<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 1996
REGISTRATION NO.: 33-39598
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 5 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 7 /X/
------------------
DEAN WITTER PREMIER INCOME TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after 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 NOVEMBER 20, 1995.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
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<PAGE>
DEAN WITTER PREMIER INCOME TRUST
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<S> <C>
ITEM CAPTION
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PART A PROSPECTUS
1. ......................................... Cover Page
2. ......................................... Summary of Fund Expenses; Prospectus Summary
3. ......................................... Dividends, Distributions and Taxes
4. ......................................... Investment Objective and Policies; The Fund and its Management; Cover
Page; Investment Restrictions; Prospectus Summary
5. ......................................... The Fund and Its Management; Back Cover; Investment Objectives and
Policies
6. ......................................... Dividends, Distributions and Taxes; Additional Information
7. ......................................... Purchase of Fund Shares; Shareholder Services
8. ......................................... Redemptions and Repurchases; Shareholder Services
9. ......................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. ......................................... Cover Page
11. ......................................... Table of Contents
12. ......................................... The Fund and Its Management
13. ......................................... Investment Practices and Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. ......................................... The Fund and Its Management; Trustees and Officers
15. ......................................... Trustees and Officers
16. ......................................... The Fund and Its Management; Purchase of Fund Shares; Custodian and
Transfer Agent; Independent Accountants
17. ......................................... Portfolio Transactions and Brokerage
18. ......................................... Description of Shares; Validity of Shares of Beneficial Interest
19. ......................................... Repurchase of Fund Shares; Redemptions and Repurchases; Statement of
Assets and Liabilities; Shareholder Services
20. ......................................... Dividends, Distributions and Taxes
21. ......................................... The Distributor
22. ......................................... Performance Information
23. ......................................... 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 Premier Income Trust (the "Fund") is an open-end,
diversified management investment company, whose investment objective is to earn
a high level of current income consistent with low volatility of principal. The
Fund seeks to achieve its investment objective by investing primarily in high
quality fixed rate and adjustable rate mortgage-backed securities and other
asset-backed securities which either are issued or guaranteed by the United
States Government, its agencies or instrumentalities, or rated Aaa by Moody's
Investors Service, Inc. or AAA by Standard & Poor's Corporation or, if not
rated, determined to be of comparable quality. See "Investment Objective and
Policies."
Shares of the Fund are offered at net asset value plus a sales
charge of 3.0% of the offering price, scaled down on purchases of $100,000 or
more. In addition, pursuant to a Rule 12b-1 Plan of Distribution under the
Investment Company Act of 1940, the Fund may reimburse the Distributor, in an
amount equal to payments not exceeding the annual rate of 0.20% of the average
daily net assets of the Fund, for specific expenses incurred in promoting the
distribution of the Fund's shares.
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 numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/3
Financial Highlights/4
The Fund and Its Management/5
Investment Objective and Policies/6
Risk Considerations/13
Investment Restrictions/17
Purchase of Fund Shares/17
Shareholder Services/20
Redemptions and Repurchases/22
Dividends, Distributions and Taxes/23
Performance Information/24
Additional Information/25
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
Premier Income Trust
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 organized as a Trust, commonly known as a Massachusetts business trust, and is an open-end,
Fund diversified management investment company investing primarily in high-quality fixed rate and adjustable rate
mortgage-backed securities and in asset-backed securities.
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Shares Offered Shares of beneficial interest with $0.01 par value (see page 25).
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Offering The price of the shares offered by this prospectus varies with the changes in the value of the Fund's
Price investments. The offering price, determined once daily as of 4:00 p.m., New York time, on each day that the New
York Stock Exchange is open, is equal to the net asset value plus a sales charge of 3.0% of the offering price,
scaled down on purchases of $100,000 or over (see page 17).
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Minimum Minimum initial investment, $1,000. Minimum subsequent investment, $100 (see page 17).
Purchase
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Investment The investment objective of the Fund is to earn a high level of current income consistent with low volatility of
Objective principal.
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Investment Manager Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its wholly-owned
and subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory, management and
Sub-Advisor administrative capacities to ninety-five investment companies and other portfolios with assets of approximately
$79.5 billion at December 31, 1995. BlackRock Financial Management, Inc. (the "Sub-Advisor") has been retained
by the Investment Manager to provide investment advice and manage the Fund's portfolio. The Sub-Advisor
currently serves as the investment adviser to fixed-income investors in the United States and overseas through
funds with combined net assets in excess of $34 billion (see page 5).
