes,
quotations of foreign portfolio securities, other assets and liabilities and
forward contracts stated in foreign currency are translated into U.S. dollar
equivalents at the prevailing market rates prior to the close of the New York
Stock Exchange. Dividends receivable are accrued as of the ex-dividend date or
as of the time that the relevant ex-dividend date and amounts become known.
Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Directors
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Directors.
Certain securities in the Fund's portfolio may be valued by an outside
pricing service approved by the Fund's Directors. 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.
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 Directors.
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 (see "Purchase of Fund Shares" and "Redemptions and
Repurchases--Involuntary Redemption").
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value per
share next determined after receipt by the Transfer Agent, by returning the
check or the proceeds to the Transfer Agent within thirty days after the payment
date. Shares so acquired are not subject to the imposition of a contingent
deferred sales charge upon their redemption (see "Redemptions and Repurchases").
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
19
<PAGE>
upon the then current net asset value. The Withdrawal Plan provides for monthly
or quarterly (March, June, September, and December) checks in any dollar amount,
not less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable contingent deferred sales charge will be
imposed on shares redeemed under the Withdrawal Plan (See "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed from
his or her account so that the proceeds (net of any applicable contingent
deferred sales charge) to the shareholder will be the designated monthly or
quarterly amount.
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"), for shares of
Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund, Dean Witter Balanced Growth Fund, Dean
Witter Balanced Income Fund, Dean Witter Intermediate Term U.S. Treasury Trust
and five Dean Witter Funds which are money market funds (the foregoing eleven
non-CDSC funds are hereinafter referred to as the "Exchange Funds"). Exchanges
may be made after the shares of the Fund acquired by purchase (not by exchange
or dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share of
each fund after the exchange order is received. When exchanging into a money
market fund from the Fund, shares of the Fund are redeemed out of the Fund at
their next calculated net asset value and the proceeds of the redemption are
used to purchase shares of the money market fund at 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 which are exchanged for shares of another CDSC fund having a
higher CDSC schedule than the Fund will be subject to the CDSC schedule of the
other CDSC fund, even if shares are subsequently re-exchanged for shares of the
Fund prior to redemption. Concomitantly, shares of the Fund acquired in exchange
for shares of another CDSC fund having a lower CDSC schedule than that of this
Fund will be subject to the CDSC schedule of this Fund, even if such shares are
subsequently re-exchanged for shares of the CDSC fund originally purchased.
During the period of time the shareholder remains invested 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 re-exchanged 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
share-
20
<PAGE>
holder was invested in shares of 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 are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may be limited by the Fund's refusal to
accept additional purchases and/ or exchanges from the investor. Although the
Fund does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests of
the Fund and its other shareholders, investors should be aware that the Fund and
each of the other Dean Witter Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such restriction will be made by the Fund on a prospective basis
only, upon notice to the shareholder not later than ten days following such
shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the Fund
and/or any of such Dean Witter Funds for which shares of the Fund have been
exchanged, upon such notice as may be required by applicable regulatory
agencies.
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. In the case of any shareholder
holding a share certificate or certificates, no exchanges may be made until all
applicable share certificates have been received by the Transfer Agent and
deposited in the shareholder's account. An exchange will be treated for federal
income tax purposes the same as a repurchase or redemption of shares, on which
the shareholder may realize a capital gain or loss. However, the ability to
deduct capital losses on an exchange may be limited in situations where there is
an exchange of shares within ninety days after the shares are purchased. The
Exchange Privilege is only available in states where an exchange may legally be
made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or 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
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<PAGE>
Transfer Agent, to initiate an exchange. If the Authorization Form is used,
exchanges may be made in writing or by contacting the Transfer Agent at (800)
869-NEWS (toll free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the 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 sent to the Fund's Transfer Agent
at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by
the shareholder, 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 three
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 three years after purchase may, however, be subject
to a charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
-----------------------
<S> <C>
First.............................. 3.0%
Second............................. 2.0%
Third.............................. 1.0%
Fourth 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 three years preceding the redemption;
(ii) the current net asset value of shares purchased more than three years prior
to the redemption; and (iii) the current net asset value of shares purchased
through reinvestment of dividends or distributions and/or shares acquired in
exchange for shares of 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
22
<PAGE>
will be assumed that amounts described in (i), (ii) and (iii) above (in that
order) are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate or
self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age 59 1/2); (B)
distributions from an IRA or 403(b) Custodial Account following attainment of
age 59 1/2; or (C) a tax-free return of an excess contribution to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of the
Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which Dean Witter Trust Company,
an affiliate of the Investment Manager, serves as recordkeeper or Trustee
("Eligible 401(k) Plan"), provided that either: (A) the plan continues to be an
Eligible 401(k) Plan after the redemption; or (B) the redemption is in
connection with the complete termination of the plan involving the distribution
of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder's
entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares, as agent for the Fund, 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-Dealers, reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed upon repurchase by the Fund,
the Distributor or DWR or other Selected Broker-Dealers. The offers by DWR and
other Selected Broker-Dealers to repurchase shares may be suspended without
notice by them at any time. In that event, shareholders may redeem their shares
through the Fund's Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances, 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 (including a government, certified or bank cashier's check), payment of
the
redemp-
23
<PAGE>
tion 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 to redeem, on sixty
days' notice and at net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Code) whose shares due to redemptions by the
shareholder have a value of less than $100 or such lesser amount as may be fixed
by the Directors or, in the case of an account opened through EasyInvest, if
after twelve months the shareholder has invested less than $1,000 in the
account. However, before the Fund redeems such shares and sends the proceeds to
the shareholder, it will notify the shareholder that the value of the shares is
less than the applicable amount and allow the shareholder sixty days to make an
additional investment in an amount which will increase the value of his or her
account to at least the applicable amount before the redemption is processed. No
CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to declare dividends from net
investment income on each day the New York Stock Exchange is open for business
(see "Purchase of Fund Shares"). The amount of the dividend declared may
fluctuate from day to day. Dividends are declared daily and paid monthly in
additional shares of the Fund. The Fund will distribute, at least annually, net
realized short-term and long-term capital gains, if any.
The Fund may, at times, make payments from sources other than income or net
capital gains. Payments from such sources would, in effect, represent a return
of a portion of each shareholder's investment. All, or a portion, of such
payments would not be taxable to shareholders.
All dividends and any capital gains distributions will be paid in additional
Fund shares and automatically credited to the shareholder's account without
issuance of a share certificate unless the shareholder requests in writing that
all dividends and/or distributions be paid in cash. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise qualify as
a regulated investment company under Subchapter M of the Code, it is not
expected that the Fund will be required to pay any federal income tax on such
income and capital gains.
Gains or losses on the Fund's transactions in certain listed options on
securities and on futures and options on futures traded on U.S. exchanges
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
24
<PAGE>
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 of certain
investments held for less than three months. This requirement may limit the
Fund's ability to engage in options and futures transactions and to engage in a
large number of short-term transactions.
Shareholders 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 distributions in additional shares or in cash. Any
dividends declared in the last quarter of any calendar year which are paid in
the following year prior to February 1, will be deemed, for tax purposes, to
have been received by the shareholder in the prior year.
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. It is not anticipated that any portion of the
Fund's distributions will be eligible for the dividends received deduction to
corporate shareholders.
After the end of the year, shareholders will receive full information on
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income and the portion taxable
as long-term capital gains.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy. Shareholders who are not citizens or residents
of, or entities organized in, the United States may be subject to withholding
taxes of up to 30% on certain payments received from the Fund.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and has made the appropriate election with the Internal Revenue Service, the
Fund will report annually to its shareholders the amount per share of such
taxes, to enable shareholders to claim United States foreign tax credits or
deductions with respect to such taxes. In the absence of such an election, the
Fund would deduct foreign tax in computing the amount of its distributable
income.
The foregoing discussion relates solely to the federal income tax
consequences of an investment in the Fund. Distributions may also be subject to
state and local taxes; therefore, each shareholder is advised to consult his or
her own tax adviser.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. Both the yield and the total return of
the Fund are based on historical earnings and are not intended to indicate
future performance. The yield of the Fund is computed by dividing the Fund's net
investment income over a 30-day period by an average value (using the average
number of shares entitled to receive dividends and the net asset value per share
at the end of the period), all in accordance with applicable regulatory
requirements. Such amount is compounded for six months and then annualized for a
twelve-month period to derive the Fund's yield.
The "average annual total return" of the Fund refers to a figure reflecting
the average annualized percentage increase (or decrease) in the value of an
initial investment in the Fund of $1,000 over a period of one year and five
years, as well as the life of the
25
<PAGE>
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 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 the Fund are of common stock of $0.01 par
value and are equal as to earnings, assets and voting privileges. There are no
conversion, pre-emptive or other subscription rights. In the event of
liquidation, each share of common stock of the Fund is entitled to its portion
of all of the Fund's assets after all debts and expenses have been paid. The
shares do not have cumulative voting rights.
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
Directors may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Fund's By-Laws.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure that
the interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within sixty days of a
sale or a sale within sixty days of a purchase) of a security. In addition,
investment personnel may not purchase or sell a security for their personal
account within thirty days before or after any transaction in any Dean Witter
Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.
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.
26
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS DEAN WITTER RETIREMENT SERIES
Dean Witter Liquid Asset Fund Inc. Liquid Asset Series
Dean Witter U.S. Government Money U.S. Government Money Market Series
Market Trust U.S. Government Securities Series
Dean Witter Tax-Free Daily Income Trust Intermediate Income Securities Series
Dean Witter California Tax-Free Daily American Value Series
Income Trust Capital Growth Series
Dean Witter New York Municipal Money Dividend Growth Series
Market Trust Strategist Series
EQUITY FUNDS Utilities Series
Dean Witter American Value Fund Value-Added Market Series
Dean Witter Natural Resource Global Equity Series
Development Securities Inc. ASSET ALLOCATION FUNDS
Dean Witter Dividend Growth Securities Dean Witter Strategist Fund
Inc. Dean Witter Global Asset Allocation
Dean Witter Developing Growth Fund
Securities Trust ACTIVE ASSETS ACCOUNT PROGRAM
Dean Witter World Wide Investment Trust Active Assets Money Trust
Dean Witter Value-Added Market Series Active Assets Tax-Free Trust
Dean Witter Utilities Fund Active Assets California Tax-Free Trust
Dean Witter Capital Growth Securities Active Assets Government Securities
Dean Witter European Growth Fund Inc. Trust
Dean Witter Precious Metals and
Minerals Trust
Dean Witter Pacific Growth Fund Inc.
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth
Securities
Dean Witter Global Utilities Fund
Dean Witter International SmallCap Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities
Trust
Dean Witter Federal Securities Trust
Dean Witter Convertible Securities
Trust
Dean Witter California Tax-Free Income
Fund
Dean Witter New York Tax-Free Income
Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income
Securities
Dean Witter Global Short-Term Income
Fund Inc.
Dean Witter Multi-State Municipal
Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury
Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal
Trust
Dean Witter Short-Term Bond Fund
Dean Witter National Municipal Trust
Dean Witter High Income Securities
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
Dean Witter Intermediate Term U.S.
Treasury Trust
<PAGE>
Dean Witter
Global Short-Term Income Fund Inc.
Dean Witter
Two World Trade Center
New York, New York 10048
DIRECTORS Global Short-Term
Michael Bozic Income Fund
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Vinh Q. Tran
Vice President
Anne Pickrell
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank, N.A.
One Chase Plaza
New York, NY 10005
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
PROSPECTUS -- FEBRUARY 1, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1996
DEAN WITTER
GLOBAL SHORT-TERM
INCOME FUND INC.
- ----------------------------------------------------------------------
Dean Witter Global Short-Term Income Fund Inc. (the "Fund") is an open-end,
non-diversified management investment company, whose investment objective is to
achieve as high a level of current income as is consistent with prudent
investment risk. The Fund seeks to achieve its investment objective by investing
in high quality fixed-income securities issued or guaranteed by foreign
governments, issued by foreign or U.S. companies, or issued or guaranteed by the
U.S. Government, its agencies and instrumentalities which have remaining
maturities at the time of purchase of not more than three years. The Fund is
designed for the investor who seeks a higher yield than a money market fund and
less fluctuation in net asset value than a longer-term bond fund.
A Prospectus for the Fund dated February 1, 1996, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed below 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
Global Short-Term Income Fund Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll free)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............................................................ 3
Directors and Officers................................................................. 6
Investment Practices and Policies...................................................... 12
Investment Restrictions................................................................ 25
Portfolio Transactions and Brokerage................................................... 27
The Distributor........................................................................ 28
Determination of Net Asset Value....................................................... 31
Shareholder Services................................................................... 32
Redemptions and Repurchases............................................................ 37
Dividends, Distributions and Taxes..................................................... 39
Performance Information................................................................ 40
Description of Common Stock............................................................ 41
Custodian and Transfer Agent........................................................... 42
Independent Accountants................................................................ 42
Reports to Shareholders................................................................ 42
Legal Counsel.......................................................................... 42
Experts................................................................................ 42
Registration Statement................................................................. 43
Financial Statements--October 31, 1995................................................. 44
Report of Independent Accountants...................................................... 57
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund was incorporated under the laws of the State of Maryland on August
2, 1990.
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 Board of Directors. In addition, Directors of the Fund provide guidance
on economic factors and interest rate trends. Information as to these Directors
and Officers is contained under the caption "Directors and Officers".
InterCapital is also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc., InterCapital
Income Securities Inc., Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Developing Growth Securities Trust,
Dean Witter American Value Fund, Dean Witter Dividend Growth Securities Inc.,
Dean Witter Natural Resource Development Securities Inc., Dean Witter U.S.
Government Money Market Trust, Dean Witter California Tax-Free Income Fund, Dean
Witter Variable Investment Series, Dean Witter World Wide Investment Trust, Dean
Witter Select Municipal Reinvestment Fund, Dean Witter U.S. Government
Securities Trust, Dean Witter New York Tax-Free Income Fund, Dean Witter
Convertible Securities Trust, Dean Witter Federal Securities Trust, Dean Witter
Value-Added Market Series, High Income Advantage Trust, High Income Advantage
Trust II, High Income Advantage Trust III, Dean Witter Government Income Trust,
Dean Witter California Tax-Free Daily Income Trust, Dean Witter Utilities Fund,
Dean Witter Strategist Fund, Dean Witter World Wide Income Trust, Dean Witter
Intermediate Income Securities, Dean Witter Capital Growth Securities, Dean
Witter European Growth Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean
Witter Precious Metals and Minerals Trust, Dean Witter Global Short-Term Income
Fund Inc., Dean Witter Multi-State Municipal Series Trust, Dean Witter New York
Municipal Money Market Trust, InterCapital Quality Municipal Investment Trust,
Dean Witter Premier Income Trust, Dean Witter Short-Term U.S. Treasury Trust,
InterCapital Insured Municipal Bond Trust, InterCapital Insured Municipal Trust,
InterCapital Quality Municipal Income Trust, Dean Witter Diversified Income
Trust, Dean Witter Health Sciences Trust, Dean Witter Retirement Series,
InterCapital Quality Municipal Securities, InterCapital California Quality
Municipal Securities, InterCapital New York Quality Municipal Securities, Dean
Witter Global Dividend Growth Securities, Dean Witter Global Utilities Fund,
Dean Witter High Income Securities, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund, Dean Witter International SmallCap Fund, Dean
Witter Mid-Cap Growth Fund, Dean Witter Select Dimensions Series, Dean Witter
Balanced Growth Fund, Dean Witter Balanced Income Fund, Dean Witter Hawaii
Municipal Trust, Dean Witter Capital Appreciation Fund, Dean Witter Intermediate
Term U.S. Treasury Trust, Dean Witter Information Fund, InterCapital Insured
Municipal Securities, InterCapital Insured California Municipal Securities,
InterCapital Insured Municipal Income Trust, InterCapital California Insured
Municipal Income Trust, Active Assets Money Trust, Active Assets California
Tax-Free Trust, Active Assets Tax-Free Trust, Active Assets Government
Securities Trust, Municipal Income Trust, Municipal Income Trust II, Municipal
Income Trust III, Municipal Income Opportunities Trust, Municipal Income
Opportunities Trust II, Municipal Income Opportunities Trust III, Municipal
Premium Income Trust and Prime Income Trust. The foregoing investment companies,
together with the Fund, are collectively referred to as the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser: TCW/DW
Core Equity Trust, TCW/DW North American Government
3
<PAGE>
Income Trust, TCW/DW Latin American Growth Fund, TCW/DW Income and Growth Fund,
TCW/DW Small Cap Growth Fund, TCW/DW Balanced Fund, TCW/DW Total Return Trust,
TCW/DW Emerging Markets Opportunities Trust, TCW/DW Mid-Cap Equity Trust, TCW/DW
Term Trust 2000, TCW/DW Term Trust 2002 and TCW/DW Term Trust 2003 (the "TCW/DW
Funds"). InterCapital also serves as: (i) sub-adviser to Templeton Global
Opportunities Trust, an open-end investment company; (ii) administrator of The
BlackRock Strategic Term Trust Inc., a closed-end investment company; and (iii)
sub-administrator of MassMutual Participation Investors and Templeton Global
Governments Income Trust, closed-end investment companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help and bookkeeping and 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. On April 17,
1995, DWSC was reorganized in the State of Delaware, necessitating the entry
into a new Services Agreement by InterCapital on that date. The foregoing
internal reorganization did not result in any change in the nature or scope of
the administrative services being provided to the Fund or any of the fees being
paid by the Fund for the overall services being performed under the terms of the
existing Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares (see "The Distributor") will be paid
by the Fund. The expenses borne by the Fund include, but are not limited to:
expenses of the Plan of Distribution pursuant to Rule 12b-1 (see "The
Distributor"), charges and expenses of any registrar, custodian, stock transfer
and dividend disbursing agent; brokerage commissions; taxes; engraving and
printing of stock 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 Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors 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 Directors who are not interested persons of the Fund or
of the Investment Manager (not including compensation or expenses of attorneys
who are employees of the Investment Manager) and independent accountants;
membership dues of industry associations; interest on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and trustees) of
the Fund which inure to its benefit; extraordinary expenses (including, but not
limited to, legal claims and liabilities and litigation costs and any
indemnification relating thereto); and all other costs of the Fund's operation.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation
4
<PAGE>
calculated daily by applying the annual rate of 0.55% to the Fund's daily net
assets not exceeding $500 million and 0.50% to the Fund's daily net assets
exceeding $500 million. For the fiscal years ended October 31, 1993, 1994 and
1995, the Fund accrued $1,971,356, $1,282,418 and $716,948, respectively, to the
Investment Manager 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. During the fiscal years ended
October 31, 1993, 1994 and 1995, the Fund's expenses did not exceed the
limitations set forth above.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder, the
Investment Manager is not liable to the Fund or any of its investors for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors. The Agreement in no way restricts the Investment Manager from
acting as investment manager or adviser to others.
The Investment Manager paid the organizational expenses of the Fund, in the
amount of approximately $150,000, incurred prior to the offering of the Fund's
shares. The Fund has reimbursed the Investment Manager for such expenses, in
accordance with the terms of the Underwriting Agreement between the Fund and
DWR. The Fund has deferred and is amortizing the reimbursed expenses on the
straight line method over a period not to exceed five years from the date of
commencement of the Fund's operations.
The Agreement was initially approved by the Board of Directors on October
30, 1992 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on January 12, 1993. The Agreement is substantially identical
to a prior investment management agreement which was initially approved by the
Directors on August 16, 1990, by DWR as the then sole shareholder on September
5, 1990, and by the shareholders of the Fund at a Special Meeting of
Shareholders held on June 24, 1992. The Agreement took effect on June 30, 1993
upon the spin-off by Sears, Roebuck and Co. of its remaining shares of DWDC. The
Agreement may be terminated at any time, without penalty, on thirty days' notice
by the Board of Directors of the Fund, by the holders of a majority, as defined
in the Investment Company Act of 1940 (the "Act"), of the outstanding shares of
the Fund, or by the Investment Manager. The Agreement will automatically
terminate in the event of its assignment (as defined in the Act).
Under its terms, the Agreement had an initial term ending April 30, 1994,
and provides that it will continue in effect from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the vote
of the holders of a majority, as defined in the Act, of the outstanding shares
of the Fund, or by the Directors of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Directors of
the Fund who are not parties to the Agreement or "interested persons" (as
defined in the Act) of any such party (the "Independent Directors"), which vote
must be cast in person at a meeting called for the purpose of voting on such
approval. At their meeting held on April 20, 1995, the Fund's Board of
Directors, including a majority of the Independent Directors, approved
continuation of the Agreement until April 30, 1996.
The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that DWR or its parent company may use, or at any time
permit others to use, the name "Dean Witter". The Fund has also agreed that in
the event the investment management contract between the Investment Manager and
the Fund is terminated, or if the affiliation between the Investment Manager and
its parent company is terminated, the Fund will eliminate the name "Dean Witter"
from its name if DWR or its parent company shall so request.
5
<PAGE>
DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
The Directors and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 79 Dean Witter Funds and the 12 TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Michael Bozic (55) Chairman and Chief Executive Officer of Levitz Furniture
Director Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief
6111 Broken Sound Parkway, N.W. Executive Officer of Hills Department Stores (May,
Boca Raton, Florida 1991-July, 1995); formerly Chairman and Chief Executive
Officer (January, 1987-August, 1990) and President and
Chief Operating Officer (August, 1990-February, 1991) of
the Sears Merchandise Group of Sears, Roebuck and Co.;
Director of Eaglemark Financial Services, Inc., the United
Negro College Fund, Weirton Steel Corporation and Domain
Inc. (home decor retailer).
Charles A. Fiumefreddo* (62) Chairman, Chief Executive Officer and Director of
Chairman of the Board, President InterCapital, Dean Witter Distributors Inc. ("Distribu-
Chief Executive Officer and Director tors") and DWSC; Executive Vice President and Director of
Two World Trade Center DWR; Chairman, Director or Trustee, President and Chief
New York, New York Executive Officer of the Dean Witter Funds; Chairman,
Chief Executive Officer and Trustee of the TCW/DW Funds;
Chairman and Director of Dean Witter Trust Company
("DWTC"); Director and/or officer of various DWDC
subsidiaries; formerly Executive Vice President and
Director of DWDC (until February, 1993).
Edwin J. Garn (63) Director or Trustee of the Dean Witter Funds; formerly
Director United States Senator (R-Utah) (1974-1992) and Chairman,
c/o Huntsman Chemical Corporation Senate Banking Committee (1980-1986); formerly Mayor of
500 Huntsman Way Salt Lake City, Utah (1971-1974); formerly Astronaut,
Salt Lake City, Utah Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Chemical Corporation (since January,
1993); Director of Franklin Quest (time management sys-
tems) and John Alden Financial Corp.; member of the board
of various civic and charitable organizations.