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Management Fee The Investment Manager receives a monthly fee at the annual rate of 0.50% of daily net assets. The Sub-Advisor
receives a monthly fee from the Investment Manager equal to 40% of the Investment Manager's monthly fee (see
page 5).
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Dividends Income dividends are declared daily and paid monthly; capital gains distributions, if any, are paid at least
annually. Income dividends and capital gains distributions are automatically reinvested in additional shares at
net asset value unless the shareholder elects to receive cash.
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Plan of The Fund is authorized to reimburse Dean Witter Distributors Inc. (the "Distributor") for specific expenses
Distribution incurred in promoting the distribution of the Fund's shares pursuant to a Plan of Distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940. Reimbursement may in no event exceed an amount equal to payments
at the annual rate of 0.20 of 1% of average daily net assets of the Fund (see page 19). The Distributor also
receives a sales charge of 3% of the offering price.
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Special Risk The net asset value of the Fund's shares will fluctuate with changes in the market value of its portfolio
Considerations securities. Mortgage-backed and asset-backed securities have different characteristics than traditional debt
securities, primarily in that interest and principal payments are made more frequently, usually monthly, and
that principal may be prepaid at any time (see page 7). Mortgage-backed and asset-backed securities generally
decrease in value as a result of increases in interest rates and may benefit less than other fixed-income
securities from declining interest rates because of prepayment risks. The types of mortgage-backed securities in
which the Fund may invest include derivative products such as collateralized mortgage obligations and stripped
mortgage-backed securities, which are highly sensitive to changes in prepayment and interest rates and have
special characteristics and risks (see pages 7 and 10). Asset-backed securities involve certain risks not posed
by mortgage-backed securities, resulting mainly from the fact that asset-backed securities do not usually
contain the complete benefit of a security interest in the related collateral (see page 10). In addition, the
Fund may utilize certain investment techniques, including options and futures for hedging purposes, and the use
of leverage, including reverse repurchase agreements and dollar rolls, which entail additional risks (see pages
11-15).
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Reduced Sales Right of Accumulation; Letter of Intent; Automatic Investment of Dividends and Distributions; EasyInvest-SM-;
Charges and Systematic Withdrawal Plan; Exchange Privilege (see pages 20-22).
Shareholder
Services
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</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE
IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
year ended October 31, 1995.
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
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Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................ 3.0 %
Maximum Sales Charge Imposed on Reinvested Dividends................................. None
Deferred Sales Charge................................................................ None
Redemption Fees...................................................................... None
Exchange Fee......................................................................... None
ANNUAL FUND EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
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Management Fees...................................................................... 0.50 %
12b-1 Fees*.......................................................................... 0.18 %
Other Expenses (includes 0.65% of interest expense).................................. 1.54 %
Total Fund Expenses.................................................................. 2.22 %
<FN>
- ------------
* THE 12B-1 FEE IS CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD") GUIDELINES.