John R. Haire (70) Chairman of the Audit Committee and Chairman of the
Director Committee of the Independent Directors or Trustees and
Two World Trade Center 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).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Dr. Manuel H. Johnson (46) Senior Partner, Johnson Smick International, Inc., a
Director consulting firm (since June, 1985); Koch Professor of
c/o Johnson Smick International, Inc. International Economics and Director of the Center for
1133 Connecticut Avenue, N.W. Global Market Studies at George Mason University (since
Washington, DC 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 NASDAQ (since June, 1995); Director of
Greenwich Capital Markets, Inc. (broker-dealer); formerly
Vice Chairman of the Board of Governors of the Federal
Reserve System (February, 1986-August, 1990) and Assistant
Secretary of the U.S. Treasury (1982-1986).
Paul Kolton (72) Director or Trustee of the Dean Witter Funds; Chairman of
Director the Audit Committee and Chairman of the Committee of the
c/o Gordon Altman Butowsky Independent Trustees and Trustee of the TCW/DW Funds;
Weitzen Shalov & Wein formerly Chairman of the Financial Accounting Standards
Counsel to the Independent Directors Advisory Council and Chairman and Chief Executive Officer
114 West 47th Street of the American Stock Exchange; Director of UCC Investors
New York, New York Holding Inc. (Uniroyal Chemical Company, Inc.); director
or trustee of various not-for-profit organizations.
Michael E. Nugent (59) General Partner, Triumph Capital, L.P., a private
Director investment partnership (since April, 1988); Director or
c/o Triumph Capital, L.P. Trustee of the Dean Witter Funds; Trustee of the TCW/DW
237 Park Avenue Funds; formerly Vice President, Bankers Trust Company and
New York, New York BT Capital Corporation (September, 1984-March, 1988);
director of various business organizations.
Philip J. Purcell* (52) Chairman of the Board of Directors and Chief Executive
Director Officer of DWDC, DWR and Novus Credit Services Inc.;
Two World Trade Center Director of InterCapital, DWSC and Distributors; Director
New York, New York or Trustee of the Dean Witter Funds; Director and/or
officer of various DWDC subsidiaries.
John L. Schroeder (65) Retired; Director or Trustee of the Dean Witter Funds;
Director Trustee of the TCW/DW Funds; Director of Citizens
c/o Gordon Altman Butowsky Utilities Company; formerly Executive Vice President and
Weitzen Shalov & Wein Chief Investment Officer of the Home Insurance Company
Counsel to the Independent Directors (August, 1991-September, 1995); Chairman and Chief
114 West 47th Street Investment Officer of Axe-Houghton Management and the
New York, New York Axe-Houghton Funds (April, 1983-June, 1991) and President
of USF&G Financial Services, Inc. (June 1990-June, 1991).
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel of
Vice President, Secretary and General Counsel InterCapital and DWSC; Senior Vice President and Secretary
Two World Trade Center of DWTC; Senior Vice President, Assistant Secretary and
New York, New York Assistant General Counsel of Distributors; Assistant
Secretary of DWR; and Vice President, Secretary and
General Counsel of
the Dean Witter Funds and the TCW/DW Funds.
Vinh Q. Tran (49) Vice President of InterCapital; formerly Director of
Vice President International Investments, Aetna Life and Casualty Co.
Two World Trade Center
New York, New York
Anne Pickrell (41) Assistant Vice President (since 1992) of InterCapital;
Vice President formerly portfolio manager, Harvard Management Co. Inc.
Two World Trade Center
New York, New York
Thomas F. Caloia (49) First Vice President (since May, 1991) and Assistant
Treasurer Treasurer (since January, 1993) of InterCapital; First
Two World Trade Center Vice President and Assistant Treasurer of DWSC; Treasurer
New York, New York of the Dean Witter Funds and the TCW/DW Funds; previously
Vice President of InterCapital.
<FN>
- ------------------------
*Denotes Directors who are "interested persons" of the Fund, as defined in the
Act.
</TABLE>
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and Director
of DWTC, Edmund C. Puckhaber, Executive Vice President of InterCapital, Robert
S. Giambrone, Senior Vice President of InterCapital, DWSC, Distributors and
DWTC, and Joseph J. McAlinden, Senior Vice President of InterCapital are Vice
Presidents of the Fund. Barry Fink and Marilyn K. Cranney, First Vice Presidents
and Assistant General Counsels of InterCapital and DWSC, and Lou Anne McInnis
and Ruth Rossi, Vice Presidents and Assistant General Counsels of InterCapital
and DWSC, and Carsten Otto, a Staff Attorney with InterCapital, are Assistant
Secretaries of the Fund.
THE BOARD OF DIRECTORS, THE INDEPENDENT DIRECTORS, AND THE COMMITTEES
The Board of Directors consists of nine (9) directors. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Directors. As of the date of this
Statement of Additional Information, there are a total of 79 Dean Witter Funds,
comprised of 119 portfolios. As of December 31, 1995, the Dean Witter Funds had
total net assets of approximately $71.5 billion and more than five million
shareholders.
Seven Directors (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own any
stock or other securities issued by InterCapital's parent company, DWDC. These
are the "disinterested" or "independent" Directors. The other two Directors (the
"management Directors") are affiliated with InterCapital. Five of the seven
independent Directors are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Directors. The Dean Witter Funds seek as Independent Directors
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make
8
<PAGE>
substantial demands on their time. Indeed, by serving on the Funds' Boards,
certain Directors who would otherwise be qualified and in demand to serve on
bank boards would be prohibited by law from doing so.
All of the Independent Directors serve as members of the Audit Committee and
the Committee of the Independent Directors. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1995,
the three Committees held a combined total of fifteen meetings. The Committees
hold some meetings at InterCapital's offices and some outside InterCapital.
Management Directors or officers do not attend these meetings unless they are
invited for purposes of furnishing information or making a report.
The Committee of the Independent Directors is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to time.
The Independent Directors are required to select and nominate individuals to
fill any Independent Director vacancy on the Board of any Fund that has a Rule
12b-1 plan of distribution. Most of the Dean Witter Funds have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He screens
and/or prepares written materials and identifies critical issues for the
Independent Directors to consider, develops agendas for Committee meetings,
determines the type and amount of information that the Committees will need to
form a judgment on various issues, and arranges to have that information
furnished to Committee members. He also arranges for the services of independent
experts and consults with them in advance of meetings to help refine reports and
to focus on critical issues. Members of the Committees believe that the person
who serves as Chairman of all three Committees and guides their efforts is
pivotal to the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Director and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In effect,
the Chairman of the Committees serves as a combination of chief executive and
support staff of the Independent Directors.
The Chairman of the Committees is not employed by any other organization and
devotes his time primarily to the services he performs as Committee Chairman and
Independent Director of the Dean Witter Funds and as an Independent Trustee of
the TCW/DW Funds. The current Committee Chairman has had more than 35 years
experience as a senior executive in the investment company industry.
9
<PAGE>
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS FOR ALL DEAN
WITTER FUNDS
The Independent Directors and the Funds' management believe that having the
same Independent Directors for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Directors for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Directors of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Directors arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Directors serve on all Fund Boards
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of Independent Directors, and a Chairman of their Committees,
of the caliber, experience and business acumen of the individuals who serve as
Independent Directors of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT DIRECTORS
The Fund pays each Independent Director an annual fee of $1,000 ($1,200
prior to September 30, 1995) plus a per meeting fee of $50 for meetings of the
Board of Directors or committees of the Board of Directors attended by the
Director (the Fund pays the Chairman of the Audit Committee an annual fee of
$750 ($1,000 prior to January 1, 1995) and pays the Chairman of the Committee of
the Independent Directors an additional annual fee of $2,400, in each case
inclusive of the Committee meeting fees). The Fund also reimburses such
Directors for travel and other out-of-pocket expenses incurred by them in
connection with attending such meetings. Directors and officers of the Fund who
are or have been employed by the Investment Manager or an affiliated company
receive no compensation or expense reimbursement from the Fund.
The Fund has adopted a retirement program under which an Independent
Director who retires after serving for at least five years (or such lesser
period as may be determined by the Board) as an Independent Director or Trustee
of any Dean Witter Fund that has adopted the retirement program (each such Fund
referred to as an "Adopting Fund" and each such Director referred to as an
"Eligible Director") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Director
is entitled to receive from the Fund, commencing as of his or her retirement
date and continuing for the remainder of his or her life, an annual retirement
benefit (the "Regular Benefit") equal to 25.0% of his or her Eligible
Compensation plus 0.4166666% of such Eligible Compensation for each full month
of service as an Independent Director or Trustee of any Adopting Fund in excess
of five years up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(1) "Eligible Compensation" is one-fifth
of the total compensation earned by such Eligible Director for service to the
Fund in the five year period prior to the date of the Eligible Director's
retirement. Benefits under the retirement program are not secured or funded by
the Fund. As of the date of this Statement of Additional Information, 57 Dean
Witter Funds have adopted the retirement program.
- ------------------------------
(1) An Eligible Director may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Director
and his or her spouse on the date of such Eligible Director's retirement.
The amount estimated to be payable under this method, through the remainder
of the later of the lives of such Eligible Director and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Director may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
10
<PAGE>
The following table illustrates the compensation paid and the retirement
benefits accrued to the Fund's Independent Directors by the Fund for the fiscal
year ended October 31, 1995 and the estimated retirement benefits for the Fund's
Independent Directors as of October 31, 1995.
<TABLE>
<CAPTION>
FUND COMPENSATION ESTIMATED RETIREMENT BENEFITS
-------------------------------------------------------------------------------------------
ESTIMATED
RETIREMENT CREDIT YEARS ESTIMATED
BENEFITS OF SERVICE ESTIMATED ANNUAL
AGGREGATE ACCRUED AS AT PERCENTAGE OF ESTIMATED BENEFITS
COMPENSATION FUND RETIREMENT ELIGIBLE ELIGIBLE UPON
NAME OF INDEPENDENT TRUSTEE FROM THE FUND EXPENSES (MAXIMUM 10) COMPENSATION COMPENSATION(2) RETIREMENT(3)
- ------------------------------ ------------- ---------- ------------ ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic................. $1,900 $ 379 10 57.5% $1,950 $1,121
Edwin J. Garn................. 2,000 655 10 57.5 1,950 1,121
John R. Haire................. 4,600(4) 3,229 10 57.5 5,162 2,968
Dr. Manuel H. Johnson......... 2,000 266 10 57.5 1,950 1,121
Paul Kolton................... 2,000 1,986 10 57.0 2,445 1,394
Michael E. Nugent............. 1,850 468 10 57.5 1,950 1,121
John L. Schroeder............. 2,000 744 8 47.9 1,950 934
</TABLE>
- ------------------------------
(2) Based on current levels of compensation.
(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Director's elections described in Footnote (1)
above.
(4) Of Mr. Haire's compensation from the Fund, $3,400 was paid to him as
Chairman of the Committee of the Independent Directors ($2,400) and as
Chairman of the Audit Committee ($1,000).
The following table illustrates the compensation paid to the Fund's
Independent Directors for the calendar year ended December 31, 1995 for services
to the 79 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Kolton
and Nugent, the 11 TCW/DW Funds that were in operation at December 31, 1995.
With respect to Messrs. Haire, Johnson, Kolton and Nugent, the TCW/DW Funds are
included solely because of a limited exchange privilege between those Funds and
five Dean Witter Money Market Funds. Mr. Schroeder was elected as a Trustee of
the TCW/DW Funds on April 20, 1995.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS TOTAL CASH
FOR SERVICE CHAIRMAN OF COMPENSATION
AS DIRECTOR OR COMMITTEES OF FOR SERVICES
TRUSTEE AND FOR SERVICE AS INDEPENDENT TO
COMMITTEE MEMBER TRUSTEE AND DIRECTORS/ 79 DEAN
OF 79 DEAN COMMITTEE MEMBER TRUSTEES AND WITTER
WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- --------------------------- ---------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Michael Bozic.............. $126,050 -- -- $126,050
Edwin J. Garn.............. 136,450 -- -- 136,450
John R. Haire.............. 98,450 $82,038 $217,350(5) 397,838
Dr. Manuel H. Johnson...... 136,450 82,038 -- 218,488
Paul Kolton................ 136,450 54,788 36,900(6) 228,138
Michael E. Nugent.......... 124,200 75,038 -- 199,238
John L. Schroeder.......... 136,450 46,964 -- 183,414
</TABLE>
- ------------------------
(5) For the 79 Dean Witter Funds in operation at December 31, 1995.
(6) For the 11 TCW/DW Funds in operation at December 31, 1995.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Directors as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
11
<PAGE>
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As discussed in the Prospectus, the Fund may enter into forward foreign
currency exchange contracts ("forward contracts") as a hedge against
fluctuations in future foreign exchange rates. 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 and investment 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.
When the Fund's Investment Manager believes that the currency of a
particular foreign country may suffer a substantial movement against the U.S.
dollar, it may enter into a forward contract to purchase or sell, for a fixed
amount of dollars or other currency, the amount of foreign currency
approximating the value of some or all of the Fund's 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 management of the Fund believes that it is important to
have the flexibility to enter 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 or other appropriate liquid high
grade debt securities in a segregated 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 segregated 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.
Where, for example, the Fund is hedging a portfolio position consisting of
foreign fixed-income securities denominated in a foreign currency against
adverse exchange rate moves vis-a-vis the U.S. dollar, at the maturity of the
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 securities
if its market value exceeds the amount of foreign currency the Fund is obligated
to deliver.
If the Fund retains the portfolio securities 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
12
<PAGE>
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.
If the Fund purchases a fixed-income security which is denominated in U.S.
dollars but which will pay out its principal based upon a formula tied to the
exchange rate between the U.S. dollar and a foreign currency, it may hedge
against a decline in the principal value of the security by entering into a
forward contract to sell or purchase an amount of the relevant foreign currency
equal to some or all of the principal value of the security.
At times when the Fund has written a call or put option on a fixed-income
security or the currency in which it is denominated, it may wish to enter into a
forward contract to purchase or sell the foreign currency in which the security
is denominated. A forward contract would, for example, hedge the risk of the
security on which a call currency option has been written declining in value to
a greater extent than the value of the premium received for the option. The Fund
will maintain with its Custodian at all times cash, U.S. Government securities
or other appropriate high grade debt obligations in a segregated account equal
in value to all forward contract obligations and option contract obligations
entered into in hedge situations such as this.
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 purchase options of the same series to effect closing
transactions, and may hedge against potential changes in the market value of its
investments (or anticipated investments) by purchasing put and call options on
portfolio (or eligible portfolio) securities (and the currencies in which they
are denominated) and engaging in transactions involving futures contracts and
options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and on various
foreign currencies are listed on several U.S. and foreign securities exchanges
and are written in over-the-counter transactions ("OTC Options"). Listed options
are issued or guaranteed by the exchange on which they trade or by a clearing
corporation such as the Options Clearing Corporation ("OCC"). Ownership of a
listed call option gives the Fund the right to buy from the OCC (in the U.S.) or
other clearing corporation or exchange, the underlying security or currency
covered by the option at the stated exercise price (the price per unit of the
underlying security or currency) by filing an exercise notice prior to the
expiration date of the option. The writer (seller) of the option would then have
the obligation to sell, to the OCC (in the U.S.) or other clearing corporation
or exchange, the underlying security or currency at that exercise price prior to
the expiration date of the option, regardless of its then current market price.
Ownership of a listed put option would give the Fund the right to sell the
underlying security or currency to the OCC (in the U.S.) or other clearing
corporation or exchange at the stated exercise price. Upon notice of exercise of
the put option, the writer of the option would have the obligation to purchase
the underlying security or currency from the OCC (in the U.S.) or other clearing
corporation or exchange at the exercise price.
OPTIONS ON TREASURY BONDS AND NOTES. Because trading interest in options
written on Treasury bonds and notes tends to center on the most recently
auctioned issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options on particular issues. Instead, the expirations introduced at the
commencement of options trading on a particular issue will be allowed to run
their course, with the possible addition of a limited
13
<PAGE>
number of new expirations as the original ones expire. Options trading on each
issue of bonds or notes will thus be phased out as new options are listed on
more recent issues, and options representing a full range of expirations will
not ordinarily be available for every issue on which options are traded.
OPTIONS ON TREASURY BILLS. Because a deliverable Treasury bill changes from
week to week, writers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of the
option, the position may be hedged from a risk standpoint by the writing of a
call option. For so long as the call option is outstanding, the Fund will hold
the Treasury bills in a segregated account with its Custodian, so that they will
be treated as being covered.
OPTIONS ON GNMA CERTIFICATES. Currently, options on GNMA Certificates are
only traded over-the-counter. Since the remaining principal balance of GNMA
Certificates declines each month as a result of mortgage payments, the Fund, as
a writer of a GNMA call holding GNMA Certificates as "cover" to satisfy its
delivery obligation in the event of exercise, may find that the GNMA
Certificates it holds no longer have a sufficient remaining principal balance
for this purpose. Should this occur, the Fund will purchase additional GNMA
Certificates from the same pool (if obtainable) or replacement GNMA Certificates
in the cash market in order to maintain its cover. A GNMA Certificate held by
the Fund to cover an option position in any but the nearest expiration month may
cease to represent cover for the option in the event of a decline in the GNMA
coupon rate at which new pools are originated under the FHA/VA loan ceiling in
effect at any given time, as such decline may increase the prepayments made on
other mortgage pools. If this should occur, the Fund will no longer be covered,
and the Fund will either enter into a closing purchase transaction or replace
such Certificate with a Certificate which represents cover. When the Fund closes
out its position or replaces such Certificate, it may realize an unanticipated
loss and incur transaction costs.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Fund may purchase put options on an
amount of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Fund would be enabled to sell the foreign
currency for a fixed amount of U.S. dollars, thereby "locking in" the dollar
value of the portfolio securities (less the amount of the premiums paid for the
options). Conversely, the Fund may purchase call options on foreign currencies
in which securities it anticipates purchasing are denominated to secure a set
U.S. dollar price for such securities and protect against a decline in the value
of the U.S. dollar against such foreign currency. The Fund may also purchase
call and put options to close out written option positions.
The Fund may also write call options on foreign currency to protect against
potential declines in its portfolio securities which are denominated in foreign
currencies. If the U.S. dollar value of the portfolio securities falls as a
result of a decline in the exchange rate between the foreign currency in which
it is denominated and the U.S. dollar, then a loss to the Fund occasioned by
such value decline would be ameliorated by receipt of the premium on the option
sold. At the same time, however, the Fund gives up the benefit of any rise in
value of the relevant portfolio securities above the exercise price of the
option and, in fact, only receives a benefit from the writing of the option to
the extent that the value of the portfolio securities falls below the price of
the premium received. The Fund may also write options to close out long call
option positions. A put option on a foreign currency would be written by the
Fund for the same reason it would purchase a call option, namely, to hedge
against an increase in the U.S. dollar value of a foreign security which the
Fund anticipates purchasing. Here, the receipt of the premium would offset, to
the extent of the size of the premium, any increased cost to the Fund resulting
from an increase in the U.S. dollar value of the foreign security. However, the
Fund could not benefit from any decline in the cost of the foreign security
which is greater than the price of the premium received. The Fund may also write
options to close out long put and call option positions.
14
<PAGE>
The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not purchase or
write such options unless and until, in the opinion of the Investment Manager,
the market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in connection with
the underlying currency, there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time. In addition,
options on foreign currencies are affected by all of those factors which
influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and have no relationship to the investment merits of a foreign security,
including foreign securities held in a "hedged" investment portfolio. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
OTC OPTIONS. Exchange-listed options are issued by the OCC (in the U.S.) or
other clearing corporation or exchange which assures that all transactions in
such options are properly executed. OTC options are purchased from or sold
(written) to dealers or financial institutions which have entered into direct
agreements with the Fund. With OTC options, such variables as expiration date,
exercise price and premium will be agreed upon between the Fund and the
transacting dealer, without the intermediation of a third party such as the OCC.
If the transacting dealer fails to make or take delivery of the securities or
amount of foreign currency underlying an option it has written, in accordance
with the terms of that option, the Fund would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Fund will
engage in OTC option transactions only with member banks of the Federal Reserve
System or primary dealers in U.S. Government securities or with affiliates of
such banks or dealers which have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million.
COVERED CALL WRITING. As stated in the Prospectus, the Fund is permitted to
write covered call options on portfolio securities and on the U.S. Dollar and
foreign currencies in which they are denominated, 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 (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 (currency)
deliverable under the call option. A call option is also covered if the Fund
holds a call on the same security as the underlying security (currency) of the
written option, where the exercise price of the call used for coverage is equal
to or less than the exercise price of the call written or greater than the
exercise price of the call written if the mark to market difference is
maintained by the Fund in cash, U.S. Government securities or other high grade
debt obligations which the Fund holds in a segregated account maintained with
its Custodian.
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The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (currencies) alone. Moreover,
the premium received will offset a portion of the potential loss incurred by the
Fund if the securities (currencies) underlying the option are ultimately sold
(exchanged) by the Fund at a loss. Furthermore, a premium received on a call
written on a foreign currency will ameliorate any potential loss of value on the
portfolio security due to a decline in the value of the currency. However,
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 (or the
exchange rate of the currency in which it is denominated) increase, but has
retained the risk of loss should the price of the underlying security (or the
exchange rate of the currency in which it is denominated) decline. The premium
received will fluctuate with varying economic market conditions. If the market
value of the portfolio securities (or the currencies in which they are
denominated) 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 OTC options, during the option period,
the Fund may be required, at any time, to deliver the underlying security
(currency) 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.
Closing purchase transactions are ordinarily effected to realize a profit on
an outstanding call option, to prevent an underlying security (currency) from
being called, to permit the sale of an underlying security (or the exchange of
the underlying currency) or to enable the Fund to write another call option on
the underlying security (currency) 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 (currency). 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 (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
(currency) during the option period. If a call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security (currency)
equal to the difference between the purchase price of the underlying security
(currency) and the proceeds of the sale of the security (currency) plus the
premium received 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, 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 (currency) as the underlying security of the
written option, where the exercise price of the purchased
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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 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 (currency). 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 (or a security denominated in the
currency underlying the option) 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 (currencies) 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 5% 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 or, in the case of a
call option on foreign currency, to hedge against an adverse exchange rate move
of the currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. 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 (currencies) 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 (currencies) which it holds
in its portfolio to protect itself against a decline in the value of the
security and to close out written put option positions. If the value of the
underlying security (currency) 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. In addition, the Fund may sell a put option
which it has previously purchased prior to the sale of the securities
(currencies) 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.
And such gain or loss could be offset in whole or in part by a change in the
market value of the underlying security (currency). If a put option purchased by
the Fund expired without being sold or exercised, the premium would be lost.
RISKS OF OPTIONS TRANSACTIONS. The successful use of options depends on the
ability of the Investment Manager to forecast correctly interest rates and
market movements. 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. In writing puts, the Fund assumes
the risk of loss should the market value of the underlying securities decline
below the exercise price of the option (any loss being decreased by the receipt
of the premium on the option written). During the option period, the 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 (or the value of its denominated currency)
increase, but has retained the risk of loss should the price of the underlying
security (or the value of its denominated currency) decline. 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.
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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 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 Fund's management.
Each of the exchanges has established limitations governing the maximum
number of 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 exchange 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.
The extent to which the Fund may enter into transactions involving options
may be limited by the Internal Revenue Code's requirements for qualification as
a regulated investment company and the Fund's intention to qualify as such (see
"Dividends, Distributions and Taxes" in the Prospectus).
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FUTURES CONTRACTS. As stated in the Prospectus, the Fund may purchase and
sell interest rate, currency, and index futures contracts ("futures contracts"),
that are traded on U.S. and foreign commodity exchanges, on such underlying
securities as U.S. Treasury bonds, notes and bills and/or any foreign government
fixed-income security ("interest rate" futures), on various currencies
("currency futures") and on such indexes of U.S. and foreign securities as may
exist or come into being ("index" futures).
The Fund will purchase or sell interest rate futures contracts for the
purpose or hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
If the Investment Manager anticipates that interest rates may rise and,
concomitantly, the price of certain of its portfolio securities fall, the Fund
may sell an interest rate futures contract. If declining interest rates are
anticipated, the Fund may purchase an interest rate futures contract to protect
against a potential increase in the price of securities the Fund intends to
purchase. Subsequently, appropriate securities may be purchased by the Fund in
an orderly fashion; as securities are purchased, corresponding futures positions
would be terminated by offsetting sales of contracts.
The Fund will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices. If the Investment Manager anticipates that the
prices of securities held by the Fund may fall, the Fund may sell an index
futures contract. Conversely, if the Fund wishes to hedge against anticipated
price rises in those securities which the Fund intends to purchase, the Fund may
purchase an index futures contract.
The Fund will purchase or sell currency futures on currencies in which its
portfolio securities (or anticipated portfolio securities) are denominated for
the purposes of hedging against anticipated changes in currency exchange rates.
The Fund will enter into currency futures contracts for the same reasons as set
forth above for entering into forward foreign currency contracts; namely, to
"lock-in" the value of a security purchased or sold in a given currency
vis-a-vis a different currency or to hedge against an adverse currency exchange
rate movement of a portfolio security's (or anticipated portfolio security's)
denominated currency vis-a-vis a different currency.
In addition to the above, interest rate, index and currency futures will be
bought or sold in order to close out a short or long position maintained by the
Fund in a corresponding futures contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. A futures contract
sale is closed out by effecting a futures contract purchase for the same
aggregate amount of the specific type of security (currency) and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same aggregate amount of the specific
type of security (currency) and the same delivery date. If the offsetting sale
price exceeds the purchase price, the purchaser would realize a gain, whereas if
the purchase price exceeds the offsetting sale price, the purchaser would
realize a loss. There is no assurance that the Fund will be able to enter into a
closing transaction.
INTEREST RATE FUTURES CONTRACTS. When the Fund enters into an interest rate
futures contract, it is initially required to deposit with the Fund's Custodian,
in a segregated account in the name of the broker performing the transaction, an
"initial margin" of cash or U.S. Government securities or other high grade
short-term obligations equal to approximately 2% of the contract amount. Initial
margin requirements are established by the exchanges on which futures contracts
trade and may, from time to time, change. In addition, brokers may establish
margin deposit requirements in excess of those required by the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a brokers' client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures
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contract. The margin deposits made are marked to market daily and the Fund may
be required to make subsequent deposits of cash or U.S. Government securities
called "variation margin", with the Fund's futures contract clearing broker,
which are reflective of price fluctuations in the futures contract. Currently,
interest rate futures contracts can be purchased on debt securities such as U.S.
Treasury Bills and Bonds, U.S. Treasury Notes with Maturities between 6 1/2 and
10 years, GNMA Certificates and Bank Certificates of Deposit.
CURRENCY FUTURES. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the exercise date, for a
set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and under
the same circumstances as forward foreign currency exchange contracts. The
Investment Manager will assess such factors as cost spreads, liquidity and
transaction costs in determining whether to utilize futures contracts or forward
contracts in its foreign currency transactions and hedging strategy. Currently,
currency futures exist for, among other foreign currencies, the Japanese yen,
West German marks, Canadian dollars, British pound, Swiss franc and European
currency unit.
Purchasers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the buying and selling of futures generally. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying currency.
Thus, the Fund must accept or make delivery of the underlying foreign currency
in accordance with any U.S. or foreign restrictions or regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery which
are assessed in the issuing country.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the Fund will
not purchase or write options on foreign currency futures contracts unless and
until, in the Investment Manager's opinion, the market for such options has
developed sufficiently that the risks in connection with such options are not
greater than the risks in connection with transactions in the underlying foreign
currency futures contracts.
INDEX FUTURES CONTRACTS. As discussed in the Prospectus, the Fund may
invest in index futures contracts. An index futures contract sale creates an
obligation by the Fund, as seller, to deliver cash at a specified future time.
An index futures contract purchase would create an obligation by the Fund, as
purchaser, to take delivery of cash at a specified future time. Futures
contracts on indexes do not require the physical delivery of securities, but
provide for a final cash settlement on the expiration date which reflects
accumulated profits and losses credited or debited to each party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirements range from 3% to 10% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in the
form of variation margin payments. The Fund may be required to make additional
margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may elect
to close the position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or gain.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in a futures contract (a long
position if the option is a
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call and a short position if the option is a put) at a specified exercise price
at any time during the term of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to the holder of
the option is accompanied by delivery of the accumulated balance in the writer's
futures margin account, which represents the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the Investment
Manager wished to protect against an increase in interest rates and the
resulting negative impact on the value of a portion of its fixed-income
portfolio, it might write a call option on an interest rate futures contract,
the underlying security of which correlates with the portion of the portfolio
the Investment Manager seeks to hedge. Any premiums received in the writing of
options on futures contracts may, of course, provide a further hedge against
losses resulting from price declines in portions of the Fund's portfolio.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the
value of the Fund's total assets, after taking into account unrealized gains and
unrealized losses on such contracts it has entered into, provided, however, that
in the case of an option that is in-the-money (the exercise price of the call
(put) option is less (more) than the market price of the underlying security) at
the time of purchase, the in-the-money amount may be excluded in calculating the
5%. However, there is no overall limitation on the percentage of the Fund's
assets which may be subject to a hedge position. In addition, in accordance with
the regulations of the Commodity Futures Trading Commission ("CFTC") under which
the Fund is exempted from registration as a commodity pool operator, the Fund
may only enter into futures contracts and options on futures contracts
transactions for purposes of hedging a part or all of its portfolio. If the CFTC
changes its regulations so that the Fund would be permitted to write options on
futures contracts for purposes other than hedging the Fund's investments without
CFTC registration, the Fund may engage in such transactions for those purposes.
Except as described above, there are no other limitations on the use of futures
and options thereon by the Fund.
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. The
successful use of futures and related options depends on the ability of the
Investment Manager to accurately predict market and interest rate movements. 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 (or the currency in which they
are denominated) held in the portfolio of the Fund may decline. If this
occurred, the Fund would lose money on the futures contract and also experience
a decline in value of its portfolio securities. However, while this could occur
for a very brief period or to a very small degree, over time the value of a
diversified portfolio will tend to move in the same direction as the futures
contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currencies) 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.
If the Fund has sold a call option on a futures contract, it will cover this
position by holding, in a segregated account maintained at its Custodian, cash,
U.S. Government securities or other high grade debt obligations equal in value
(when added to any initial or variation margin on deposit) to the market value
of the securities (currencies) underlying the futures contract or the exercise
price of the option.
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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 it will
hold cash, U.S. Government securities or other high grade debt obligations equal
to the purchase price of the contract (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.
Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit the Fund's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may occasion delays in the
settlement of the Fund's transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by the Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by the Fund only with brokers
or financial institutions deemed creditworthy by the Investment Manager.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities (and the currencies in which they
are denominated) is that the prices of securities and indexes subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Fund's portfolio securities (and the
currencies in which they are denominated). Another such risk is that prices of
interest rate futures contracts may not move in tandem with the changes in
prevailing interest rates against which the Fund seeks a hedge. A correlation
may also be distorted by the fact that the futures market is dominated by
short-term traders seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds. Such distortions are
generally minor and would diminish as the contract approached maturity.
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 securities (currencies) 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
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underlying securities rather than engage in closing transactions due to the
resultant reduction in the liquidity of the futures market. In addition, due to
the fact that, from the point of view of speculators, the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market could cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and because of the imperfect correlation between movements in the
prices of securities and movements in the prices of futures contracts, a correct
forecast of interest rate trends 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 securities (currencies) at a time when it may
be disadvantageous to do so.
The extent to which the Fund may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the Fund's
intention to qualify as such (see "Dividends, Distributions and Taxes" in the
Prospectus).
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund
notwithstanding that the purchase or sale of a futures contract would not result
in a loss, as in the instance where there is no movement in the prices of the
futures contract or underlying securities (currencies).
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, is always at least equal to the purchase price plus
accrued interest. If required, additional collateral will be requested from the
counterparty and when received added to the account 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.
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<PAGE>
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 management of the Fund subject
to procedures established by the Directors. The procedures also require that the
collateral underlying the agreement be specified.
REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase
agreements for purposes of meeting redemptions or as part of its investment
strategy. Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. Generally, the effect of such a transaction is
that the Fund can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement, while
it will be able to keep the interest income associated with those portfolio
securities. Such transactions are only advantageous if the interest cost to the
Fund of the reverse repurchase transaction is less than the cost of obtaining
the cash otherwise. Opportunities to achieve this advantage may not always be
available, and the Fund intends to use the reverse repurchase technique only
when it will be to its advantage to do so. The Fund will establish a segregated
account with its custodian bank in which it will maintain cash or cash
equivalents or other portfolio securities (i.e., U.S. Government securities)
equal in value to its obligations in respect of reverse repurchase agreements.
Reverse repurchase agreements are considered borrowings by the Fund and, in
accordance with legal requirements, the Fund will maintain an asset coverage
(including the proceeds) of at least 300% with respect to all reverse repurchase
agreements. Reverse repurchase agreements may not exceed 10% of the Fund's total
assets. The Fund will make no purchases of portfolio securities while it is
still subject to a reverse repurchase agreement.
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 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 Fund's management and the Directors do not believe that the Fund's
net asset value or income will be adversely affected by its purchase of
securities on such basis.
WHEN, AS AND IF ISSUED SECURITIES. As discussed in the Prospectus, the Fund
may purchase securities on a "when, as and if issued" basis under which the
issuance of the security depends upon the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization, leveraged buyout or debt
restructuring. The commitment for the purchase of any such security will not be
recognized in the portfolio of the Fund until the Investment Manager determines
that issuance of the security is probable. At such time, the Fund will record
the transaction and, in determining its net asset value, will reflect the value
of the security daily. At such time, the Fund will also establish a segregated
account with its custodian bank in which it will continuously maintain cash or
U.S. Government securities or other high grade debt portfolio securities equal
in value to recognized commitments for such
24
<PAGE>
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 Fund's management and the Directors 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.
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 day's notice, or by the Fund on two
business days' notice. If the borrower fails to deliver the loaned securities
within two days after receipt of notice, the Fund could use the collateral to
replace the securities while holding the borrower liable for any excess of
replacement cost over collateral. As with any extensions of credit, there are
risks of delay in recovery and in some cases even loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms deemed by the
Fund's management to be creditworthy and when the income which can be earned
from such loans justifies the attendant risks. Upon termination of the loan, the
borrower is required to return the securities to the Fund. Any gain or loss in
the market price during the loan period would inure to the Fund. The
creditworthiness of firms to which the Fund lends its portfolio securities will
be monitored on an ongoing basis by the Fund's management pursuant to procedures
adopted and reviewed, on an ongoing basis, by the Board of Directors 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. The Fund has not
to date nor does it presently intend to lend any of its portfolio securities in
the foreseeable future.
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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<PAGE>
The Fund may not:
1. 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.
2. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the
Fund may invest in the securities of companies which operate, invest in, or
sponsor such programs.
3. Borrow money (except insofar as the Fund may be deemed to have
borrowed by entrance into a reverse repurchase agreement up to an
amount not exceeding 10% of the Fund's total assets), 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). The Fund will not purchase
portfolio securities while any borrowings, including reverse repurchase
agreements, of the Fund are outstanding.
4. 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 or reverse 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.
5. 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 or reverse repurchase agreements; or (c) by lending its portfolio
securities.
6. 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.
7. Invest for the purpose of exercising control or management of any
other issuer.
8. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or write interest rate, currency and stock and bond
index futures contracts and related options thereon.
9. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. (For the purpose of this restriction,
collateral arrangements with respect to the writing of options and
collateral arrangements with respect to initial or variation margin for
futures are not deemed to be pledges of assets.)
10. Purchase securities on margin (but the Fund may obtain short-term
loans as are necessary for the clearance of transactions). The
deposit or payment by the fund of initial or variation margin in connection
with futures contracts or related options thereon is not considered the
purchase of a security on margin.
11. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition.
12. Invest more than 5% of its net assets in warrants (valued at the
lower of cost or market), including not more than 2% of such assets
which are not listed on the New York or American Stock Exchange. However,
warrants acquired by the Fund in units or attached to other securities may
be deemed to be without value.
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.
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<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Board of Directors, 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, 1994 and 1995 the Fund
paid $0, $17,164 and $9,450, respectively, in brokerage commissions on portfolio
securities transactions.
The Investment Manager currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, the main
factors considered are the respective investment objectives, the relative size
of portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of the Fund and
other client accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration 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.
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.
27
<PAGE>
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the management fee paid to the Investment
Manager is not reduced by any amount that may be attributable to the value of
such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR. In order for DWR to effect any portfolio transactions for
the Fund, the commissions, fees or other remuneration received by DWR must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow DWR to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Directors of the Fund,
including a majority of the Directors 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 did not pay DWR any
brokerage commissions during the fiscal year ended October 31, 1995.
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. To the extent Section 11(a) would apply to 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
in Rule 11a2-2(T).
THE DISTRIBUTOR
- --------------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of DWDC. The Directors of the
Fund, including a majority of the Directors who are not, and were not at the
time they voted, interested persons of the Fund, as defined in the Act (the
"Independent Directors"), approved, at their meeting held on October 30, 1992,
the current Distribution Agreement appointing the Distributor as exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. The current Distribution Agreement
is substantively identical to the Fund's previous distribution agreement in all
material respects, except for the dates of effectiveness. The current
Distribution Agreement took effect on June 30, 1993, upon the spin-off by Sears,
Roebuck and Co. of its remaining shares of DWDC. By its terms, the Distribution
Agreement had an initial term ending April 30, 1994, and provides that it will
remain in effect from year to year thereafter if approved by the Board. At their
meeting held on April 20, 1995, the Directors, including all of the Independent
Directors, approved the continuation of the Distribution Agreement until April
30, 1996.
The Distributor bears all expenses incurred 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
28
<PAGE>
distribution of the Fund's shares, including the costs of preparing, printing
and distributing advertising or promotional materials, and the costs of printing
and distributing prospectuses and supplements thereto used in connection with
the offering and sale of the Fund's shares. The Fund bears the costs of initial
typesetting, printing and distribution of prospectuses and supplements thereto
to shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws. The Fund and the Distributor
have agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. Under the Distribution
Agreement, the Distributor uses its best efforts in rendering services to the
Fund, but in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations, the Distributor is not liable to the Fund
or any of its shareholders for any error of judgment or mistake of law or for
any act or omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION. To compensate the Distributor for the services
provided and for the expenses borne by the Distributor or any selected dealer
under the Distribution Agreement, the Fund has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Act (the "Plan") pursuant to which the Fund
pays the Distributor compensation accrued daily and payable monthly at the
annual rate of 0.75% 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 "Redemption and Repurchases--Contingent
Deferred Sales Charge" in the Prospectus). The Distributor of the shares of the
Fund has informed the Fund that it received approximately $1,305,000, $575,000
and $106,991 in contingent deferred sales charges for the fiscal years ended
October 31, 1993, 1994 and 1995, respectively.
At their meeting held on October 30, 1992, the Directors of the Fund,
including all of the Directors 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 Directors"), 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 they had been before the amendment, and that the
Distributor in turn is authorized to make payments to DWR, its affiliates or
other selected broker-dealers (or direct that the Fund pay such entities
directly). The Distributor is also authorized to retain part of such fee as
compensation for its own distribution-related expenses. At their meeting held on
April 28, 1993, the Directors, including a majority of the Independent 12b-1
Directors, also approved certain technical amendments to the Plan in connection
with amendments adopted by the National Association of Securities Dealers, Inc.
to its Rules of Fair Practice. At their meeting held on October 26, 1995, the
Directors of the Fund, including all of the Independent 12b-1 Directors,
approved an amendment to the Plan to permit payments to be made under the Plan
with respect to certain distribution expenses incurred in connection with the
distribution of shares, including personal services to shareholders with respect
to holdings of such shares, of an investment company whose assets are acquired
by the Fund in a tax-free reorganization.
The Distributor has informed the Fund that a portion of the fees payable by
the Fund each year pursuant to the Plan equal to 0.25% of the Fund's average
daily net assets is characterized as a "service fee" under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (of which the
Distributor is a member). Such portion of the fee is a payment made for personal
service and/or the maintenance of shareholder accounts. The remaining portion of
the Plan fees payable by the Fund is characterized as an "asset-based sales
charge" as defined in the aforementioned Rules of Fair Practice.
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<PAGE>
Pursuant to the Plan and as required by Rule 12b-1, the Directors receive
and review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended by the Distributor under the
Plan and the purpose for which such expenditures were made. The Fund accrued
amounts payable to the Distributor under the Plan, during the fiscal year ended
October 31, 1995, of $977,657. This amount is equal to payments required to be
paid monthly by the Fund which were computed at the annual rate of 0.75% of the
average daily net assets. This 12b-1 fee is treated by the Fund as an expense in
the year it is accrued.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method shares of the Fund are
sold without a sales load being deducted at the time of purchase, so that the
full amount of an investor's purchase payment will be invested in shares without
any deduction for sales charges. Shares of the Fund may be subject to a
contingent deferred sales charge, payable to the Distributor, if redeemed during
the three 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 3% of the amount sold and an annual
residual commission of up to 0.25 of 1% of the current value of the amount sold.
The gross sales credit is a charge which reflects commissions paid by DWR to its
account executives and DWR's Fund associated distribution-related expenses,
including sales compensation, and overhead and other branch office distribution-
related expenses including: (a) the expenses of operating DWR's branch offices
in connection with the sale of Fund shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs of
client sales seminars; (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares; and (d) other expenses relating to branch
promotion of Fund share sales. The distribution fee that the Distributor
receives from the Fund under the Plan, in effect, offsets distribution expenses
incurred under the Plan on behalf of the Fund and its 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 $977,657 accrued under the Plan for the fiscal
year ended October 31, 1995 to the Distributor. The Distributor and DWR estimate
that they have spent, pursuant to the Plan, $21,727,061 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) 6.37% ($1,383,330) -- advertising and
promotional expenses; (ii) 0.68% ($147,260) -- printing of prospectuses for
distribution to other than current shareholders; and (iii) 92.95% ($20,196,471)
- -- other expenses, including the gross sales credit and the carrying charge, of
which 7.77% ($1,570,579) represents carrying charges, 36.08% ($7,286,449)
represents commission credits to DWR branch offices for payments of commissions
to account executives and 56.15% ($11,339,443) 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. DWR has advised the Fund that such excess
amount, including the carrying charge designed to approximate the opportunity
costs incurred by DWR which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's shares, totalled $6,822,993 as of October 31, 1995. Because there is no
requirement under the Plan that the Distributor be reimbursed for all its
expenses or any requirement that the Plan be continued from year to year, this
excess amount does not constitute a liability of the Fund. Although there is no
legal obligation for the Fund to pay 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
30
<PAGE>
Directors 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 Director of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or indirect
financial interest in the operation of the Plan except to the extent that the
Distributor, InterCapital, DWR or certain of their employees may be deemed to
have such an interest as a result of benefits derived from the successful
operation of the Plan or as a result of receiving a portion of the amounts
expended thereunder by the Fund.
Under its terms, the Plan had an initial term ending April 30, 1991, and
provided that it will remain in effect from year to year thereafter, provided
such continuance is approved annually by a vote of the Directors, including a
majority of the Independent 12b-1 Directors. The Plan was initially submitted to
and approved by the Directors of the Fund, including a majority of the
Independent 12b-1 Directors, at their meeting held on April 29, 1992 and
subsequently by the shareholders at the Special Meeting of Shareholders held on
June 24, 1992. Continuation of the Plan was most recently approved by the
Directors, including a majority of the Independent 12b-1 Directors, on April 20,
1995 at a meeting called for the purpose of voting on such Plan. At that
meeting, the Directors and the Independent 12b-1 Directors, after evaluating all
the information they deemed necessary to make an informed determination of
whether or not the Plan should be continued, approved the continuation of the
Plan until April 30, 1996. In making their determination to continue the Plan,
the Directors considered: (1) the Fund's experience under the Plan and whether
such experience indicates that the Plan is operating as anticipated; (2) the
benefits the Fund had obtained, was obtaining and would be likely to obtain
under the Plan; and (3) what services had been provided and were continuing to
be provided under the Plan to the Fund and its shareholders. Based upon their
review, the Directors of the Fund, including each of the Independent 12b-1
Directors, 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 Directors' quarterly review of the
Plan, they will consider its continued appropriateness and the level of
compensation provided therein.
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
Director 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
Directors 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 Directors shall be committed to the discretion of the
Independent Directors.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
As stated in the Prospectus, short-term securities with remaining maturities
of sixty days or less at the time of purchase are valued at amortized cost,
unless the Directors determine such does not reflect the securities' market
value, in which case these securities will be valued at their fair value as
determined by the Directors. Other short-term debt securities will be valued on
a mark-to-market basis until such time as they reach a remaining maturity of
sixty days, whereupon they will be valued at amortized cost using their value on
the 61st day unless the Directors determine such does not reflect the
securities' market value, in which case these securities will be valued at their
fair market value as determined by the Directors. 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 Directors.
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes prior
to 4:00 p.m., at such earlier time) on each day that the New York Stock Exchange
is open and on each other day in which there is a sufficient degree of trading
in the Fund's investments to affect the net asset value, except that the net
asset value may not be
31
<PAGE>
computed on a day on which no orders to purchase, or tenders to sell or redeem,
Fund shares have been received, by taking the value of all assets of the Fund,
subtracting its liabilities, dividing by the number of shares outstanding and
adjusting to the nearest cent. The New York Stock Exchange currently observes
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Board of Directors has adopted a procedure to value over-the-counter
options purchased or sold by the Fund whereby the Investment Manager will secure
daily bid and asked quotations from the counterparty to the option, and value
the option at the mean of such bid and asked quotations.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund and maintained by the Fund's
Transfer Agent, Dean Witter Trust Company (the "Transfer Agent"). This is an
open account in which shares owned by the investor are credited by the Transfer
Agent in lieu of issuance of a share certificate. If a share certificate is
desired, it must be requested in writing for each transaction. Certificates are
issued only for full shares and may be redeposited in the account at any time.