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
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<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period............................................................... $ 52 $ 97 $ 145 $ 278
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE MORE 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" and "Purchase of Fund Shares."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding throughout each period and the data relating to debt outstanding
have been audited by Price Waterhouse LLP, independent accountants. This data
should be read in conjunction with the financial statements, notes thereto, and
the unqualified report of independent accountants which are contained in the
Statement of Additional Information. Further information about the performance
of the Fund is contained in the Fund's Annual Report to Shareholders, which may
be obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 1,
1991*
FOR THE YEAR ENDED OCTOBER 31 THROUGH
------------------------------------------ OCTOBER
1995 1994 1993 1992 31, 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.......................... $ 8.77 $ 9.18 $ 9.69 $ 9.95 $ 9.60
--------- --------- --------- --------- ---------
Net investment income............ 0.53 0.54 0.73 0.71 0.26
Net realized and unrealized gain
(loss).......................... 0.14 (0.41) (0.45) (0.21) 0.37
--------- --------- --------- --------- ---------
Total from investment
operations...................... 0.67 0.13 0.28 0.50 0.63
--------- --------- --------- --------- ---------
Dividends and distributions from:
Net investment income.......... (0.65) (0.54) (0.61) (0.71) (0.26)
Net realized gain.............. -- -- (0.18) (0.05) (0.02)
--------- --------- --------- --------- ---------
Total dividends and
distributions................... (0.65) (0.54) (0.79) (0.76) (0.28)
--------- --------- --------- --------- ---------
Net asset value, end of period... $ 8.79 $ 8.77 $ 9.18 $ 9.69 $ 9.95
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 7.97% 1.44% 2.87% 5.18% 6.41%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses:
Operating...................... 1.57% 1.24% 0.95% 0.99% 0.85%(2)
Interest....................... 0.65% 0.34% 0.65% 0.61% 0.84%(2)
Total............................ 2.22% 1.58% 1.60% 1.60% 1.69%(2)(3)
Net investment income............ 5.83% 5.32% 7.32% 7.05% 7.50%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands....................... $31,259 $43,875 $90,260 $154,860 $132,219
Portfolio turnover rate.......... 366% 393% 412% 254% 91%(1)
</TABLE>
<TABLE>
<S> <C>
<FN>
- ---------------
* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL EXPENSES THAT WERE ASSUMED OR WAIVED BY THE THE
INVESTMENT MANAGER, THE ABOVE ANNUALIZED EXPENSE AND NET INVESTMENT INCOME
RATIOS WOULD HAVE BEEN 1.85% AND 7.34%, RESPECTIVELY.
</TABLE>
4
<PAGE>
THE FUND AND ITS MANAGEMENT
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Dean Witter Premier Income Trust (the "Fund") is an open-end, diversified
management investment company. The Fund is a trust of the type commonly known as
a "Massachusetts business trust" and was organized under the laws of
Massachusetts on March 27, 1991.
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 total 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 supervise the investment of the Fund's
assets. InterCapital has retained Dean Witter Services Company Inc. to perform
the aforementioned administrative services for the Fund.
Under a Sub-Advisory Agreement between BlackRock Financial Management, Inc.
(the "Sub-Advisor") and the Investment Manager, the Sub-Advisor provides the
Fund with investment advice and portfolio management relating to the Fund's
investments in portfolio securities, subject to the overall supervision of the
Investment Manager. The Fund's Trustees review the various services provided by
or under the direction of the Investment Manager and the Sub-Advisor to ensure
that the Fund's general investment policies and programs are being properly
carried out and that administrative services are being provided to the Fund in a
satisfactory manner.
The Sub-Advisor, whose address is 345 Park Avenue, New York, New York 10154,
is a Delaware limited partnership organized in April, 1988 by Laurence D. Fink,
Ralph L. Schlosstein and The Blackstone Group (a private investment bank). The
Sub-Advisor's general partners are Messrs. Fink and Schlosstein and Blackstone
Financial Management Inc. (all the stock of which is owned by partners of The
Blackstone Group). The Sub-Advisor serves as investment adviser to fixed-income
investors in the U.S. and overseas with combined net assets in excess of $34
billion as of December 31, 1995.
On June 16, 1994, the partners of the Sub-Advisor entered into a definitive
agreement to sell their partnership interests in the Sub-Advisor to PNC Bank,
N.A. ("PNC"), headquartered in Pittsburgh, Pennsylvania (the "Transaction"). The
Transaction, which was subject to bank regulatory approval, closed on February
28, 1995 and was subject to various conditions, including the following:
BlackRock will retain its name and will continue to operate out of its New York
office. All members of the Sub-Advisor's senior management team agreed to sign
long-term employment contracts and be responsible for managing the day-to-day
affairs of the Sub-Advisor. Following the closing of the Transaction, the
Sub-Advisor became a wholly owned corporate subsidiary of PNC Asset Management
Group, Inc., the holding company for PNC's asset management business.
PNC is a commercial bank offering a wide range of domestic and international
commercial banking, retail banking and trust services to its customers. Its
principal office is located in Pittsburgh, Pennsylvania.
5
<PAGE>
PNC is a wholly-owned indirect subsidiary of PNC Bank Corp. (the "Holding
Company"), a bank holding company organized under the laws of the Commonwealth
of Pennsylvania.