There is no charge to the investor for issuance of a certificate. Whenever a
shareholder instituted transaction takes place in the Shareholder Investment
Account, the shareholder will be mailed a confirmation of the transaction from
the Fund or from DWR or other selected broker-dealer.
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of the
Fund is made upon the condition that the Transfer Agent is thereby automatically
appointed as agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and distributions
will be paid, at the net asset value per share, in shares of the Fund (or in
cash if the shareholder so requests) on the monthly payment date, which will be
no later than the last business day of the month for which the dividend or
distribution is payable. Processing of dividend checks begins immediately
following the monthly payment date. Shareholders who have requested to receive
dividends in cash will normally receive their monthly dividend check during the
first ten days of the following month. 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 permissable,
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 Global Short-Term Income Fund Inc. Such investment will be made at the
net asset value per share of the selected Dean Witter Fund as of the close of
business on the Fund's payment date, 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
32
<PAGE>
the net asset value calculated the same business day the transfer of funds is
effected. For further information or to subscribe to EasyInvest, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution at the net
asset value next determined after receipt by the Transfer Agent, without the
imposition of a contingent deferred sales charge upon redemption, by returning
the check or the proceeds to the Transfer Agent within 30 days after the payment
date. If the shareholder returns the proceeds of a dividend or distribution,
such funds must be accompanied by a signed statement indicating that the
proceeds constitute a dividend or distribution to be invested. Such investment
will be made at the net asset value per share next determined after receipt of
the check or proceeds by the Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon the
then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any 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" in the Prospectus). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed from
his or her account so that the proceeds (net of any applicable contingent
deferred sales charge) to the shareholder will be the designated monthly or
quarterly amount.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be mailed
by the Transfer Agent 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 a commercial bank or trust company (not a savings bank), or by a
member of a national securities exchange. A shareholder may, at any time, change
the amount and interval of withdrawal payments through his or her Account
Executive or by written notification to the Transfer Agent. In addition, the
party and/or the address to which checks are mailed may be changed by written
notification to the Transfer Agent, with signature guarantees required in the
manner described above. The shareholder may also terminate the Withdrawal Plan
at any time by written notice to the Transfer Agent. In the event of such
termination, the account will be continued as a regular shareholder investment
account. The shareholder may also redeem all or part of the shares held in the
Withdrawal Plan account (see "Redemptions and Repurchases" in the Prospectus) at
any time.
33
<PAGE>
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 Global
Short-Term Income Fund Inc., 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 Bond Fund, Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust,
Dean Witter Balanced Growth Fund, Dean Witter Balanced Income Fund, Dean Witter
Intermediate Term U.S. Treasury Trust and for shares of five Dean Witter Funds
which are money market funds (the foregoing eleven non-CDSC funds are
hereinafter referred to as the "Exchange Funds"). Exchanges may be made after
the shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment. An exchange
will be treated for federal income tax purposes the same as a repurchase or
redemption of shares, on which the shareholder may realize a gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the captions "Exchange
Privilege" and "Contingent Deferred Sales Charge", a contingent deferred sales
charge ("CDSC") may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of the Fund or any
other CDSC fund are exchanged for shares of an Exchange Fund, 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 the Exchange Fund shares were acquired) the holding
period or "year since purchase payment made" is frozen. When shares are redeemed
out of an Exchange Fund, they will be subject to a CDSC which would be based
upon the period of time the shareholder held shares in a CDSC fund. However, in
the case of shares exchanged for shares of an Exchange Fund, upon a redemption
of shares which results in a CDSC being imposed, a credit (not to exceed the
amount of the CDSC) will be given in an amount equal to the Exchange Fund 12b-1
distribution fees which are attributable to those shares. Shareholders acquiring
shares of an Exchange Fund pursuant to this exchange privilege may exchange
those shares back into a CDSC fund from the Exchange Fund, with no CDSC being
imposed on such exchange. The holding period previously frozen when shares were
first exchanged for shares of the Exchange Fund resumes on the date shares of a
CDSC fund are reacquired. Thus, a CDSC is imposed only upon an ultimate
redemption, based upon the time (calculated as described above) the shareholder
was invested in a CDSC fund.
If shares of the Fund are exchanged for shares of another CDSC fund having a
CDSC which is imposed at a higher rate or is subject to a different time
schedule than the CDSC imposed upon a redemption of a share of the Fund, the
higher CDSC will be imposed upon redemption of shares of the fund exchanged
into. Likewise, if shares of another CDSC fund are exchanged for shares of the
Fund, upon redemption of shares of the Fund, a CDSC will be imposed in
accordance with the CDSC schedule applicable to the fund with the higher CDSC.
Moreover, if shares of the Fund are exchanged for shares of
34
<PAGE>
another CDSC fund with a different CDSC schedule imposing a higher CDSC and are
subsequently exchanged again for shares of the Fund, the higher CDSC will still
apply upon ultimate redemption of shares of the 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 (of the Fund or another Dean Witter Fund) 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 Strategist Fund acquired prior to November 8, 1989, shares
of Dean Witter American Value Fund acquired prior to April 30, 1984, and shares
of Dean Witter Dividend Growth Securities Inc. and Dean Witter Natural Resource
Development Securities Inc. acquired prior to July 2, 1984, are also considered
Free Shares and will be the first Free Shares to be exchanged. After an
exchange, all dividends earned on shares in 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 a block in the same Exchange
Privilege account, the shares of that block that are subject to a lower CDSC
rate will be exchanged prior to the shares of that block that are subject to a
higher CDSC rate). Shares equal to any appreciation in the value of non-Free
shares exchanged will be treated as Free Shares, and the amount of the purchase
payments for the non-Free Shares of the fund exchanged into will be equal to the
lesser of (a) the purchase payments for, or (b) the current net asset value of,
the exchanged non-Free Shares. If an exchange between funds would result in
exchange of only part of a particular block of non-Free Shares, then shares
equal to any appreciation in the value of the block (up to the amount of the
exchange) will be treated as Free Shares and exchanged first, and the purchase
payment for that block will be allocated on a pro rata basis between the
non-Free Shares of that block to be retained and the non-Free Shares to be
exchanged. The prorated amount of such purchase payment attributable to the
retained non-Free Shares will remain as the purchase payment for such shares,
and the amount of purchase payment for the exchanged non-Free Shares will be
equal to the lesser of (a) the prorated amount of the purchase payment for, or
(b) the current net asset value of, those exchanged non-Free Shares. Based upon
the procedures described in the Prospectus under the caption "Contingent
Deferred Sales Charge", any applicable CDSC will be imposed upon the ultimate
redemption of shares of any fund, regardless of the number of exchanges since
those shares were originally purchased.
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.
35
<PAGE>
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 New York Municipal Money Market
Trust, Dean Witter Tax-Free Daily Income Trust and Dean Witter California
Tax-Free Daily Income Trust, although those funds may, at their discretion,
accept initial investments of as low as $1,000. The minimum initial investment
is $10,000 for Dean Witter Short-Term U.S. Treasury Trust, although that fund,
in its discretion, may accept initial purchases of as low as $5,000. The minimum
initial investment for all other Dean Witter Funds for which the Exchange
Privilege is available is $1,000.) Upon exchange into an Exchange Fund, the
shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of money market funds, including the check writing feature, will
not be available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days for termination or material
revision), provided that six months' prior written notice of termination will be
given to the shareholders who hold shares of an Exchange Fund pursuant to the
Exchange Privilege, and provided further that the Exchange Privilege may be
terminated or materially revised without notice at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, (d) during any other period when the Securities and
Exchange Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist) or (e) if the Fund would be
unable to invest amounts effectively in accordance with its investment
objective(s), policies and restrictions.
The Exchange Privilege may be terminated or revised at any time by the Fund
and/or any of such Dean Witter Funds for which shares of the Fund may be
exchanged, upon such notice as may be required by applicable regulatory agencies
(presently sixty days' prior written notice for termination or material
revision), provided that six months' prior notice of termination will be given
to shareholders who hold shares of Exchange Funds pursuant to the Exchange
Privilege, and provided further that the Exchange Privilege may be terminated or
materially revised without notice under certain unusual circumstances.
Shareholders maintaining margin accounts with DWR or another Selected Broker-
Dealer are referred to their account executive regarding restrictions on
exchange of shares of the Fund pledged in the margin account.
The current prospectus for each of the Dean Witter Funds describes its
investment objective(s) and policies. Shareholders should obtain a copy and read
it carefully before investing. Exchange Funds are subject to the minimum
investment requirement and any other conditions imposed by each Fund. In the
case of any shareholder holding a share certificate or certificates, no
exchanges may be made until all applicable share certificates have been received
by the Transfer Agent and deposited in the shareholder's account. An exchange
will be treated for federal income tax purposes the same as a repurchase or
redemption of shares on which the shareholder will 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.
36
<PAGE>
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. As stated in the Prospectus, shares of the Fund can be redeemed
for cash at any time at the net asset value per share next determined; however,
such redemption proceeds may be reduced by the amount of any applicable
contingent deferred sales charges (see below). If shares are held in a
shareholder's account without a share certificate, a written request for
redemption to the Fund's Transfer Agent at P.O. Box 983, Jersey City, NJ 07303
is required. If certificates are held by the shareholder the shares may be
redeemed by surrendering the certificates with a written request for redemption.
The share certificate, or an accompanying stock power, and the request for
redemption, must be signed by the shareholder or shareholders exactly as the
shares are registered. Each request for redemption, whether or not accompanied
by a share certificate, must be sent to the Fund's Transfer Agent, which will
redeem the shares at their net asset value next computed (see "Purchase of Fund
Shares" in the Prospectus) after it receives the request, and certificate, if
any, in good order. Any redemption request received after such computation will
be redeemed at the next determined net asset value. The term "good order" means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent. If
redemption is requested by a corporation, partnership, trust or fiduciary, the
Transfer Agent may require that written evidence of authority acceptable to the
Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, 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 three years. However, no CDSC will
be imposed to the extent that the net asset value of the shares redeemed does
not exceed: (a) the current net asset value of shares purchased more than three
years prior to the redemption, plus (b) the current net asset value of shares
purchased through reinvestment of dividends or distributions of the Fund or
another Dean Witter Fund (see "Shareholder Services--Targeted Dividends"), plus
(c) the current net asset value of shares acquired in exchange for (i) shares of
Dean Witter front-end sales charge funds, or (ii) shares of other Dean Witter
Funds for which shares of front-end sales charge funds have been exchanged (see
"Shareholder Services--Exchange Privilege"), plus (d) increases in the net asset
value of the investor's shares above the total amount of payments for the
purchase of Fund shares made during the preceding three years. The CDSC will be
paid to the Distributor.
In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last three years will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will be
the amount which represents the net asset value of the investor's shares
purchased more than three years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions and/or shares acquired in
exchange for shares of Dean Witter front-end sales charge funds, or for shares
of other Dean
37
<PAGE>
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 three years prior to the redemption and/or shares purchased through
reinvestment of dividends or distributions and/or shares acquired in the
above-described exchanges will be subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of 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 AS A
PURCHASE PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
---------------------------- ---------------------
<S> <C>
First................................................................... 3.0%
Second.................................................................. 2.0%
Third................................................................... 1.0%
Fourth and thereafter................................................... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable three 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 three
years and amounts equal to the current value of shares purchased more than three
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
three years of purchase which are in excess of these amounts and which
redemptions are not (a) requested within one year of death or initial
determination of disability of a shareholder, or (b) made pursuant to certain
taxable distributions from retirement plans or retirement accounts, as described
in the Prospectus.
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. As discussed in the Prospectus,
payment for shares presented for repurchase or redemption will be made by check
within seven days after receipt by the Transfer Agent of the certificate and/or
written request in "good order". Such payment may be postponed or the right of
redemption suspended at times (a) when the New York Stock Exchange is closed for
other than customary weekends and holidays, (b) when trading on that Exchange is
restricted, (c) when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or (d) during any other period when the Securities and Exchange
Commission by order so permits; provided that applicable rules and regulations
of the Securities and Exchange Commission shall govern as to whether the
conditions prescribed in (b) or (c) exist. If the shares to be redeemed have
recently been purchased by check (including a certified or bank cashier's
check), payment of redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of investment of the proceeds 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
38
<PAGE>
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 30 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, if the Fund makes an election, the shareholders would include
such undistributed gains in their income and shareholders will be able to claim
their share of the tax paid by the Fund as a credit against their individual
federal income tax.
Gains or losses on sales of securities by the Fund will generally be
long-term capital gains or losses if the securities have been held by the Fund
for more than twelve months. Gains or losses on the sale of securities held for
twelve months or less will be generally short-term gains or losses.
The Fund 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 in which it
distributes such income and capital gains to its shareholders. In addition, the
Fund intends to distribute to its shareholders each calendar year a sufficient
amount of ordinary income and capital gains to avoid the imposition of a 4%
excise tax.
At October 31, 1995, the Fund had net capital loss carryovers of
approximately $8,335,000, of which $85 will be available through October 31,
1999, $1,231 will be available through October 31, 2000, $1,004 will be
available through October 31, 2001, $4,853 will be available through October 31,
2002 and 1,662 will be available through October 31, 2003 to offset future
gains.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or the distribution of realized net long-term capital gains, such
payment or distribution would be in part a return of the shareholder's
investment to the extent of such reduction below the shareholder's cost, but
nonetheless would be fully taxable. Therefore, an investor should consider the
tax implications of purchasing Fund shares immediately prior to a distribution
record date.
Any loss realized by shareholders upon a redemption of shares within six
months of the date of their purchase will be treated as a long-term capital loss
to the extent of any distributions of net long-term capital gains during the
six-month period.
Dividends, interest and capital gains received by the Fund may give rise to
withhholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States
39
<PAGE>
may reduce or eliminate such taxes. Investors may be entitled to claim United
States foreign tax credits or deductions with respect to such taxes, subject to
certain provisions and limitations contained in the Code. If more than 50% of
the Fund's total assets at the close of its fiscal year consist of securities of
foreign corporations, the Fund would be eligible and would determine whether or
not to file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their respective pro rata
portions of such withholding taxes in their United States income tax returns as
gross income, treat such respective pro rata portions as taxes paid by them, and
deduct such respective pro rata portions in computing their taxable income or,
alternatively, use them as foreign tax credits against their United States
income taxes. The Fund will report annually to its shareholders the amount per
share of such withholding.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS. In general, gains
from foreign currencies and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in stock,
securities or foreign currencies are currently considered to be qualifying
income for purposes of determining whether the Fund qualifies as a regulated
investment company. It is currently unclear, however, who will be treated as the
issuer of certain foreign currency instruments or how foreign currency options,
futures, or forward foreign currency contracts will be valued for purposes of
the regulated investment company diversification requirements applicable to the
Fund. 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 or losses derived with respect to foreign fixed-income
securities are also subject to Section 988 treatment. In general, therefore,
Code Section 988 gains or losses will increase or decrease the amount of the
Fund's investment company taxable income available to be distributed to
shareholders as ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Additionally, if Code Section 988 losses exceed
other investment company taxable income during a taxable year, the Fund would
not be able to make any ordinary dividend distributions.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature. Yield
is calculated for any 30-day period as follows: the amount of interest and/or
dividend income for each security in the Fund's portfolio is determined in
accordance with regulatory requirements; the total for the entire portfolio
constitutes the Fund's gross income for the period. Expenses accrued during the
period are subtracted to arrive at "net investment income". The resulting amount
is divided by the product of the net asset value per share on the last day of
the period multiplied by the average number of Fund shares outstanding during
the period that were entitled to dividends. This amount is added to 1 and raised
to the sixth power. 1 is then subtracted from the result and the difference is
multiplied by 2 to arrive at the annualized yield. For the 30-day period ended
October 31, 1995, the Fund's yield, calculated pursuant to the formula described
above, was 6.02%.
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
40
<PAGE>
dividends and distributions are reinvested. The formula for computing the
average annual total return involves a percentage obtained by dividing the
ending redeemable value by the amount of the initial investment, taking a root
of the quotient (where the root is equivalent to the number of years in the
period) and subtracting 1 from the result. The average annual total return of
the Fund for the period November 1, 1990 through October 31, 1995 and the fiscal
year ended October 31, 1995 were 4.95% and 5.27%, respectively.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculations may or may not reflect the
deduction of the contingent deferred sales charge which, if reflected, would
reduce the performance quoted. For example, the average annual total return of
the Fund may be calculated in the manner described above, but without deduction
for any applicable contingent deferred sales charge. Based on this calculation,
the average annual total return for the Fund for the period November 1, 1990
through October 31, 1995 and the fiscal year ended October 31, 1995 were 4.95%
and 8.27%, 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 period November 1, 1990 through
October 31, 1995 and the fiscal year ended October 31, 1995 were 27.28% and
8.27%, 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 contingent deferred sales charge) and
multiplying by $10,000, $50,000 or $100,000, as the case may be. Investments of
$10,000, $50,000 and $100,000 in the Fund at inception would have grown to
$12,728, $63,640 and $127,280, respectively, at October 31, 1995.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
DESCRIPTION OF COMMON STOCK
- --------------------------------------------------------------------------------
The Fund is authorized to issue 500,000,000 shares of common stock of $0.01
par value. Shares of the Fund, when issued, are fully paid, non-assessable,
fully transferable and redeemable at the option of the holder. All shares are
equal as to earnings, assets and voting privileges. There are no conversion,
preemptive or other subscription rights. In the event of liquidation, each share
of common stock of the Fund is entitled to its portion of all of the Fund's
assets after all debts and expenses have been paid. Except for agreements
entered into by the Fund in its ordinary course of business within the
limitations of the Fund's fundamental investment policies (which may be modified
only by shareholder vote), the Fund will not issue any securities other than
common stock.
The shares of the Fund do not have cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors if they choose to do so, and in such
event, the holders of the remaining less than 50% of the shares voting for the
election of directors will not be able to elect any person or persons to the
Board of Directors.
The Fund's By-Laws provide that one or more of the Fund's Directors may be
removed, either with or without cause, at any time by the affirmative vote of
the Fund's shareholders holding a majority of the outstanding shares entitled to
vote for the election of Directors. A special meeting of the shareholders of the
Fund will be called by the Fund's Secretary upon the written request of
shareholders entitled to vote at least 10% of the Fund's outstanding shares. The
Fund will also comply with the provisions of Section 16(c) of the Act.
41
<PAGE>
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Chase Manhattan Bank N.A., One Chase Plaza, New York, New York 10005 is
the Custodian of the Fund's assets in the United States and around the world. As
Custodian, The Chase Manhattan Bank has contracted with various foreign banks
and depositaries to hold portfolio securities of non-U.S. issuers on behalf of
the Fund. 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 Distributor Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts, including
providing subaccounting and recordkeeping services for certain retirement
accounts; disbursing cash dividends and reinvesting dividends; processing
account registration changes; handling purchase and redemption transactions;
mailing prospectuses and reports; mailing and tabulating proxies; processing
share certificate transactions; and maintaining shareholder records and lists.
For these services Dean Witter Trust Company receives a per shareholder account
fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on 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 Directors.
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 for the year ended October 31, 1995
included in this Statement of Additional Information and incorporated by
reference in the Prospectus have been so included and incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
42
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT & CORPORATE BONDS (93.5%)
AUSTRALIA (3.2%)
GOVERNMENT OBLIGATION
Au$ 4,650 Australia Treasury Bill.................. 0.00 % 02/14/96 $ 3,458,372
---------------
GERMANY (5.0%)
BANKING - INTERNATIONAL
$ 5,000 Bayerische Vereinsbank................... 8.125 01/27/00 5,348,445
---------------
ITALY (11.8%)
GOVERNMENT OBLIGATIONS
ITL 7,930,000 Italy Treasury Bond+..................... 10.50 04/15/98 4,939,043
12,500,000 Italy Treasury Bond+..................... 10.50 04/01/00 7,672,170
---------------
TOTAL ITALY..................................................... 12,611,213
---------------
NEW ZEALAND (10.3%)
GOVERNMENT OBLIGATIONS
NZ$ 8,000 New Zealand Treasury Bond+............... 9.00 11/15/96 5,333,211
8,265 New Zealand Treasury Bond+............... 10.00 07/15/97 5,658,918
---------------
TOTAL NEW ZEALAND............................................... 10,992,129
---------------
SPAIN (13.2%)
GOVERNMENT OBLIGATIONS
ESP 390,000 Spain Treasury Bond+..................... 11.45 08/30/98 3,289,815
1,325,000 Spain Treasury Bond+..................... 10.25 11/30/98 10,865,109
---------------
TOTAL SPAIN..................................................... 14,154,924
---------------
SWEDEN (3.6%)
GOVERNMENT OBLIGATION
SEK 24,700 Sweden Treasury Bond..................... 10.75 01/23/97 3,806,480
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES (46.4%)
BANKING (24.2%)
$ 5,000 Bank One................................. 7.80 % 12/30/96 $ 5,100,850
5,000 Morgan (J.P.) & Co., Inc................. 7.625 11/15/98 5,208,400
7,000 National Bank of Detroit................. 6.85 05/11/98 7,107,940
6,000 Norwest Corp............................. 5.75 03/15/98 5,954,880
2,500 Society Bank - Cleveland................. 7.125 04/15/97 2,534,600
---------------
25,906,670
---------------
U.S GOVERNMENT OBLIGATIONS (22.2%)
U.S. Treasury Notes
13,000 ......................................... 6.125 05/15/98 13,130,000
10,000 ......................................... 7.50 10/31/99 10,595,313
---------------
23,725,313
---------------
TOTAL UNITED STATES............................................. 49,631,983
---------------
TOTAL GOVERNMENT & CORPORATE BONDS
(IDENTIFIED COST $98,398,091)................................... 100,003,546
---------------
SHORT-TERM INVESTMENTS (4.7%)
TIME DEPOSITS (a)
ITALY (2.7%)
BANKING - INTERNATIONAL
ITL 4,648,740 Bank of New York......................... 10.375 11/03/95 2,923,736
---------------
SPAIN (1.4%)
BANKING - INTERNATIONAL
ESP 184,652 Bankers Trust............................ 9.125 11/03/95 1,514,161
---------------
TOTAL TIME DEPOSITS............................................. 4,437,897
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED STATES (b) (0.6%)
U.S. GOVERNMENT AGENCY
$ 615 Student Loan Marketing Assoc............. 5.69 % 11/01/95 $ 615,000
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $5,011,129).................................... 5,052,897
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST $103,409,220) (C)........ 98.2% 105,056,443
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES............................... 1.8 1,882,393
----- ------------
NET ASSETS................................ 100.0% $106,938,836
----- ------------
----- ------------
<FN>
- ---------------------
+ Some or all of these securities are segregated in connection with open
forward foreign currency contracts.
(a) Subject to withdrawal restrictions until maturity.
(b) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(c) The aggregate cost for federal income tax purposes is $103,409,220; the
aggregate gross unrealized appreciation is $1,873,213 and the aggregate
gross unrealized depreciation is $225,990, resulting in net unrealized
appreciation of $1,647,223.
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 1995:
<TABLE>
<CAPTION>
CONTRACTS IN EXCHANGE DELIVERY UNREALIZED
TO DELIVER FOR DATE DEPRECIATION
- -------------------------------------------------------------------
<S> <C> <C> <C>
DEM 7,092,960 $4,812,702 05/29/96 $ (216,459)
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
(1) Financial statements and schedules, included
in Prospectus (Part A): PAGE IN
PROSPECTUS
----------
Financial highlights for the years ended
October 31, 1991, 1992, 1993, 1994 and 1995....... 4
Financial statements included in the Statement of
Additional Information (Part B): PAGE IN
SAI
---
Portfolio of Investments at October 31, 1995...... 43
Statement of assets and liabilities at
October 31, 1995.................................. 46
Statement of operations for the year ended
October 31, 1995.................................. 47
Statement of changes in net assets for the
years ended October 31, 1994 and 1995............. 48
Notes to Financial Statements..................... 49
Financial highlights for the years ended
October 31, 1991, 1992, 1993, 1994 and 1995....... 55
(3) Financial statements included in Part C:
None
(b) EXHIBITS
--------
1. -- Articles of Incorporation*
2. -- Amended and Restated By-Laws
6. -- Form of Selected Dealers Agreement
8. -- Form of Custody Agreement*
9. -- Form of Services Agreement between InterCapital and
Dean Witter Services Company Inc.
<PAGE>
11. -- Consent of Independent Accountants
15. -- Amended and Restated Plan of Distribution Pursuant to
Rule 12b-1
16. -- Schedules for Computation of Performance Quotations
27. -- Financial Data Schedule
-------------
* Previously filed; re-filed via EDGAR with this Amendment to the
Registration Statement. All other exhibits were previously filed
and are hereby incorporated by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AT DECEMBER 31, 1995
-------------- -------------------------
Shares of Common Stock 8,185
Item 27. INDEMNIFICATION
Reference is made to Section 3.15 of the Registrant's By-Laws and Section
2-418 of the Maryland General Corporation Law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, 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 director, 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 director, 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.
2
<PAGE>
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
Directors, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Director, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment adviser. The following information is given regarding
officers of Dean Witter InterCapital Inc. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. The principal address of the Dean
Witter Funds is Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(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
3
<PAGE>
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
OPEN-END INVESTMENT COMPANIES:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Strategist Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Information 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
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
4
<PAGE>
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Global Asset Allocation Fund
(51) Dean Witter Balanced Growth Fund
(52) Dean Witter Balanced Income Fund
(53) Dean Witter Hawaii Municipal Trust
(54) Dean Witter Capital Appreciation Fund
(55) Dean Witter Intermediate Term U.S. Treasury Trust
The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee, President
and Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co. ("DWDC"); Director and/or officer
of various DWDC subsidiaries.
5
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
David A. Hughey Executive Vice President and Chief Administrative
Executive Vice Officer of DWSC, Distributors and DWTC; Director
President and Chief of DWTC; Vice President of the Dean Witter Funds
Administrative Officer and the TCW/DW Funds.
Edmund C. Puckhaber Director of DWTC; Vice President of the Dean
Executive Vice Witter Funds.
President
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone
Senior Vice President Senior Vice President of DWSC, Distributors
and DWTC; Vice President of the Dean Witter Funds
and the TCW/DW Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Joseph McAlinden
Senior Vice President Vice President of the Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira Ross
Senior Vice President Vice President of various Dean Witter Funds.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Douglas Brown
Vice President
Thomas Chronert
Vice President
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Peter W. Gurman
Vice President
Russell Harper
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of Dean Witter Mid-Cap Growth Fund.
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Stanley Kapica
Vice President
Michael Knox Vice President of Dean Witter Convertible
Vice President Securities Trust.
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
Lou Anne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Hugh Rose
Vice President
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Marianne Zalys
Vice President
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Information Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
11
<PAGE>
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Limited Term Municipal Trust
(52) Dean Witter Variable Investment Series
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
POSITIONS AND
OFFICE WITH
NAME DISTRIBUTORS
- ---- ------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
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 stockholders,
upon request and without charge.
fr\glo\partc.95
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 29th day of January, 1996.
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
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. 6 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,
Director and Chairman
By /s/ Charles A. Fiumefreddo 01/29/96
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 01/29/96
-----------------------------
Thomas F. Caloia
(3) Majority of the Directors
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 01/29/96
-----------------------------
Sheldon Curtis
Attorney-in-Fact
Jack F. Bennett Manuel H. Johnson
Michael Bozic Paul Kolton
Edwin J.Garn Michael E. Nugent
John R. Haire John L. Schroeder
By /s/ David M. Butowsky 01/29/96
-----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
1. -- Articles of Incorporation*
2. -- Amended and Restated By-Laws
6. -- Form of Selected Dealers Agreement
8. -- Form of Custody Agreement*
9. -- Form of Services Agreement between InterCapital and
Dean Witter Services Company Inc.
11. -- Consent of Independent Accountants
15. -- Amended and Restated Plan of Distribution Pursuant
to Rule 12b-1
16. -- Schedules for Computation of Performance Quotations
27. -- Financial Data Schedule
- ------------
* Previously filed; re-filed via EDGAR with this Amendment to the
Registration Statement. All other exhibits were previously filed
and are hereby incorporated by reference.
<PAGE>
ARTICLES OF INCORPORATION
OF
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
ARTICLE I
The undersigned, Lawrence Lafer, whose post office address is Two
World Trade Center, New York, New York 10048, and who is of full legal age, does
hereby declare that he is an incorporator intending to form a corporation under
and by virtue of the Maryland General Corporation Law authorizing the formation
of corporations.
ARTICLE II
The name of the Corporation is Dean Witter Global Short-Term Income
Fund Inc.
ARTICLE III
PURPOSES AND POWERS
The purposes for which the Corporation is formed, and its objects,
rights, powers and privileges are:
(1) To conduct and carry on the business of an investment company of
the open-end management type;
(2) To subscribe for, or otherwise acquire, purchase, pledge, sell,
assign, transfer, exchange, distribute or otherwise dispose of, and generally
deal in and hold all forms of securities and other investments, including, but
not by way of limitation, stocks (preferred and common), notes, bonds,
debentures, scrip, warrants, participation certificates, foreign exchange
contracts, futures, options of all types on securities and futures, mortgages,
commercial paper, choses in action, evidences of indebtedness and other
obligations of every kind and description, precious metals and contracts and
rights to
<PAGE>
acquire or dispose of precious metals, and in connection therewith to hold part
or all of its assets in cash or cash equivalents or money market instruments;
(3) To issue and sell shares of its own capital stock in such amount
and on such terms and conditions, for such purposes and for such amount or kind
of consideration now or hereafter permitted by the Maryland General Corporation
Law and by these Articles of Incorporation, as its Board of Directors may
determine;
(4) To redeem, purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue, retire or cancel (all without the vote or consent of
the stockholders of the Corporation) shares of its capital stock, in any manner
and to the extent now or hereafter permitted by the laws of Maryland and the
Articles of Incorporation;
(5) To borrow or raise money for any purpose of the Corporation and
from time to time draw, make, accept, endorse, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds, debentures and other
negotiable and nonnegotiable instruments and evidences of indebtedness, and to
pledge, hypothecate and borrow upon the credit of the assets of the Corporation;
(6) To take such action as shall be desirable and necessary to cause
its shares to be licensed or registered for sale under the laws of the United
States and in any state, county, city or other municipality of the United
States, the territories thereof, the District of Columbia or in any foreign
country and in any town, city or subdivision thereof;
(7) To make contracts and generally to do any and all acts and things
necessary or desirable in furtherance of any of the corporate purposes or
designed to protect, preserve and/or enhance the value of the corporate assets,
all to the extent permitted to business corporations authorized under the laws
of the State of Maryland, as now or may in the future be authorized by said
laws;
(8) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes, objects or powers hereinbefore set forth
to the same extent and as fully as a natural person might or could do, in any
part of the world and either alone or in association or partnership with other
corporations, firms or individuals;
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<PAGE>
(9) To have all the rights, powers and privileges now or hereafter
conferred by the laws of the State of Maryland upon a corporation organized
under the Maryland General Corporation Law, or under any act amendatory thereof,
supplemental thereto or in substitution therefor;
(10) To do any and all such further acts or things and to exercise any
and all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers,
and it is hereby expressly provided that the enumeration herein of any specific
objects and powers shall not be held to limit or restrict in any way the general
powers of the Corporation, nor shall such objects and powers, except when
otherwise expressly provided, be in any way limited or restricted by reference
to, or inference from, the terms of any other clause of the Articles of
Incorporation but the objects and powers specified in each of the foregoing
clauses of this Article shall be regarded as independent objects and powers.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Prentice-Hall Corporation System, Maryland, 929
North Howard Street, Baltimore, Maryland 21201. The resident agent of the
Corporation in the State of Maryland is The Prentice-Hall Corporation System,
Maryland, a corporation of the State of Maryland, whose post-office address is
929 North Howard Street, Baltimore, Maryland 21201.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of stock which the Corporation
initially shall have authority to issue is Five Hundred Million shares of common
stock of the par value of one cent ($.01) each, to be classified as "Common
Shares", and of the aggregate par value of Five Million Dollars. Unless
otherwise prohibited by law, so long as the Corporation is registered as an
open-end investment company under the Investment Company Act of 1940, as
amended, the total number of shares which the
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<PAGE>
Corporation is authorized to issue may be increased or decreased by the Board of
Directors in accordance with the applicable provisions of the Maryland General
Corporation Law.
(2) The Corporation is authorized to issue its shares in two or more
series or two or more classes, and, subject to the requirements of the
Investment Company Act of 1940, as amended, particularly Section 18(f) thereof
and Rule 18f-2 thereunder, the different series or classes shall be established
and designated, and the variations in the relative preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption as between the different
series or classes shall be fixed and determined by the Board of Directors;
provided that the Board of Directors shall not classify or reclassify any of
such shares into any class or series of stock which is prior to any class or
series of stock then outstanding with respect to rights upon the liquidation,
dissolution or winding up of the affairs of, or upon any distribution of the
general assets of, the Corporation, except that there may be variations so fixed
and determined between different series or classes as to investment objective,
purchase price, right of redemption, special rights as to dividends and on
liquidation with respect to assets belonging to a particular series or class,
voting powers and conversion rights. All references to Common Shares in these
Articles shall be deemed to be shares of any or all series and classes as the
context may require.
The following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of any additional class or
series of Common Stock of the Corporation (unless provided otherwise by the
Board of Directors with respect to any such additional class or series at the
time of establishing and designating such additional class or series).
(a) The number of authorized Common Shares and the number of Common
Shares of each series or of each class that may be issued shall be in such
number as may be determined by the Board of Directors. The Directors may
classify or reclassify any unissued Common Shares or any Common Shares
previously issued and reacquired of any series or class into one or more series
or one or more classes that may be established and designated from time to time.
The Directors may reissue for such consideration and on such terms as they may
determine, or cancel any Common Shares of any series or any class reacquired by
the Corporation at their discretion from time to time.
-4-
<PAGE>
(b) All consideration received by the Corporation for the issue or
sale of Common Shares of a particular series or class, together with all assets
in which such consideration is invested or reinvested, all income, earnings,
profits and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series or class for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account of the
Corporation. In the event that there are any assets, income, earnings, profits
and proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular series or class, the Directors shall allocate them
among any one or more of the series or classes established and designated from
time to time in such manner and on such basis as they, in their sole discretion,
deem fair and equitable. Each such allocation by the Corporation shall be
conclusive and binding upon the stockholders of all series or classes for all
purposes. The Directors shall have full discretion, to the extent not
inconsistent with the Investment Company Act of 1940, as amended, and the
Maryland General Corporation Law to determine which items shall be treated as
income and which items shall be treated as capital; and each such determination
and allocation shall be conclusive and binding upon the stockholders.
(c) The assets belonging to each particular series or class shall be
charged with the liabilities of the Corporation in respect of that series or
class and all expenses, costs, charges and reserves attributable to that series,
and any general liabilities, expenses, costs, charges or reserves of the
Corporation which are not readily identifiable as belonging to any particular
series or class shall be allocated and charged by the Directors to and among any
one or more of the series or classes established and designated from time to
time in such manner and on such basis as the Directors in their sole discretion
deem fair and equitable. Each allocation of liabilities, expenses, costs,
charges and reserves by the Directors shall be conclusive and binding upon the
stockholders of all series or classes for all purposes.
(d) Dividends and distributions on Common Shares of a particular
series or class may be paid with such frequency as the Directors may determine,
which may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Board of Directors
may determine, to the holders of Common Shares of that series or class, from
such of the income and capital gains, accrued or realized, from the assets
belonging to that series or class, as the Directors may determine, after
providing for actual and
-5-
<PAGE>
accrued liabilities belonging to that series or class. All dividends and
distributions on Common Shares of a particular series or class shall be
distributed pro rata to the holders of that series or class in proportion to the
number of Common Shares of that series or class held by such holders at the date
and time of record established for the payment of such dividends or
distributions except that in connection with any dividend or distribution
program or procedure, the Board of Directors may determine that no dividend or
distribution shall be payable on shares as to which the stockholder's purchase
order and/or payment in proper form have not been received by the time or times
established by the Board of Directors under such program or procedure.
The Corporation intends to have each separate series qualify as a
regulated investment company under the Internal Revenue Code of 1986, or any
successor comparable statute thereto, and regulations promulgated thereunder.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books of the Corporation,
the Board of Directors shall have the power, in its sole discretion, to
distribute in any fiscal year as dividends, including dividends designated in
whole or in part as capital gains distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the respective series to qualify as
regulated investment companies and to avoid liability of such series for Federal
income tax in respect of that year. However, nothing in the foregoing shall
limit the authority of the Board of Directors to make distributions greater than
or less than the amount necessary to qualify the series as regulated investment
companies and to avoid liability of such series for such tax.
Dividends and distributions may be made in cash, property or
additional shares of the same or another class or series, or a combination
thereof, as determined by the Board of Directors or pursuant to any program that
the Board of Directors may have in effect at the time for the election by each
stockholder of the mode of the making of such dividend or distribution to that
stockholder. Any such dividend or distribution paid in shares will be paid at
the net asset value thereof as defined in section (3) below.
(e) In the event of the liquidation or dissolution of the Corporation
or of a particular class or series, the stockholders of each class or series
that has been established and designated and is being liquidated shall be
entitled to receive, as a class or series, when and as declared by the Board of
Directors, the excess of the assets belonging to that class or series over the
liabilities belonging to that class or series.
-6-
<PAGE>
The holders of shares of any particular class or series shall not be entitled
thereby to any distribution upon liquidation of any other class or series. The
assets so distributable to the stockholders of any particular class or series
shall be distributed among such stockholders in proportion to the number of
shares of that class or series held by them and recorded on the books of the
Corporation. The liquidation of any particular class or series in which there
are shares then outstanding may be authorized by vote of a majority of the Board
of Directors then in office, subject to the approval of a majority of the
outstanding securities of that class or series, as defined in the Investment
Company Act of 1940, as amended, and without the vote of the holders of any
other class or series. The liquidation or dissolution of a particular class or
series may be accomplished, in whole or in part, by the transfer of assets of
such class or series to another class or series or by the exchange of shares of
such class or series for the shares of another class or series.
(f) On each matter submitted to a vote of the stockholders, each
holder of a share shall be entitled to one vote for each share standing in his
name on the books of the Corporation, irrespective of the class or series
thereof, and all shares of all classes or series shall vote as a single class or
series ("Single Class voting"); provided, however, that (i) as to any matter
with respect to which a separate vote of any class or series is required by the
Investment Company Act of 1940, as amended, or by the Maryland General
Corporation Law, such requirement as to a separate vote by that class or series
shall apply in lieu of Single Class voting as described above; (ii) in the event
that the separate vote requirements referred to in (i) above apply with respect
to one or more classes or series, then, subject to (iii) below, the shares of
all other classes or series shall vote as a single class or series; and (iii) as
to any matter which does not affect the interest of a particular class or
series, only the holders of shares of the one or more affected classes shall be
entitled to vote.
(g) The establishment and designation of any series or class of
Common Shares shall be effective upon the adoption by a majority of the then
Directors of a resolution setting forth such establishment and designation and
the relative rights and preferences of such series or class, or as otherwise
provided in such instrument and the filing with the proper authority of the
State of Maryland of Articles Supplementary setting forth such establishment and
designation and relative rights and preferences.
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(3) The Corporation shall, upon due presentation of a share or shares
of stock for redemption, redeem such share or shares of stock at a redemption
price prescribed by the Board of Directors in accordance with applicable laws
and regulations. Redemption proceeds shall be paid exclusively out of the
assets of the series whose shares are being redeemed, and shall be paid in cash
or by check (or similar form of payment) and not in kind.
Notwithstanding the foregoing, the Corporation may postpone payment of
the redemption price and may suspend the right of the holders of shares of any
class or series to require the Corporation to redeem shares of that class or
series during any period or at any time when and to the extent permissible
under the Investment Act of 1940, as amended, or any rule or order thereunder.
The net asset value of a share of any class or series of Common Stock
of the Corporation shall be determined in accordance with applicable laws and
regulations or under the supervision of such persons and at such time or times
at as shall from time to time be prescribed by the Board of Directors.
(4) The Board of Directors may cause the Corporation to redeem at net
asset value the shares of any class from a holder (i) if such redemption is, in
the opinion, of the Board of Directors of the Corporation, desirable in order to
prevent the Corporation from being deemed a "personal holding company" within
the meaning of the Internal Revenue Code of 1986, as amended, or (ii) if such
holder has had, for a period of more than six months, shares of that class or
series having an aggregate net asset value (determined in accordance with
subsection (3)) of $100.00 or such lesser amount as may be fixed by the
Directors, provided that in the case of a redemption pursuant to clause (ii)
hereof at least sixty (60) days prior written notice of the proposed redemption
has been given to such holder by postage paid mail to his last known address.
Upon redemption of shares pursuant to this subsection, the Corporation shall
promptly cause payment of the full redemption price to be made to the holder of
shares so redeemed.
(5) The Corporation may issue, sell, redeem, repurchase and otherwise
deal in and with shares of its stock in fractional denominations and such
fractional denominations shall, for all purposes, be shares of common stock
having proportionately to the respective fractions represented thereby all the
rights of whole shares, including without limitation, the right to vote, the
right to receive dividends and distributions, and the right to participate upon
liquidation of the Corporation; provided that the issue of shares in fractional
denominations shall be limited to such transactions and be made upon such terms
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as may be fixed by or under authority of the by-laws.
(6) The Corporation shall not be obligated to issue certificates
representing shares of any class or series unless it shall receive a written
request therefor from the record holder thereof in accordance with procedures
established in the by-laws or by the Board of Directors.
ARTICLE VI
PREEMPTIVE RIGHTS
No stockholder of the Corporation of any class, whether now or
hereafter authorized, shall have any preemptive or preferential or other right
of purchase of or subscription to any shares of any class of stock, or
securities convertible into, exchangeable for or evidencing the right to
purchase stock of any class whatsoever, whether or not the stock in question be
of the same class as may be held by such stockholders, and whether now or
hereafter authorized and whether issued for cash, property, services or
otherwise, other than such, if any, as the Board of Directors in its discretion
may from time to time fix.
ARTICLE VII
NUMBER AND POWERS OF DIRECTORS
(1) The number of directors of the Corporation shall be three (3),
which number may be increased or decreased pursuant to the By-Laws of the
Corporation, but shall never be less than the minimum number permitted by the
General Laws of the State of Maryland now or hereafter in force. The names of
the directors who will serve until the first annual meeting and until their
successors are elected and qualified are as follows:
Andrew J. Melton, Jr.
Charles A. Fiumefreddo
Sheldon Curtis
(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether now
or hereafter authorized, for such consideration as the Board of Directors may
deem advisable, subject to such limitations as may be set forth in the Charter
or the by-laws of the Corporation or in the Maryland General Corporation Law.
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(3) Each Director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted by the Maryland
General Corporation Law and the by-laws of the Corporation, as such Law and by-
laws may now or in the future may be in effect, subject only to such limitations
as may be required by the Investment Company Act of 1940, as amended.
(4) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no director or
officer of the Corporation shall be personally liable to the Corporation or its
stockholders for money damages; provided, however, that nothing herein shall be
construed to protect any director or officer of the Corporation against any
liability to which such director or officer would otherwise be subject by reason
of wilful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office. No amendment, modification or
repeal of this Article SEVENTH, Section 4 shall adversely affect any right or
protection of a director or officer that exists at the time of such amendment,
modification or repeal.
(5) The Board of Directors of the Corporation may make, alter or
repeal from time to time any of the by-laws of the Corporation except any
particular by-law which is specified as not subject to alteration or repeal by
the Board of Directors.
ARTICLE VIII
STOCKHOLDER VOTE
Notwithstanding any provisions of Maryland law requiring a greater
proportion than a majority of the votes of all classes or of any class of stock
entitled to be cast, to take or authorize any action, the Corporation may take
or authorize any such action upon the concurrence of a majority of the aggregate
number of the votes entitled to be cast thereon.
ARTICLE IX
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
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ARTICLE X
AMENDMENT
The Corporation reserves the right from time to time to make any
amendment of its Articles of Incorporation now or hereafter authorized by law,
including any amendment which alters the contract rights, as expressly set forth
in its Articles, of any outstanding stock by classification, reclassification or
otherwise.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation on
this 1st day of August, 1990.
/s/ Lawrence Lafer
-----------------------------------
Lawrence Lafer
Incorporator
WITNESS:
/s/ Marilyn K. Cranney
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AMENDED AND RESTATED
(JANUARY 25, 1995)
BY-LAWS
OF
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
ARTICLE I
OFFICES
SECTION 1.1. PRINCIPAL OFFICE. The principal office of the Corporation in
the State of Maryland shall be in the City of Baltimore.
SECTION 1.2. OTHER OFFICES. In addition to its principal office in the
State of Maryland, the Corporation may have an office or offices in the City
of New York, State of New York, and at such other places as the Board of
Directors may from time to time designate or the business of the Corporation
may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 2.1. PLACE OF MEETINGS. Meetings of stockholders shall be held at
such place, within or without the State of Maryland, as may be designated
from time to time by the Board of Directors.
SECTION 2.2. ANNUAL MEETINGS. Annual or other meetings of the
stockholders, unless required by the Investment Company Act of 1940, as
amended, or the Maryland General Corporation Law shall not be required to be
held but may, in the discretion of the Directors, be held notwithstanding the
absence of a requirement under the Investment Company Act of 1940, as
amended, or the Maryland General Corporation Law to hold such a meeting.
SECTION 2.3. SPECIAL MEETINGS. Special meetings of stockholders of the
Corporation shall be held whenever called by the Board of Directors or the
President of the Corporation. Special meetings of stockholders shall also be
called by the Secretary upon the written request of the holders of shares
entitled to vote not less than ten percent (10%) of all the votes entitled to
be cast at such meeting. Such request shall state the purpose or purposes of
such meeting and the matters proposed to be acted on thereat. The Secretary
shall inform such stockholders of the reasonable estimated cost of preparing
and mailing such notice of the meeting, and upon payment to the Corporation
of such costs, the Secretary shall give notice stating the purpose or
purposes of the meeting to all entitled to a vote at such meeting. Unless
requested by stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted upon at
any special meeting of stockholders held during the preceding twelve months.