In order to assure continuity of investment advisory services to the Fund by
the Sub-Advisor after the Transaction, the Board met in person on October 20,
1994, for the purpose of considering whether it would be in the best interests
of the Fund and its shareholders for InterCapital to enter into a new
sub-advisory agreement with the Sub-Advisor (the "current Sub-Advisory
Agreement") to take effect upon consummation of the Transaction. At its meeting,
the Board, including each of the Trustees who are not "interested persons" of
the Fund, as that term is defined in the 1940 Act (the "Independent Trustees"),
unanimously approved the current Sub-Advisory Agreement and recommended it for
approval by Shareholders. The current Sub-Advisory Agreement is identical to the
former Sub-Advisory Agreement except for the effective date and the stated
expiration date. At the meeting of Shareholders which took place on February 17,
1995, the Shareholders voted to approve the current Sub-Advisory Agreement which
became effective on February 28, 1995.
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 0.50% to the Fund's net assets. As compensation for its services
provided pursuant to the Sub-Advisory Agreement, the Investment Manager pays the
Sub-Advisor monthly compensation equal to 40% of its monthly compensation.
For the fiscal year ended October 31, 1995, the Fund accrued total
compensation to the Investment Manager amounting to 0.50% of the Fund's average
daily net assets (of which 40% was accrued to the Sub-Advisor by the Investment
Manager) and the Fund's total expenses amounted to 2.22% of the Fund's average
daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to earn a high level of current
income consistent with low volatility of principal. The Fund's investment
objective is a fundamental policy and may not be changed without shareholder
approval. There is no assurance that the objective will be achieved. The
following policies may be changed by the Board of Trustees without shareholder
approval.
The Fund seeks to achieve its investment objective by investing under normal
circumstances at least 65% of its total assets in (i) fixed rate and adjustable
rate mortgage-backed securities ("Mortgage-Backed Securities") and (ii)
securities backed by other assets, such as automobile or credit card receivables
and home equity loans ("Asset-Backed Securities"). The Fund will only purchase
Mortgage-Backed Securities and Asset-Backed Securities which are issued or
guaranteed by the United States Government, its agencies or instrumentalities or
are rated Aaa by Moody's Investors Service, Inc. ("Moody's") or AAA by Standard
& Poor's Corporation ("S&P") or, if not rated, determined to be of comparable
quality by the Investment Manager and the Sub-Advisor. (Currently there are no
Asset-Backed Securities issued or guaranteed by the United States Government,
its agencies or instrumentalities.) The Fund expects that under normal
circumstances the market value dollar weighted average life (or period until the
next reset date) of the Fund's portfolio securities will be no greater than five
years.
The Fund seeks to achieve low volatility by investing in a diversified
portfolio of securities which the Investment Manager and the Sub-Advisor believe
will, in the aggregate, be resistant to significant fluctuations in market
value. The Investment Manager and Sub-Advisor believe that the Fund's policies
of purchasing shorter term Mortgage-
6
<PAGE>
Backed and Asset-Backed Securities will reduce the volatility of the Fund's net
asset value over the long term. Although the values of fixed-income securities
generally increase during periods of declining interest rates and decrease
during periods of increasing interest rates, the extent of these fluctuations
has historically generally been smaller for short term securities than for
securities with longer maturities. Conversely, the yield available on short term
securities has also historically been lower on average than those available from
longer term securities.
While the Fund invests primarily in Mortgage-Backed Securities and
Asset-Backed Securities, under ordinary circumstances it may invest up to 35% of
its total assets in (i) U.S. Government securities (securities guaranteed as to
principal and interest by the United States or its agencies or
instrumentalities), (ii) corporate debt securities, including adjustable rate
securities, rated Aaa by Moody's or AAA by S&P or, if unrated, determined to be
of comparable quality by the Fund's Trustees, (iii) with respect to up to 5% of
the Fund's total assets, high quality municipal securities, including zero
coupon securities, with the highest rating by Moody's or S&P, or (iv) money
market instruments. U.S. Government securities in which the Fund may invest
include Treasury bills, notes and bonds, including zero coupon securities. Money
market instruments in which the Fund may invest are securities issued or
guaranteed by the U.S. Government (Treasury bills, notes and bonds, including
zero coupon securities); bank obligations; Eurodollar certificates of deposit;
obligations of savings institutions; fully insured certificates of deposit; and
commercial paper rated within the two highest grades by Moody's or S&P or, if
not rated, issued by a company having an outstanding debt issue rated AAA by S&P
or Aaa by Moody's.