SECTION 2.4. NOTICE OF MEETINGS. Written or printed notice of every
stockholders' meeting stating the place, date and time, and in the case of a
special meeting the purpose or purposes thereof, shall be given by the
Secretary not less than ten (10) nor more than ninety (90) days before such
meeting to each stockholder entitled to vote at such meeting, either by mail
or by presenting it to him personally, or by leaving it at his residence or
usual place of business. If mailed, such notice shall be deemed to be given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
SECTION 2.5. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Charter of the Corporation, or by these By-Laws, at
all meetings of stockholders the holders of a majority of the shares issued
and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum for
the transaction of business. In the absence of
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a quorum, the stockholders present or represented by proxy and entitled to
vote thereat shall have power to adjourn the meeting from time to time (but
in no event to a date more than 120 days after the original record date)
without notice other than announcement at the meeting, until a quorum shall
be present. At any adjourned meeting at which a quorum shall be present, any
business may be transacted if the meeting had been held as originally called.
SECTION 2.6. VOTING RIGHTS, PROXIES. At each meeting of the stockholders
at which a quorum is present, each holder of stock entitled to vote thereat
shall be entitled to one vote (with fractional votes for fractional shares)
in person or by proxy, executed in writing by the stockholder or his duly
authorized attorney-in-fact, for each share of stock of the Corporation
entitled to vote so registered in his name on the books of the Corporation on
the date fixed as the record date for the determination of stockholders
entitled to vote at such meeting. In all elections of directors, each share
of stock may be voted once for each individual to be elected and for whose
election such share is entitled to be voted. No proxy shall be valid after
eleven months from its date, unless otherwise provided in the proxy. At all
meetings of stockholders, unless the voting is conducted by inspectors, all
questions relating to the qualification of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by the chairman of
the meeting.
SECTION 2.7. VOTE REQUIRED. Except as otherwise provided by law, by the
Charter of the Corporation, or by these By-Laws, at each meeting of
stockholders at which a quorum is present, all matters shall be decided by a
majority of the votes cast by the stockholders present in person or
represented by proxy and entitled to vote with respect to any such matter.
SECTION 2.8. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Directors may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of stockholders may, and on the
request of any stockholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Directors in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of shares of stock outstanding, the shares of stock represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, shall receive votes, ballots or consents, shall hear and determine
all challenges and questions in any way arising in connection with the right
to vote, shall count and tabulate all votes or consents, determine the
results, and do such other acts as may be proper to conduct the election or
vote with fairness to all stockholders. On request of the chairman of the
meeting or of any stockholder or his proxy, the Inspectors of Election shall
make a report in writing of any challenge or question or matter determined by
them and shall execute a certificate of any facts found by them.
SECTION 2.9. ACTION BY STOCKHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of stockholders may be taken without a meeting if a
consent in writing setting forth the action shall be signed by all the
stockholders entitled to vote upon the action and such consent shall be filed
with the records of the Corporation.
ARTICLE III
DIRECTORS
SECTION 3.1. NUMBER AND TERM. The Board of Directors shall consist of not
less than three (3) and not more than fifteen (15) directors, the number of
directors to be fixed from time to time within the above-specified limits by
the affirmative vote of a majority of the whole Board of Directors. At the
first annual meeting of stockholders and at each meeting thereafter called
for the purpose of electing directors, the stockholders shall elect directors
to hold office until their successors are elected and qualify. Directors need
not be stockholders of the Corporation.
SECTION 3.2. POWERS. The business of the Corporation shall be managed by
the Board of Directors which may exercise all powers of the Corporation and
do all lawful acts and things which are not by law or by the Charter of the
Corporation, or by these By-Laws, directed or required to be exercised or
done exclusively by the stockholders.
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SECTION 3.3. ORGANIZATIONAL MEETINGS. The first meeting of each newly
elected Board of Directors for the purposes of organization and the election
of officers and otherwise shall be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of
the Board of Directors, or as shall be specified in a written waiver signed
by all directors.
SECTION 3.4. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held at such time and place as shall be determined from time to time
by the Board of Directors without further notice.
SECTION 3.5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called at any time by the President and shall be called by such
President or the Secretary upon the written request of any two (2) directors.
SECTION 3.6. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Board of Directors, stating the place, date and time thereof,
shall be given not less than two (2) days before such meeting to each
director, personally, by telegram, by mail, or by leaving such notice at his
place of residence or usual place of business. If mailed, such notice shall
be deemed to be given when deposited in the United States mail, postage
prepaid, directed to the director at his address as it appears on the records
of the Corporation.
SECTION 3.7. TELEPHONE MEETINGS. Any member or members of the Board of
Directors or of any committee designated by the Board, may participate in a
meeting of the Board, or any such committee, as the case may be, by means of
a conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
Participation in a meeting by these means constitutes presence in person at
the meeting. This Section 3.7 shall not be applicable to meetings held for
the purpose of voting in respect of approval of contracts or agreements
whereby a person undertakes to serve or act as investment adviser of, or
principal underwriter for, the Corporation, or in respect of other matters as
to which the Investment Company Act of 1940 requires a vote cast in person.
SECTION 3.8. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings
of the Board of Directors, a majority of the whole Board shall be requisite
to and shall constitute a quorum for the transaction of business. If a quorum
is present, the affirmative vote of a majority of the directors present shall
be the act of the Board of Directors, unless the concurrence of a greater
proportion is expressly required for such action by law, the Charter of the
Corporation or these By-Laws. If at any meeting of the Board there be less
than a quorum present, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting
until a quorum shall have been obtained.
SECTION 3.9. REMOVAL. Any one or more of the directors may be removed,
either with or without cause, at any time, by the affirmative vote of the
stockholders holding a majority of the outstanding shares entitled to vote
for the election of directors. (For purposes of determining the circumstances
and procedures under which such removal of directors may take place, the
provisions of Section 16(c) of the Investment Company Act of 1940 shall be
applicable to the same extent as if the Corporation were subject to the
provisions of that Section.) The successor or successors of any director or
directors so removed may be elected by the stockholders entitled to vote
thereon at the same meeting to fill any resulting vacancies for the unexpired
term of removed directors. Except as provided by law, pending, or in the
absence of, such an election, the successor or successors of any director or
directors so removed may be chosen by the Board of Directors.
SECTION 3.10. VACANCIES. Except as otherwise provided by law, any vacancy
occurring in the Board of Directors and newly created directorships resulting
from an increase in the authorized number of directors may be filled by the
vote of a majority of the directors then in office or, if only one director
shall then be in office, by such director. A director elected by the Board of
Directors to fill a vacancy shall be elected to hold office until the next
annual meeting of stockholders or until his successor is elected and
qualifies.
SECTION 3.11. ACTION BY DIRECTORS WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required
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or permitted to be taken at any meeting of the Board of Directors may be
taken without a meeting if a consent in writing setting forth the action
shall be signed by all of the directors entitled to vote upon the action and
such written consent is filed with the minutes of proceedings of the Board of
Directors.
SECTION 3.12. EXPENSES AND FEES. Each director may be allowed expenses, if
any, for attendance at each regular or special meeting of the Board of
Directors and shall receive for services rendered as a director of the
Corporation such compensation as may be fixed by the Board of Directors.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 3.13. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other
papers shall be executed in the name and on behalf of the Corporation and all
checks, notes, drafts and other obligations for the payment of money by the
Corporation shall be signed, and all transfer of securities standing in the
name of the Corporation shall be executed, by the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Corporation as shall be designated for that purpose by vote of the Board of
Directors; notwithstanding the above, nothing in this Section 3.13 shall be
deemed to preclude the electronic authorization, by designated persons, of
the Corporation's Custodian (as described herein in Section 10.1) to transfer
assets of the Corporation, as provided for herein in Section 10.1.
SECTION 3.14. CONTRACTS. Except as otherwise provided by law or by the
Charter of the Corporation, no contract or transaction between the
Corporation and any partnership or corporation, and no act of the
Corporation, shall in any way be affected or invalidated by the fact that any
officer or director of the Corporation is pecuniarily or otherwise interested
therein or is a member, officer or director of such interest shall be known
to the Board of Directors of the Corporation. Specifically, but without
limitation of the foregoing, the Corporation may enter into one or more
contracts appointing Dean Witter Reynolds Inc. investment manager of the
Corporation, and may otherwise do business with Dean Witter Reynolds Inc.,
notwithstanding the fact that one or more of the directors of the Corporation
and some or all of its officers are, have been or may become directors,
officers, members, employees, or stockholders of Dean Witter Reynolds Inc.;
and in the absence of fraud, the Corporation and Dean Witter Reynolds Inc.
may deal freely with each other, and neither such contract appointing Dean
Witter Reynolds Inc. investment manager to the Corporation nor any other
contract or transaction between the Corporation and Dean Witter Reynolds Inc.
shall be invalidated or in any wise affected thereby, nor shall any director
or officer of the Corporation by reason thereof be liable to the Corporation
or to any stockholder or creditor of the Corporation or to any other person
for any loss incurred under or by reason of any such contract or transaction.
For purposes of this paragraph, any reference to "Dean Witter Reynolds Inc."
shall be deemed to include said company and any parent, subsidiary or
affiliate of said company and any successor (by merger, consolidation or
otherwise) to said company or any such parent, subsidiary or affiliate.
SECTION 3.15. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. (a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent
of the Corporation. The indemnification shall be against judgments,
penalties, fines, settlements and reasonable expenses, including attorneys'
fees, actually incurred in connection with the proceeding, unless it is
established that: (i) the act or omission of the director was material to the
matter giving rise to the proceeding; and (A) was committed in bad faith, or
(B) was the result of active and deliberate dishonesty; or (ii) the director
actually received an improper personal benefit in money, property, or
services, or (iii) in the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful. Officers,
employees, and agents of the Corporation are entitled to indemnification and
the advancement of expenses to the same extent as directors. The termination
of any action, suit, or proceeding by judgment, order or settlement, shall
not, of itself, create a presumption that the person did not meet the
requisite standard of conduct set forth above. The termination of any
proceeding by conviction, a plea of nolo contendere or its equivalent, or an
entry of an order of probation prior to judgment, creates a rebuttable
presumption that the person did not meet the requisite standard of conduct.
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(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Corporation to obtain a judgment or decree in
its favor by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation. The indemnification shall be against
judgments, penalties, fines, settlements and reasonable expenses, including
attorney's fees, actually incurred in connection with the proceeding, if he
met the standard of conduct set forth in paragraph (a) above, except that no
indemnification shall be made in respect of any proceeding as to which the
person has been adjudged to be liable to the Corporation, except to the
extent that a court of appropriate jurisdiction determines upon application
of that person that, despite the failure to meet the requisite standard of
conduct or an actual adjudication of liability, but in view of all relevant
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for those expenses which the court shall deem proper, provided such
director or officer is not adjudged to be liable by reason of his willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
(c) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsection (a) or (b) or in defense
of any claim, issue or matter therein, he shall be indemnified against
expenses, including attorneys' fees, actually and reasonably incurred by him
in connection therewith.
(d)(1) Unless a court orders otherwise, any indemnification under
subsection (a) or (b) of this section may be made by the Corporation only as
authorized in the specific case after a determination that indemnification of
the director, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsection
(a) or (b).
(2) The determination shall be made:
(i) By the Board of Directors, by a majority vote of a quorum which
consists of directors who were not parties to the action ("non-party
directors"), suit or proceeding; or if a quorum of non-party directors
is not obtainable, by a majority vote of a committee of at least two
non-party directors; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion; or
(iii) By the stockholders.
(3) Notwithstanding the provisions of paragraphs (1) and (2) of this
subsection (d), no person shall be entitled to indemnification for any
liability, whether or not there is an adjudication of liability, arising by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of duties as described in Sections 17(h) and (i) of the Investment
Company Act of 1940, as amended ("disabling conduct"). A person shall be
deemed not liable by reason of disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of directors who are neither
"interested persons" of the Corporation, as defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended, nor
parties to the action, suit or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a director, officer,
employee or agent of the Corporation in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition thereof if:
(1) authorized in the specific case by the Board of Directors; and
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(2) the Corporation receives an undertaking by or on behalf of the
director, officer, employee or agent of the Corporation to repay the
advance if it is not ultimately determined that such person is entitled to
be indemnified by the Corporation; and
(3) either
(i) such person provides a security for his undertaking, or
(ii) the Corporation is insured against losses by reason of any
lawful advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of directors who are
neither "interested persons" of the Corporation, as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the action, suit or proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person.
(g) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the
Corporation, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such. However, in no
event will the Corporation pay for that portion of the premium, if any, for
insurance to indemnify any officer or director against liability for any act
for which the Corporation itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
director or officer of the Corporation against any liability to the
Corporation or to its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(i) Any indemnification of, or advance of expenses to, a director in
accordance with this Section, if arising out of a proceeding by or in the
right of the Corporation, shall be reported in writing to the shareholders
with the notice of the next stockholders' meeting or prior to the meeting.
ARTICLE IV
COMMITTEES
SECTION 4.1. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the whole Board, may designate an
Executive Committee and/or other committees, each committee to consist of two
(2) or more of the directors of the Corporation and may delegate to such
committees, in the intervals between meetings of the Board of Directors, any
or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation, except the power to: declare
dividends or distributions of stock; issue stock; recommend to stockholders
any action requiring stockholder approval; amend the By-Laws of the
Corporation; or approve any merger or share exchange which does not require
shareholder approval. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a
quorum, may appoint a member of the Board of Directors to act in place of
such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
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All actions of the Executive Committee shall be reported to the Board of
Directors at the meeting thereof next succeeding to the taking of such
action.
SECTION 4.2. ADVISORY COMMITTEE. The Board of Directors may appoint an
advisory committee which shall be composed of persons who do not serve the
Corporation in any other capacity and which shall have advisory functions
with respect to the investments, business or activities of the Corporation as
may be delegated to it, but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed
of by the Corporation, or to take action by or in the name of the
Corporation. The number of persons constituting any such advisory committee
shall be determined from time to time by the Board of Directors. The members
of any such advisory committee may receive compensation for their services
and may be allowed such fees and expenses for the attendance at meetings as
the Board of Directors may from time to time determine to be appropriate.
SECTION 4.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Board appointed pursuant to Section 4.1
of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE V
OFFICERS
SECTION 5.1. EXECUTIVE OFFICERS. The executive officers of the Corporation
shall be a Chairman of the Board, a President, one or more Vice Presidents, a
Secretary and a Treasurer. The Board of Directors may also elect one or more
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers and
may elect, or may delegate to the President the power to appoint, such other
officers and agents as the Board of Directors shall at any time or from time
to time deem advisable. The Chairman of the Board shall be selected from
among the directors but none of the other executive officers need be a member
of the Board of Directors. Two or more offices, except those of President and
any Vice President, may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity. The
executive officers of the Corporation shall be elected by the Board of
Directors.
SECTION 5.2. TERM, REMOVAL AND VACANCIES. Each officer of the Corporation
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Corporation may be removed by the Board of Directors
whenever, in its judgment, the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the
contractual rights, if any, of the person so removed.
SECTION 5.3. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Corporation shall be fixed by the Board of Directors, or by the
President to the extent provided by the Board of Directors with respect to
officers appointed by the President.
SECTION 5.4. POWER AND DUTIES. All officers and agents of the Corporation,
as between themselves and the Corporation, shall have such authority and
perform such duties in the management of the Corporation as may be provided
in or pursuant to these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors; provided, that no rights of any third
party shall be affected or impaired by any such By-Law or resolution of the
Board unless he has knowledge thereof.
SECTION 5.5. THE CHAIRMAN. The Chairman, if any, or in his absence the
President, shall preside at all meetings of the stockholders and of the Board
of Directors; and he shall perform such other duties as the Board of
Directors may from time to time prescribe.
SECTION 5.6. THE PRESIDENT. The President shall be the chief executive
officer of the Corporation; he shall have general and active management of
the business of the Corporation, shall see that all orders and resolutions of
the Board of Directors are carried into effect, and, in connection therewith,
shall be authorized to delegate to one or more Vice Presidents such of his
powers and duties at such times and in such manner as he may deem advisable.
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In the absence of the Chairman, the President shall preside at all
meetings of the stockholders and the Board of Directors; and he shall perform
such other duties as the Board of Directors may, from time to time,
prescribe.
SECTION 5.7. THE VICE PRESIDENTS. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Board of Directors. The Vice President, or, if there be more than one,
the Vice Presidents in the order of their seniority as may be determined from
time to time by the Board of Directors shall, in the absence or disability of
the President, exercise the powers and perform the duties of those officers;
and he or they shall perform such other duties as the Board of Directors may
from time to time prescibe.
SECTION 5.8. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Board of Directors or the President.
SECTION 5.9. THE SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the stockholders and of the Board of Directors
in a book to be kept for that purpose, and shall perform like duties for the
standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board
of Directors, and shall perform such other duties and have such powers as the
Board of Directors, may from time to time prescribe. He shall keep in safe
custody the seal of the Corporation and affix or cause the same to be affixed
to any instrument requiring it, and, when so affixed, it shall be attested by
his signature.
SECTION 5.10. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors or the President, shall in the absence or disability
of the Secretary, perform the duties and exercise the powers of the Secretary
and shall perform such duties and have such other powers as the Board of
Directors or the President may from time to time prescribe.
SECTION 5.11. THE TREASURER. The Treasurer shall be the chief financial
officer of the Corporation. He shall keep or cause to be kept full and
accurate accounts or receipts and disbursements in books belonging to the
Corporation, and he shall render to the Board of Directors whenever any of
them require it, an account of his transactions as Treasurer and of the
financial condition of the Corporation; and he shall perform such other
duties as the Board of Directors may from time to time prescribe.
SECTION 5.12. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors or the President, shall, in the absence
or disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such powers as the
Board of Directors, or the President, may from time to time prescribe.
SECTION 5.13. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Board of Directors may deem it
desirable, the Board may delegate the powers and duties of an officer to any
other officer or officers or to any Director or Directors.
ARTICLE VI
CAPITAL STOCK
SECTION 6.1. ISSUANCE OF STOCK. The Corporation shall not issue its shares
of capital stock except as approved by the Board of Directors.
SECTION 6.2. CERTIFICATES OF STOCK. Certificates for shares of each class
of the capital stock of the Corporation shall be in such form and of such
design as the Board of Directors shall approve, subject to the right of the
Board of Directors to change such form and design at any time or from time to
time, and shall be entered in the books of the Corporation as they are
issued. Each such certificate shall bear a distinguishing number; shall
exhibit the holder's name and certify the number of full shares owned by such
holder; shall be signed by or in the name of the Corporation by the
President, or a Vice President or an
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Assistant Vice President, and countersigned by the Secretary or an Assistant
Secretary or the Treasurer of the Corporation; shall be sealed with the
corporate seal; and shall contain such recitals as may be required by law.
Where any stock certificate is signed by a Transfer Agent or by a Registrar,
the signature of such corporate officers and the corporate seal may be
facsimile, printed or engraved. The Corporation may, at its option, defer the
issuance of a certificate or certificates to evidence shares of capital stock
owned of record by any stockholder until such time as demand therefor shall
be made upon the Corporation or its Transfer Agent, but upon the making of
such demand each stockholder shall be entitled to such certificate or
certificates.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Corporation, whether
because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate
or certificates shall, nevertheless, be adopted by the Corporation and be
issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures shall
appear therein had not ceased to be such officer or officers of the
Corporation.
No certificate shall be issued for any share of stock until such share is
fully paid.
SECTION 6.3. TRANSFER OF STOCK. Transfers of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
holder thereof, or by his attorney thereunto duly authorized by a power of
attorney duly executed and filed with the Corporation or a Transfer Agent of
the Corporation, if any, upon written request in proper form if no share
certificate has been issued, or in the event such certificate has been
issued, upon presentation and surrender in proper form of said certificate.
SECTION 6.4. RECORD DATE. The Board of Directors may fix in advance a date
as the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders
entitled to receive payment of any dividend or the allotment of any rights,
or in order to make a determination of stockholders for any other purpose.
Such date, in any case shall be not more than ninety (90) days, and in case
of a meeting of stockholders not less than ten (10) days prior to the date on
which particular action requiring such determination of stockholders is to be
taken. In lieu of fixing a record date the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, twenty (20) days. If the stock transfer books are closed
for the purpose of determining stockholders entitled to notice of a vote at a
meeting of stockholders, such books shall be closed for at least ten (10)
days immediately preceding such meeting.
SECTION 6.5. LOST, STOLEN, DESTROYED AND MULTILATED CERTIFICATES. The
Board of Directors may direct a new certificate or certificates to be issued
in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon satisfactory
proof of such loss, theft, or destruction; and the Board of Directors may, in
its discretion, require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give to the Corporation and to
such Registrar, Transfer Agent and/or Transfer Clerk as may be authorized or
required to countersign such new certificate or certificates, a bond in such
sum and of such type as they may direct, and with such surety or sureties, as
they may direct, as indemnity against any claim that may be against them or
any of them on account of or in connection with the alleged loss, theft or
destruction of any such certificate.
SECTION 6.6. REGISTERED OWNERS OF STOCK. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares of stock to receive dividends, and to vote as such owner, and
to hold liable for calls and assessments a person registered on its books as
the owner of shares of stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Maryland.
SECTION 6.7. FRACTIONAL DENOMINATIONS. Subject to any applicable
provisions of law and the Charter of the Corporation, the Corporation may
issue shares of its capital stock in fractional denominations, provided that
the transactions in which and the terms and conditions upon which shares in
fractional denominations may be issued may from time to time be limited or
determined by or under the authority of the Board of Directors.
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ARTICLE VII
SALE OF STOCK
SECTION 7.1. SALE OF STOCK. Upon the sale of each share of its Common
Stock, except as otherwise permitted by applicable laws and regulations, the
Corporation shall receive in cash or in securities valued as provided in
Article VIII of these By-Laws, not less than the current net asset value
thereof, exclusive of any distributing commission or discount, and in no
event less than the par value thereof.
SECTION 7.2. REDEMPTION OF STOCK. Subject to and in accordance with any
applicable laws and regulations and any applicable provisions of the
Corporation's Articles of Incorporation, the Corporation shall redeem all
outstanding shares of its capital stock duly delivered or offered for
redemption by any registered stockholder in a manner prescribed by or under
authority of the Board of Directors. Any shares so delivered or offered for
redemption shall be redeemed at a redemption price prescribed by the Board of
Directors in accordance with applicable laws and regulations; provided that
in no event shall such price be less than the applicable net asset value of
such shares as determined in accordance with the provisions of Article VIII
of these By-Laws. The Corporation may redeem, at current net asset value,
shares not offered for redemption held by any shareholder whose shares have a
value of less than $100, or such lesser amount as may be fixed by the Board
of Directors; provided that before the Corporation redeems such shares it
must notify the shareholder that the value of his shares is less than $100
and allow him 60 days to make an additional investment in an amount which
will increase the value of his account to $100 or more. The Corporation shall
pay redemption prices in cash.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE; VALUATION OF
PORTFOLIO SECURITIES AND OTHER ASSETS
SECTION 8.1. NET ASSET VALUE. The net asset value of a share of Common
Stock of the Corporation shall be determined in accordance with applicable
laws and regulations under the supervision of such persons and at such time
or times as shall from time to time be prescribed by the Board of Directors.
Each such determination shall be made by subtracting from the value of the
assets of the Corporation (as determined pursuant to Section 8.2 of these
By-Laws) the amount of its liabilities, dividing the remainder by the number
of shares of Common Stock issued and outstanding, and adjusting the results
to the nearest full cent per share.
SECTION 8.2. VALUATION OF PORTFOLIO SECURITIES AND OTHER ASSETS. Except as
otherwise required by any applicable law or regulation of any regulatory
agency having jurisdiction over the activities of the Corporation, the
Corporation shall determine the value of its portfolio securities and other
assets as follows:
(a) securities for which market quotations are readily available shall
be valued at current market value determined in such manner as the Board
of Directors may from time to time prescribe;
(b) all other securities and assets shall be valued at amounts deemed
best to reflect their fair value as determined in good faith by or under
the supervision of such persons and at such time or times as shall from
time to time be prescribed by the Board of Directors.
All quotations, sale prices, bid and asked prices and other information
shall be obtained from such sources as the persons making such determination
believe to be reliable and any determination of net asset value based thereon
shall be conclusive.
ARTICLE IX
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Charter of the
Corporation, dividends and distributions upon the Common Stock of the
Corporation may be declared at such intervals as the Board of Directors may
determine, in cash, in securities or other property, or in shares of stock of
the Corporation, from any sources permitted by law, all as the Board of
Directors shall from time to time determine.
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Inasmuch as the computation of net income and net profits from the sale of
securities or other properties for federal income tax purposes may vary from
the computation thereof on the books of the Corporation, the Board of
Directors shall have power, in its discretion, to distribute as income
dividends and as capital gain distributions, respectively, amounts sufficient
to enable the Corporation to avoid or reduce liability for federal income
taxes.
ARTICLE X
CUSTODIAN
SECTION 10.1. APPOINTMENT AND DUTIES. The Corporation shall at all times
employ a bank or trust company having the qualifications specified by the
Investment Company Act of 1940, as amended, as custodian with authority as
its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in these By-Laws and the Investment
Company Act of 1940, as amended:
(1) to receive and hold the securities owned by the Corporation and
deliver the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Corporation and
deposit the same in its own banking department or elsewhere as the
Directors may direct;
(3) to distribute such funds upon orders or vouchers;
(4) to keep the books and accounts of the Corporation and furnish
clerical and accounting services;
(5) to compute the net income of the Corporation and the net asset value
of the Corporation and its shares;
all upon such basis of compensation as may be agreed upon between the
Directors and the custodian. If so directed by a vote of a majority of the
shares of stock outstanding, the custodian shall deliver and pay over all
property of the Corporation held by it as specified in such vote.
The Board of Directors may also authorize the custodian to employ one or
more sub-custodians from time to time to perform such of the acts and
services of the custodian and upon such terms and conditions as may be agreed
upon between the custodian and such sub-custodian and approved by the Board
of Directors.
SECTION 10.2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Directors may direct
the custodian to deposit all or any part of the securities owned by the
Corporation in a system for the central handling of securities established by
a national securities exchange or a national securities association
registered with the Commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Securities and Exchange
Commission, or otherwise in accordance with the Investment Company Act of
1940, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Corporation.
ARTICLE XI
BOOKS AND RECORDS
SECTION 11.1. LOCATION. The books and records of the Corporation may be
kept outside the State of Maryland at such place or places as the Board of
Directors may from time to time determine, except as otherwise required by
law.
SECTION 11.2. STOCK LEDGERS. The Corporation shall maintain at the office
of its Transfer Agent an original stock ledger containing the names and
addresses of all stockholders and the number of shares held by each
stockholder. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for
visual inspection.
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SECTION 11.3. ANNUAL STATEMENT. The President or a Vice President or the
Treasurer shall prepare or cause to be prepared annually a full and correct
statement of the affairs of the Corporation, including a statement of assets
and liabilities and a statement of operations for the preceding fiscal year,
which shall be submitted at the annual meeting of stockholders if such
meeting be held, and shall be filed within twenty (20) days thereafter at the
principal office of the Corporation in the State of Maryland.
ARTICLE XII
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
stockholders, directors, or of any committee is required to be given under
the provisions of the statute or under the provisions of the Charter of the
Corporation or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance at
the meeting of Directors or committee in person, shall be deemed equivalent
to the giving of such notice to such person.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. SEAL. The Board of Directors shall adopt a corporate seal,
which shall be in the form of a circle, and shall have inscribed thereon the
name of the Corporation, the year of its incorporation, and the words
"Corporate Seal--Maryland." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 13.2. FISCAL YEAR. The fiscal year of the Corporation shall end on
such date as the Board of Directors may by resolution specify, and the Board
of Directors may by resolution change such date for future fiscal years at
any time and from time to time.
SECTION 13.3. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Corporation, and all notes or other evidences of
indebtedness issued in the name of the Corporation, shall be signed by such
officer or officers or such other person or persons as the Board of Directors
may from time to time designate, or as may be specified in or pursuant to the
agreement between the Corporation and the bank or trust company appointed as
Custodian of the securities and funds of the Corporation.
ARTICLE XIV
COMPLIANCE WITH FEDERAL REGULATIONS
The Board of Directors is hereby empowered to take such action as they may
deem to be necessary, desirable or appropriate so that the Corporation is or
shall be in compliance with any federal or state statute, rule or regulation
with which compliance by the Corporation is required.
ARTICLE XV
AMENDMENTS
These By-Laws may be amended, altered, or repealed at any annual or
special meeting of the stockholders by the affirmative vote of the holders of
a majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote, provided notice of the general purpose of
the proposed amendment, alteration or repeal is given in the notice of said
meeting; or, at any meeting of the Board of Directors, by a vote of a
majority of the whole Board of Directors, provided, however, that any By-Law
or amendment or alteration of the By-Laws adopted by the Board of Directors
may be amended, altered or repealed and any By-Law repealed by the Board of
Directors may be reinstated, by vote of the stockholders of the Corporation.
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DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
SELECTED DEALERS AGREEMENT
Gentlemen:
DW Distributors, Inc. (the "Distributor") has a distribution agreement
(the "Distribution Agreement") with Dean Witter Global Short-Term Income Fund
Inc., a Maryland corporation (the "Fund"), pursuant to which it acts as the
Distributor for the sale of the Fund's shares of common stock, par value $0.01
per share (the "Shares"). Under the Distribution Agreement, the Distributor has
the right to distribute Shares for resale.
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, a amended, and the Shares being offered to the
public are registered under the Securities Act of 1933, as amended. You have
received a copy of the Distribution Agreement between us and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms used herein, including "Prospectus" and "Registration Statement" of
the Fund and "Selected Dealer" shall have the same meaning in this Agreement as
in the Distribution Agreement. As principal, we offer to sell shares to you, as
a Selected Dealer, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act as dealer for your
own account, and in no transaction shall you have any authority to act as agent
for the Fund, for us or for any other Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order, as set forth in the
current Prospectus. The procedure relating to the handling of orders shall be
subject to instructions which we or the Fund shall forward from time to time to
you. All orders are subject to acceptance or rejection by the Distributor or
the Fund in the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable net asset values and
subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares except
under circumstances that will result in compliance with the applicable Federal
and state securities laws and that in connection with sales and offers to sell
Shares you will furnish to each person to whom any such sale or offer is made a
copy of the Prospectus (as then amended or supplemented) and will not furnish to
any person any information relating to the Shares, which is inconsistent in any
respect with the information contained in the Prospectus (as then amended or
supplemented) or cause any advertisement to be published by radio or television
or in any newspaper or posted in any public place or use any sales promotional
material without our consent and the consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund
and personal services to Fund shareholders by paying you a sales charge and/or
other commissions, which may be in the form of a gross sales credit and/or an
annual residual commission and/or service fee, under the terms and in the
percentage amounts as may be in effect from time to time by the Distributor.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding; e.g., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
6. If any Shares sold to you under the terms of this Agreement are
repurchased by us for the account of the Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and refund
to us, any commission received by you with respect to such Shares.
7. No person is authorized to make any representations concerning the
Shares or the Fund except those contained in the current Prospectus and in such
printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus. In purchasing Shares through us you
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shall rely solely on the representations contained in the Prospectus and
supplemental information above mentioned. Any printed information which we
furnish you other than the Prospectus and the Fund's periodic reports and proxy
solicitation material are our sole responsibility and not the responsibility of
the Fund, and you agree that the Fund shall have no liability or responsibility
to you in these respects unless expressly assumed in connection therewith.
8. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus at or prior to the time offering or
sale and you agree thereafter to deliver to such purchasers copies of the annual
and interim reports and proxy solicitation materials of the Fund. You further
agree to endeavor to obtain proxies from such purchasers. Additional copies of
the Prospectus, annual or interim reports and proxy solicitation materials of
the Fund will be supplied to you in reasonable quantities upon request.
9. You are hereby authorized (i) to place orders directly with the Fund
or its agent for shares of the Fund to be sold by us to you subject to the
applicable terms and conditions governing the placement of orders of the
purchase of Fund shares, as set forth in the Distribution Agreement, and (ii) to
tender shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in the Distribution Agreement.
10. We reserve the right in our discretion, without notice, to suspend
sales and withdraw the offering of Shares entirely. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Fund shares. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us herein. Nothing
contained in this paragraph is intended to operate as, and the provisions of
this paragraph shall not in any way whatsoever constitute, a waiver by you of
compliance with any provision of the Securities Act of 1933, as amended, or of
the rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume no
responsibility or obligations as to your right to sell Shares in any
jurisdiction.
14. All communications to us should be sent to the address shown below.
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
15. This Agreement shall become effective as of the date of your
acceptance hereof, provided that you return to us promptly a signed and dated
copy.
DW DISTRIBUTORS INC.
By /s/ Sheldon Curtis
--------------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
DW Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: DEAN WITTER REYNOLDS INC.
-------------------------
By: /s/ Charles A. Fiumefreddo
---------------------------------
Address: 2 WTC
----------------------------
New York, New York 10048
- ------------------------------------
Date: January 4, 1993
-------------------------------
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[Logo] CHASE
GLOBAL
CUSTODY
AGREEMENT
<PAGE>
This AGREEMENT is effective September 5, 1990, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and Dean Witter Global Short-Term Income Fund
Inc. (the "Customer").
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts")
(a) a custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests (therein and other similar property whether certificated or
uncertificated as may be received by the Bank or is Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities"); and
(b) a deposit account in the name of the Customer ("Deposit Account") for
any and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal by
draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the
same class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to the
Bank;
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) cash will be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-
interest bearing accounts as may be available for the particular currency. To
the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians or their securities
depositories, such arrangement must be authorized by a written agreement, signed
by the Bank and the Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets
in the Accounts in accounts which the Bank has established with one or more of
its branches or Subcustodians. The Bank and Subcustodians are authorized to
hold any of the Securities in their account with any securities depository in
which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold Assets together with assets belonging to
other customers of the Bank in accounts identified on such Subcustodian's books
as special custody accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only
to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
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5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand bearing interest at the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification, (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its
Subcustodian shall have no duty or obligation to institute legal proceedings,
file a claim or a proof of claim in any insolvency proceedings or take any
action with respect to the collection of such amount, but may act for the
Customer upon Instructions after consultation with the Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank or
its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be made
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Accounts.
(i) The Bank may reverse credits or debits made to the Accounts in
its discretion if the related transaction fails to settle within a
reasonable period, determined by the Bank in its discretion, after the
contractual settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the credits
and debits of the particular transaction at any time.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will perform the following functions.
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfer
of Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty days of receipt, the Customer shall be deemed to have
approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
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All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Banks shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the Bank has agreed to take any action under this Agreement.
8. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase plans
and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received
which bears an expiration date, the Bank will endeavor to obtain Instructions
from the Customer or its Authorized Person, as defined in Section 10, but if
Instructions are not received in time for the Bank to take timely action, or
actual notice of such Corporate Action was received too late to seek
Instructions, the Bank is authorized to sell such rights entitlement or
fractional interest and to credit the Deposit Account with the proceeds or
take any other action it deems, in good faith, to be appropriate in which case
it shall be held harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing. Such
proxies shall be executed in the appropriate nominee name relating to Securities
in the Custody Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted; and where bearer
Securities are involved, proxies will be delivered in accordance with
Instructions.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may, without notice to the Customer, cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. AUTHORIZED PERSONS.
As used in this Agreement the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from the Customer or its designated agent
that any such employee or agent is no longer an Authorized Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until cancelled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold the
Bank harmless for the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. Either Party may electronically record any Instructions given
by telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
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12. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Assets. The
Bank shall be liable to the Customer for any loss which shall occur as
the result of the failure of a Subcustodian to exercise reasonable
care with respect to the safekeeping of such Assets to the same extent
that the Bank would be liable to the Customer if the Bank were holding
such Assets in New York. In the event of any loss to the Customer by
reason of the failure of the Bank or its Subcustodian to utilize
reasonable care, the Bank shall be liable to the Customer only to the
extent of the Customer's direct damages, to be determined based on the
market value of the property which is the subject of the loss at the
date of discovery of such loss and without reference to any special
conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent which it or a
Subcustodian appoints unless such appointment was made negligently or
in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant
to Instructions or otherwise within the scope of this Agreement if
such act or omission was in good faith, without negligence. In
performing its obligations under this Agreement, the Bank may rely on
the genuineness of any document which it believes in good faith to
have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from
any liability or loss resulting from the imposition or assessment of
any taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act upon the
advice of counsel (who may be counsel for the Customer) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
(vi) The Bank need not maintain any insurance for the benefit of
the Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from 1) the general risk of investing, or
2) investing or holding Assets in a particular country including, but
not limited to, losses resulting from nationalization, expropriation
or other governmental actions; regulation of the banking or securities
industry; currency restrictions, devaluations or fluctuations; and
market conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or
work stoppages, acts of war or terrorism, insurrection, revolution,
nuclear fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to
(i) question Instructions or make any suggestions to the Customer
or an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments
or the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party
to which Securities are delivered or payments are made pursuant to
this Agreement or
(v) review or reconcile trade confirmations received from brokers.
The Customer or its Authorized Persons issuing instructions shall bear
any responsibility to review such confirmations against instructions
issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any if its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.
<PAGE>
13. FEES AND EXPENSES.
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under any provision of
this Agreement.
14. MISCELLANEOUS.
(a) FOREIGN EXCHANGE TRANSACTIONS. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to enter
into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange through
its subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement, shall apply to such transaction.
(b) CERTIFICATION OF RESIDENCY, ETC. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) ACCESS TO RECORDS. The Bank shall allow the Customer's independent
public accountants reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.
(d) GOVERNING LAW: SUCCESSORS AND ASSIGNS. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Bank.
(e) ENTIRE AGREEMENT; APPLICABLE RIDERS. Customer represents that the
Assets deposited in the Accounts are (check one):
employee benefit plan or other assets subject to the Employee
---- Retirement Income Security Act of 1974, as amended ("ERISA");
mutual fund assets subject to Securities and Exchange Commission
---- ("SEC") rules and regulations;
neither of the above.
----
This Agreement consists exclusively on this document together with Schedule
A, Exhibits 1 - ____ and the following rider(s) [check applicable rider(s)]:
ERISA
----
MUTUAL FUND
----
SPECIAL TERMS AND CONDITIONS
----
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) SEVERABILITY. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of any such provision and the remaining provisions, under
other circumstances or in other jurisdictions will not in any way be affected or
impaired.
<PAGE>
(g) WAIVER. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) NOTICES. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing:
Bank: The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas
New York, NY 10036
Attention Global Custody Division
Customer: Dean Witter Global Short-Term Income Fund Inc.
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Two World Trade Center
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New York, NY 10048
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(i) TERMINATION. This Agreement may be terminated by the Customer or the
Bank by giving sixty days written notice to the other, provided that such notice
to the Bank shall specify the names of the persons to whom the Bank shall
deliver the Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within sixty days following receipt of the notice
deliver to the Bank Instructions specifying the names of the persons to whom the
Bank shall deliver the Assets. In either case the Bank will deliver the Assets
to the person so specified, after deducting any amounts which the Bank
determines in good faith to be owned to it under Section 13. If within sixty
days following receipt of a notice of termination by the Bank. The Bank does
not receive Instructions from the Customer specifying the names of the persons
to whom the Bank shall deliver the Assets, the Bank, at its election, may
deliver the Assets to a bank or trust company doing business in the State of New
York to be held and disposed of pursuant to the provisions of this Agreement, or
to Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.
CUSTOMER
By /s/ David A. Hughey
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Vice President
-----------------------------------
Title
THE CHASE MANHATTAN BANK, N.A.
By /s/ Kathy Roeder
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Vice President
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Title
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Dean Witter Global Short-Term Income Fund Inc.
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, effective September 5, 1990
---------------- ----------------
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the "Act"), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation or interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
SECTION 3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in
Rule 17f-5 under the Act:
(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof), (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the Bank or (iv) any other entity shall have been so qualified by exemptive
order, rule or other appropriate action of the SEC; and
(c) "eligible securities depository" shall mean a securities depository or
clearing agency, incorporated or organized under the laws of a country other
than the United States, which operates (i) the central system for handling
securities or equivalent book-entries in that country or (ii) a transnational
system for the central handling of securities or equivalent book-entries.
The Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, which are attached
as Exhibits I through _______ of Schedule A, and further represents that its
Board has determined that the use of each Subcustodian and the terms of each
subcustody agreement are consistent with the best interests of the Customer's
fund(s) and its (their) shareholders. The Bank will supply the Customer with
any amendment to Schedule A for approval. The Customer has supplied or will
supply the Bank with certified copies of its Board of Directors resolution(s)
with respect to the foregoing prior to placing Assets with any Subcustodian so
approved.
SECTION 11. INSTRUCTIONS.
Add the following language to the end of Section 11.
Account transactions made pursuant to Sections 5 and 6 of this Agreement
may be made only for the purposes listed below. Instructions must specify the
purpose for which any transactions is to be made and Customer shall be solely
responsible to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth in its
prospectus.
<PAGE>
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise become
payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment or interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a pledge
of Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Bank, its Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc., relating to compliance with the rules
of The Options Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive the Securities previously deposited from
brokers. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt or income from Securities or related transactions.
(n) For other proper purposes as may be specified in Instructions issued
by an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment of
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer.
(o) Upon the termination of this Agreement as set forth in Section 14(i).
SECTION 12. STANDARD OF CARE; LIABILITIES.
Add the following subsection (d) to Section 12:
(d) The Bank hereby warrants to the Customer that in its opinion, after
due inquiry, the established procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.
SECTION 14. ACCESS TO RECORDS.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995 by and between Dean Witter
InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a Delaware corporation
(herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement") with
certain investment companies as set forth on Schedule A (each such investment
company being herein referred to as a "Fund" and, collectively, as the "Funds")
pursuant to which InterCapital is to perform, or supervise the performance of,
among other services, administrative services for the Funds (and, in the case of
Funds with multiple portfolios, the Series or Portfolios of the Funds (such
Series and Portfolio being herein individually referred to as "a Series" and,
collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice); (ii)
provide the Fund with full administrative services, including the maintenance of
certain books and records, such as journals, ledger accounts and other records
required under the Investment Company Act of 1940, as amended (the "Act"), the
notification to the Fund and InterCapital of available funds for investment, the
reconciliation of account information and balances among the Fund's custodian,
transfer agent and dividend disbursing agent and InterCapital, and the
calculation of the net asset value of the Fund's shares; (iii) provide the Fund
with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary to provide effective
operation of the Fund; (iv) oversee the performance of administrative and
professional services rendered to the Fund by others, including its custodian,
transfer agent and dividend disbursing agent, as well as accounting, auditing
and other services; (v) provide the Fund with adequate general office space and
facilities; (vi) assist in the preparation and the printing of the periodic
updating of the Fund's registration statement and prospectus (and, in the case
of an open-end Fund, the statement of additional information), tax returns,
proxy statements, and reports to its shareholders and the Securities and
Exchange Commission; and (vii) monitor the compliance of the Fund's investment
policies and restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to perform
administrative services hereunder, it shall notify DWS in writing. If DWS is
willing to render such services, it shall notify InterCapital in writing,
whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to time
determine to be necessary or useful to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, the staff and
personnel of DWS shall be deemed to include officers of DWS and persons employed
or otherwise retained by DWS (including officers and employees of InterCapital,
with the consent of InterCapital) to furnish services, statistical and other
factual data, information with respect to technical and scientific developments,
and such other information, advice and assistance as DWS may desire. DWS shall
maintain each Fund's records and books of account (other than those maintained
by the Fund's transfer agent, registrar, custodian and other agencies). All such
books and records so maintained shall be the property of the Fund and, upon
request therefor, DWS shall surrender to InterCapital or to the Fund such of the
books and records so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other information
relating to the business and affairs of the Fund as DWS may reasonably require
in order to discharge its duties and obligations to the Fund under this
Agreement or to comply with any applicable law and regulation or request of the
Board of Directors/Trustees of the Fund.
1
<PAGE>
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of a
closed-end Fund) by applying the annual rate or rates set forth on Schedule B to
the net assets of each Fund. Except as hereinafter set forth, (i) in the case of
an open-end Fund, compensation under this Agreement shall be calculated by
applying 1/365th of the annual rate or rates to the Fund's or the Series' daily
net assets determined as of the close of business on that day or the last
previous business day and (ii) in the case of a closed-end Fund, compensation
under this Agreement shall be calculated by applying the annual rate or rates to
the Fund's average weekly net assets determined as of the close of the last
business day of each week. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth on
Schedule B. Subject to the provisions of paragraph 5 hereof, payment of DWS'
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund and/or any Series thereof imposed by
state securities laws or regulations thereunder, as such limitations may be
raised or lowered from time to time, or, in the case of InterCapital Income
Securities Inc. or Dean Witter Variable Investment Series or any Series thereof,
the expense limitation specified in the Fund's Investment Management Agreement,
the fee payable hereunder shall be reduced on a pro rata basis in the same
proportion as the fee payable by the Fund under the Investment Management
Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by DWS,
and such clerical help and bookkeeping services as DWS shall reasonably require
in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations hereunder,
DWS shall not be liable to the Fund or any of its investors for any error of
judgment or mistake of law or for any act or omission by DWS or for any losses
sustained by the Fund or its investors. It is understood that, subject to the
terms and conditions of the Investment Management Agreement between each Fund
and InterCapital, InterCapital shall retain ultimate responsibility for all
services to be performed hereunder by DWS. DWS shall indemnify InterCapital and
hold it harmless from any liability that InterCapital may incur arising out of
any act or failure to act by DWS in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person controlling,
controlled by or under common control with DWS, and that DWS and any person
controlling, controlled by or under common control with DWS may have an interest
in the Fund. It is also understood that DWS and any affiliated persons thereof
or any persons controlling, controlled by or under common control with DWS have
and may have advisory, management, administration service or other contracts
with other organizations and persons, and may have other interests and
businesses, and further may purchase, sell or trade any securities or
commodities for their own accounts or for the account of others for whom they
may be acting.
9. This Agreement shall continue until April 30, 1995, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the event that the Investment Management
Agreement between any Fund and InterCapital is terminated, this Agreement will
automatically terminate with respect to such Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
2
<PAGE>
11. This Agreement may be assigned by either party with the written consent
of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By: /s/ Sheldon Curtis
. . . . . . . . . . . . . .
Attest:
/s/ Lou Anne D. McInnis
. . . . . . . . . . . . . . . . . . . . .
DEAN WITTER SERVICES COMPANY INC.
By: /s/ Charles A. Fiumefreddo
. . . . . . . . . . . . . .
Attest:
/s/ Barry Fink
. . . . . . . . . . . . . . . . . . . . .
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
at April 17, 1995
Open-End Funds
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter Balanced Growth Fund
7. Dean Witter Balanced Income Fund
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter California Tax-Free Income Fund
10. Dean Witter Capital Growth Securities
11. Dean Witter Convertible Securities Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter Diversified Income Trust
14. Dean Witter Dividend Growth Securities Inc.
15. Dean Witter European Growth Fund Inc.
16. Dean Witter Federal Securities Trust
17. Dean Witter Global Asset Allocation Fund
18. Dean Witter Global Dividend Growth Securities
19. Dean Witter Global Short-Term Income Fund Inc.
20. Dean Witter Global Utilities Fund
21. Dean Witter Health Sciences Trust
22. Dean Witter High Income Securities
23. Dean Witter High Yield Securities Inc.
24. Dean Witter Intermediate Income Securities
25. Dean Witter International Small Cap Fund
26. Dean Witter Limited Term Municipal Trust
27. Dean Witter Liquid Asset Fund Inc.
28. Dean Witter Managed Assets Trust
29. Dean Witter Mid-Cap Growth Fund
30. Dean Witter Multi-State Municipal Series Trust
31. Dean Witter National Municipal Trust
32. Dean Witter Natural Resource Development Securities Inc.
33. Dean Witter New York Municipal Money Market Trust
34. Dean Witter New York Tax-Free Income Fund
35. Dean Witter Pacific Growth Fund Inc.
36. Dean Witter Precious Metals and Minerals Trust
37. Dean Witter Premier Income Trust
38. Dean Witter Retirement Series
39. Dean Witter Select Dimensions Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Short-Term Bond Fund
42. Dean Witter Short-Term U.S. Treasury Trust
43. Dean Witter Strategist Fund
44. Dean Witter Tax-Exempt Securities Trust
45. Dean Witter Tax-Free Daily Income Trust
46. Dean Witter U.S. Government Money Market Trust
47. Dean Witter U.S. Government Securities Trust
48. Dean Witter Utilities Fund
49. Dean Witter Value-Added Market Series
50. Dean Witter Variable Investment Series
51. Dean Witter World Wide Income Trust
52. Dean Witter World Wide Investment Trust
Closed-End Funds
53. High Income Advantage Trust
54. High Income Advantage Trust II
55. High Income Advantage Trust III
56. InterCapital Income Securities Inc.
57. Dean Witter Government Income Trust
58. InterCapital Insured Municipal Bond Trust
59. InterCapital Insured Municipal Trust
60. InterCapital Insured Municipal Income Trust
61. InterCapital California Insured Municipal Income Trust
62. InterCapital Insured Municipal Securities
63. InterCapital Insured California Municipal Securities
64. InterCapital Quality Municipal Investment Trust
65. InterCapital Quality Municipal Income Trust
66. InterCapital Quality Municipal Securities
67. InterCapital California Quality Municipal Securities
68. InterCapital New York Quality Municipal Securities
4
<PAGE>
SCHEDULE B
DEAN WITTER SERVICES COMPANY INC.
Schedule of Administrative Fees--April 17, 1995
Monthly compensation calculated daily by applying the following annual
rates to a fund's net assets:
FIXED INCOME FUNDS
Dean Witter Balanced Income Fund 0.60% to the net assets.
Dean Witter California Tax-Free 0.055% of the portion of daily net assets not
Income Fund exceeding $500 million; 0.0525% of the
portion exceeding $500 million but not
exceeding $750 million; 0.050% of the portion
exceeding $750 million but not exceeding $1
billion; and 0.0475% of the portion of the
daily net assets exceeding $1 billion.
Dean Witter Convertible 0.060% of the portion of the daily net
Securities Securities Trust assets not exceeding $750 million; .055% of
the portion of the daily net assets exceeding
$750 million but not exceeding $1 billion;
0.050% of the portion of the daily net assets
of the exceeding $1 billion but not exceeding
$1.5 billion; 0.0475% of the portion of the
daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.045% of the
portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and
0.0425% of the portion of the daily net
assets exceeding $3 billion.
Dean Witter Diversified 0.040% of the net assets.
Income Trust
Dean Witter Federal Securities 0.055% of the portion of the daily net assets
Trust not exceeding $1 billion; 0.0525% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.5 billion;
0.050% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2
billion; 0.0475% of the portion of the daily
net assets exceeding $2 billion but not
exceeding $2.5 billion; 0.045% of the portion
of daily net assets exceeding $2.5 billion
but not exceeding $5 billion; 0.0425% of the
portion of the daily net assets exceeding $5
billion but not exceeding $7.5 billion;
0.040% of the portion of the daily net assets
exceeding $7.5 billion but not exceeding $10
billion; 0.0375% of the portion of the daily
net assets exceeding $10 billion but not
exceeding $12.5 billion; and 0.035% of the
portion of the daily net assets exceeding
$12.5 billion.
Dean Witter Global Short-Term 0.055% of the portion of the daily net
Income Fund assets not exceeding $500 million; and 0.050%
of the portion of the daily net assets
exceeding $500 million.
Dean Witter High Income 0.050% to the net assets.
Securities
Dean Witter High Yield 0.050% of the portion of the daily net
Securities Inc. assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of
B-1
<PAGE>
the daily net assets exceeding $1 billion but
not exceeding $2 billion; 0.0325% of the
portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and
0.030% of the portion of daily net assets
exceeding $3 billion.
Dean Witter Intermediate 0.060% of the portion of the daily net
Income Securities assets not exceeding $500 million; 0.050% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.040% of the portion of the daily net assets
exceeding $750 million but not exceeding $1
billion; and 0.030% of the portion of the
daily net assets exceeding $1 billion.
Dean Witter Limited Term 0.050% to the net assets.
Municipal Trust
Dean Witter Multi-State 0.035% to the net assets.
Municipal Series Trust (10)
Dean Witter National 0.035% to the net assets.
Municipal Trust
Dean Witter New York Tax-Free 0.055% to the net assets not exceeding
Income Fund $500 million and 0.0525% of the net assets
exceeding $500 million.
Dean Witter Premier 0.050% to the net assets.
Income Trust
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities
Trust
Dean Witter Select Dimensions 0.65% to the net assets.
Series-North American
Government Securities
Portfolio
Dean Witter Short-Term 0.070% to the net assets.
Bond Fund
Dean Witter Short-Term U.S. 0.035% to the net assets.
Treasury Trust
Dean Witter Tax-Exempt 0.050% of the portion of the daily net assets
Securities Trust not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; and 0.035% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.25 billion;
.0325% of the portion of the daily net assets
exceeding $1.25 billion.
Dean Witter U.S. Government 0.050% of the portion of such daily net
Securities Trust assets not exceeding $1 billion; 0.0475% of
the portion of such daily net assets
exceeding $1 billion but not exceeding $1.5
billion; 0.045% of the portion of such daily
net assets exceeding $1.5 billion but not
exceeding $2 billion; 0.0425% of the portion
of such daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.040% of
that portion of such daily net assets
exceeding $2.5 billion but not exceeding $5
billion; 0.0375% of that portion
B-2
<PAGE>
of such daily net assets exceeding $5 billion
but not exceeding $7.5 billion; 0.035% of
that portion of such daily net assets
exceeding $7.5 billion but not exceeding $10
billion; 0.0325% of that portion of such
daily net assets exceeding $10 billion but
not exceeding $12.5 billion; and 0.030% of
that portion of such daily net assets
exceeding $12.5 billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-High Yield
Dean Witter Variable Investment 0.050% to the net assets.
Series-Quality Income
Dean Witter World Wide Income 0.075% of the daily net assets up to
Trust $250 million; 0.060% of the portion of the
daily net assets exceeding $250 million but
not exceeding $500 million; 0.050% of the
portion of the daily net assets of the
exceeding $500 million but not exceeding $750
milliion; 0.040% of the portion of the daily
net assets exceeding $750 million but not
exceeding $1 billion; and 0.030% of the daily
net assets exceeding $1 billion.
Dean Witter Select Municipal 0.050% to the net assets.
Reinvestment Fund
EQUITY FUNDS
Dean Witter American Value 0.0625% of the portion of the daily net
Fund assets not exceeding $250 million and 0.050%
of the portion of the daily net assets
exceeding $250 million.
Dean Witter Balanced Growth 0.60% to the net assets.
Fund
Dean Witter Capital Growth 0.065% to the portion of daily net assets
Securities not exceeding $500 million; 0.055% of the
portion exceeding $500 million but not
exceeding $1 billion; 0.050% of the portion
exceeding $1 billion but not exceeding $1.5
billion; and 0.0475% of the net assets
exceeding $1.5 billion.
Dean Witter Developing Growth 0.050 of the portion of daily net
Securities Trust assets not exceeding $500 million; and
0.0475% of the portion of daily net assets
exceeding $500 million.
Dean Witter Dividend Growth 0.0625% of the portion of the daily net
Securities Inc. assets not exceeding $250 million; 0.050% of
the portion exceeding $250 million but not
exceeding $1 billion; 0.0475% of the portion
of daily net assets exceeding $1 billion but
not exceeding $2 billion; 0.045% of the
portion of daily net assets exceeding $2
billion but not exceeding $3 billion; 0.0425%
of the portion of daily net assets exceeding
$3 billion but not exceeding $4 billion;
0.040% of the portion of daily net assets
exceeding $4 billion but not exceeding $5
billion; 0.0375% of the portion of the daily
net assets exceeding $5 billion but not
exceeding $6 billion; 0.035% of the portion
of the daily net assets exceeding $6 billion
but not exceeding $8 billion; and 0.0325% of
the portion of the daily net assets exceeding
$8 billion.
B-3
<PAGE>
Dean Witter European Growth 0.060% of the portion of daily net
Fund Inc. assets not exceeding $500 million; and 0.057%
of the portion of daily net assets exceeding
$500 million.
Dean Witter Global Asset 1.0% to the net assets.
Allocation Fund
Dean Witter Global Dividend 0.075% to the net assets.
Growth Securities
Dean Witter Global Utilities 0.065% to the net assets.
Fund
Dean Witter Health Sciences Trust 0.10% to the net assets.
Dean Witter International 0.075% to the net assets.
Small Cap Fund
Dean Witter Managed Assets Trust 0.060% to the daily net assets not exceeding
$500 million and 0.055% to the daily net
assets exceeding $500 million.
Dean Witter Mid-Cap Growth Fund 0.75% to the net assets.
Dean Witter Natural Resource 0.0625% of the portion of the daily net
Development Securities Inc. assets not exceeding $250 million and 0.050%
of the portion of the daily net assets
exceeding $250 million.
Dean Witter Pacific Growth 0.060% of the portion of daily net assets
Fund Inc. not exceeding $1 billion; and 0.057% of the
portion of daily net assets exceeding $1
billion.
Dean Witter Precious Metals 0.080% to the net assets.
and Minerals Trust
Dean Witter Retirement Series 0.085% to the net assets.
American Value
Dean Witter Retirement Series 0.085% to the net assets.
Capital Growth
Dean Witter Retirement Series 0.075% to the net assets.
Dividend Growth
Dean Witter Retirement Series 0.10% to the net assets.
Global Equity
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income Securities
Dean Witter Retirement Series 0.050% to the net assets.
Liquid Asset
Dean Witter Retirement Series 0.085% to the net assets.
Strategist
Dean Witter Retirement Series 0.050% to the net assets.
U.S. Government Money Market
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities
Dean Witter Retirement Series 0.075% to the net assets.
Utilities
B-4
<PAGE>
Dean Witter Retirement Series 0.050% to the net assets.
Value Added
Dean Witter Select Dimensions
Series-
American Value 0.625% to the net assets.
Portfolio Balanced Portfolio 0.75% to the net assets.
Core Equity Portfolio 0.85% to the net assets.
Developing Growth Portfolio 0.50% to the net assets.
Diversified Income Portfolio 0.40% to the net assets.
Dividend Growth Portfolio 0.625% to the net assets.
Emerging Markets Portfolio 1.25% to the net assets.
Global Equity Portfolio 1.0% to the net assets.
Utilities Portfolio 0.65% to the net assets.
Value-Added Market Portfolio 0.50% to the net assets.
Dean Witter Strategist Fund 0.060% of the portion of daily net assets not
exceeding $500 million; 0.055% of the portion
of the daily net assets exceeding $500
million but not exceeding $1 billion; and
0.050% of the portion of the daily net assets
exceeding $1 billion.
Dean Witter Utilities Fund 0.065% of the portion of daily net assets not
exceeding $500 million; 0.055% of the portion
exceeding $500 million but not exceeding $1
billion; 0.0525% of the portion exceeding $1
billion but not exceeding $1.5 billion;
0.050% of the portion exceeding $1.5 billion
but not exceeding $2.5 billion; 0.0475% of
the portion exceeding $2.5 billion but not
exceeding $3.5 billion; 0.045% of the portion
of the daily net assets exceeding $3.5 but
not exceeding $5 billion; and 0.0425% of the
portion of daily net assets exceeding $5
billion.
Dean Witter Value-Added Market 0.050% of the portion of daily net assets
Series not exceeding $500 million; and 0.45% of the
portion of daily net assets exceeding $500
million.
Dean Witter Variable Investment 0.065% to the net assets.
Series-Capital Growth
Dean Witter Variable Investment 0.0625% of the portion of daily net
Series-Dividend Growth assets not exceeding $500 million; and 0.050%
of the portion of daily net assets exceeding
$500 million.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Equity
Dean Witter Variable Investment 0.060% to the net assets.
Series-European Growth
Dean Witter Variable Investment 0.050% to the net assets.
Series-Managed
Dean Witter Variable Investment 0.065% of the portion of daily net assets
Series-Utilities exceeding $500 million and 0.055% of the
portion of daily net assets exceeding $500
million.
Dean Witter World Wide 0.055% of the portion of daily net assets
Investment Trust not exceeding $500 million; and 0.05225% of
the portion of daily net assets exceeding
$500 million.
B-5
<PAGE>
MONEY MARKET FUNDS
Active Assets Account (4) 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter California Tax-Free 0.050% of the portion of the daily net
Daily Income Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter Liquid Asset 0.050% of the portion of the daily net
Fund Inc. assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.35 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.35 billion but not exceeding $1.75
billion; 0.030% of the portion of the daily
net assets exceeding $1.75 billion but not
exceeding $2.15 billion; 0.0275% of the
portion of the daily net assets exceeding
$2.15 billion but not exceeding $2.5 billion;
0.025% of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $15
billion; 0.0249% of the portion of the daily
net assets exceeding $15 billion but not
exceeding $17.5 billion; and 0.0248% of the
portion of the daily net assets exceeding
$17.5 billion.
Dean Witter New York Municipal 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 bil-
B-6
<PAGE>
lion but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3
billion; and 0.025% of the portion of the
daily net assets exceeding $3 billion.
Dean Witter Retirement Series 0.050% of the net assets.
Liquid Assets
Dean Witter Retirement Series 0.050% of the net assets.
U.S. Government Money Market
Dean Witter Select Dimensions 0.50% to the net assets.
Series-
Money Market Portfolio
Dean Witter Tax-Free Daily 0.050% of the portion of the daily net
Income Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter U.S. Government 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Money Market
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
CLOSED-END FUNDS
Dean Witter Government Income 0.060% to the average weekly net assets.
Trust
High Income Advantage Trust 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of average weekly net assets
exceeding
B-7
<PAGE>
$750 million and not exceeding $1 billion;
and 0.030% of the portion of average weekly
net assets exceeding $1 billion.
High Income Advantage Trust II 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of average weekly net assets
exceeding $750 million and not exceeding $1
billion; and 0.030% of the portion of average
weekly net assets exceeding $1 billion.
High Income Advantage Trust III 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of the average weekly net assets
exceeding $750 million and not exceeding $1
billion; and 0.030% of the portion of average
weekly net assets exceeding $1 billion.
InterCapital Income Securities 0.050% to the average weekly net assets.
Inc.
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Bond Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital California Insured 0.035% to the average weekly net assets.
Municipal Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Investment Trust
InterCapital New York Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Securities
InterCapital California Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Securities
InterCapital Insured California 0.035% to the average weekly net assets.
Municipal Securities
B-8
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 6 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
December 11, 1995, relating to the financial statements and financial
highlights of Dean Witter Global Short-Term Income Fund Inc., which appears
in such Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the reference to us under the
heading "Financial Highlights" in such Prospectus and to the references to us
under the headings "Independent Accountants" and "Experts" in such Statement
of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 22, 1996
<PAGE>
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
OF
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND INC.
WHEREAS, Dean Witter Global Short-Term Income Fund Inc. (the "Fund") is
engaged in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, on April 28, 1993, the Fund most recently amended and restated a
Plan of Distribution pursuant to Rule 12b-1 under the Act which had initially
been adopted on September 5, 1990, and the Directors then determined that there
was a reasonable likelihood that adoption of the Plan of Distribution, as then
amended and restated, would benefit the Fund and its shareholders; and
WHEREAS, the Directors 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 September 5, 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 entered into a separate Distribution
Agreement dated as of June 30, 1993, pursuant to which the Fund has employed the
Distributor in such capacity during the continuous offering of shares of the
Fund.
NOW, THEREFORE, the Fund hereby amends the Plan of Distribution previously
adopted and amended and restated, and the Distributor hereby agrees to the terms
of said Plan of Distribution (the "Plan"), as amended herein, in accordance with
Rule 12b-1 under the Act on the following terms and conditions:
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) 0.75% 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) 0.75% 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 Directors
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, such excess being
hereinafter referred to as "carryover expenses"). The overhead and other branch
office distribution-related expenses referred to in this paragraph 2 may
include: (a) the expenses of operating the branch offices of the Distributor or
other broker-dealers, including DWR, in connection
1
<PAGE>
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. Payments may also be made with respect to distribution
expenses incurred in connection with the distribution of shares, including
personal services to shareholders with respect to holdings of such shares, of an
investment company whose assets are acquired by the Fund in a tax-free
reorganization, provided that carryover expenses as a percentage of Fund assets
will not be materially increased thereby.
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 Directors of the Fund and of the Directors 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 Directors"), 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, 1996, 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 Directors of the Fund and the
Directors 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 Directors shall request the Distributor to specify such items
of expenses as the Directors deem appropriate. The Directors 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 Directors, 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 Directors 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 Directors
who are not interested persons (as defined in the Act) of the Fund shall
be committed to the discretion of the Directors 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.
2
<PAGE>
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
amended and restated Plan of Distribution as of the day and year set forth below
in New York, New York.
<TABLE>
<S> <C>
Date: September 5, 1990 DEAN WITTER GLOBAL SHORT-TERM INCOME FUND
As amended on January 4, 1993, INC.
April 28, 1993 and October 26, 1995
By /s/ Sheldon Curtis
..........................................
Attest:
/s/ Barry Fink
.........................................
DEAN WITTER DISTRIBUTORS INC.
By /s/ Robert M. Scanlan
..........................................
Attest:
/s/ David A. Hughey
.........................................
DEAN WITTER REYNOLDS INC.
By /s/ Charles A. Fiumefreddo
..........................................
Attest:
/s/ Marilyn K. Cranney
.........................................
</TABLE>
3
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
GLOBAL SHORT TERM INCOME FUND
(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-95 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------- ----------- -------------- ---------------------------------
<S> <C> <C> <C> <C>
31-Oct-94 $1,052.70 5.27% 1.00 5.27%
01-Nov-90 $1,272.80 27.28% 4.997 4.95%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
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)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-95 RETURN -TR YEARS - n TOTAL RETURN
- ---------------- ----------------------------------------------------
31-Oct-94 $1,082.70 8.27% 1.00 8.27%
01-Nov-90 $1,272.80 27.28% 4.997 4.95%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
(D) (E) (F)
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>
01-Nov-90 27.28 $12,728 $63,640 $127,280
</TABLE>
<PAGE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DW GLOBAL SHORT TERM
30 day Yield as of 10/31/95
6
YIELD = 2{ [ ((a-b)/c * d) + 1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = The maximum offering price per share on the last
day of the period
6
YIELD = 2{ [(( 698,723.04-162,481.60)/12,172,482*8.89)+1] -1}
= 6.020647%
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
DEAN WITTER GLOBAL SHORT-TERM INCOME FUND
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 103,409,220
<INVESTMENTS-AT-VALUE> 105,056,443
<RECEIVABLES> 4,757,365
<ASSETS-OTHER> 79,747
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 109,893,555
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,954,719
<TOTAL-LIABILITIES> 2,954,719
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 113,556,418
<SHARES-COMMON-STOCK> 12,026,267
<SHARES-COMMON-PRIOR> 19,475,304
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (121,077)
<ACCUMULATED-NET-GAINS> (7,964,339)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,467,834
<NET-ASSETS> 106,938,836
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,228,024
<OTHER-INCOME> 0
<EXPENSES-NET> 2,187,586
<NET-INVESTMENT-INCOME> 8,040,438
<REALIZED-GAINS-CURRENT> (2,375,703)
<APPREC-INCREASE-CURRENT> 4,237,361
<NET-CHANGE-FROM-OPS> 9,902,096
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,576,785)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (1,427,490)
<NUMBER-OF-SHARES-SOLD> 332,379
<NUMBER-OF-SHARES-REDEEMED> (8,316,754)
<SHARES-REINVESTED> 535,338
<NET-CHANGE-IN-ASSETS> (63,177,803)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7,172,576)
<OVERDISTRIB-NII-PRIOR> (915)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 716,948
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,187,586
<AVERAGE-NET-ASSETS> 130,354,165
<PER-SHARE-NAV-BEGIN> 8.73
<PER-SHARE-NII> .54
<PER-SHARE-GAIN-APPREC> .16
<PER-SHARE-DIVIDEND> (.44)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.10)
<PER-SHARE-NAV-END> 8.89
<EXPENSE-RATIO> 1.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