In an effort to increase investment return or to hedge the Fund's portfolio,
the Fund may engage in various investment techniques, including reverse
repurchase agreements, dollar rolls, purchasing and selling call and put
options, entering into interest rate futures contracts and related options,
purchasing securities on a when-issued, delayed delivery or forward commitment
basis and lending portfolio securities (see "Other Investment Policies" below).
There may be periods during which, in the opinion of the Investment Manager
and the Sub-Advisor, market conditions warrant reduction of some or all of the
Fund's securities holdings. During such periods, the Fund may adopt a temporary
"defensive" posture in which greater than 35% of its total assets are invested
in U.S. Government securities, money market instruments or cash.
MORTGAGE-BACKED SECURITIES
Mortgage-Backed Securities are securities that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
secured by real property. The term Mortgage-Backed Securities as used herein
includes adjustable rate mortgage securities and derivative mortgage products
such as collateralized mortgage obligations, stripped Mortgage-Backed Securities
and other products described below.
There are currently three basic types of Mortgage-Backed Securities: (i)
those issued or guaranteed by the United States Government or one of its
agencies or instrumentalities, such as the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC") (securities issued by GNMA, but
not those issued by FNMA or FHLMC, are backed by the "full faith and credit" of
the United States); (ii) those issued by private issuers that represent an
interest in or are collateralized by Mortgage-Backed Securities issued or
guaranteed by the United States Government or one of its agencies or
instrumentalities; and (iii) those issued by private issuers that represent an
interest in or are collateralized by whole mortgage loans or Mortgage-Backed
Securities without a government guarantee but usually having some form of
private credit enhancement.
The Fund will invest in mortgage pass-through securities representing
participation interests in
7
<PAGE>
pools of residential mortgage loans originated by United States governmental or
private lenders and guaranteed, to the extent provided in such securities, by
the United States Government or one of its agencies or instrumentalities. Such
securities, which are ownership interests in the underlying mortgage loans,
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semiannually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.
The mortgage pass-through securities in which the Fund may invest include
those issued or guaranteed by GNMA, FNMA and FHLMC. GNMA certificates are direct
obligations of the U.S. Government and, as such, are backed by the "full faith
and credit" of the United States. FNMA is a federally chartered, privately owned
corporation and FHLMC is a corporate instrumentality of the United States. FNMA
and FHLMC certificates are not backed by the full faith and credit of the United
States but the issuing agency or instrumentality has the right to borrow, to
meet its obligations, from an existing line of credit with the U.S. Treasury.
The U.S. Treasury has no legal obligation to provide such line of credit and may
choose not to do so. Each of GNMA, FNMA and FHLMC guarantee timely distribution
of interest to certificate holders. GNMA and FNMA also guarantee timely
distribution of scheduled principal payments. FHLMC generally guarantees only
the ultimate collection of principal of the underlying mortgage loans.
Certificates for Mortgage-Backed Securities evidence an interest in a
specific pool of mortgages. These certificates are, in most cases, "modified
pass-through" instruments, wherein the issuing agency guarantees the payment of
principal and interest on mortgages underlying the certificates, whether or not
such amounts are collected by the issuer on the underlying mortgages.
ADJUSTABLE RATE MORTGAGE SECURITIES. The Fund may also invest in adjustable
rate mortgage securities ("ARMs"), which are pass-through mortgage securities
collateralized by mortgages with adjustable rather than fixed rates. ARMs
eligible for inclusion in a mortgage pool generally provide for a fixed initial
mortgage interest rate for either the first three, six, twelve or thirteen
scheduled monthly payments. Thereafter, the interest rates are subject to
periodic adjustment based on changes to a designated benchmark index.
ARMs contain maximum and minimum rates beyond which the mortgage interest
rate may not vary over the lifetime of the security. In addition, certain ARMs
provide for additional limitations on the maximum amount by which the mortgage
interest rate may adjust for any single adjustment period. Alternatively,
certain ARMs contain limitations on changes in the required monthly payment. In
the event that a monthly payment is not sufficient to pay the interest accruing
on an ARM, any such excess interest is added to the principal balance of the
mortgage loan, which is repaid through future monthly payments. If the monthly
payment for such an instrument exceeds the sum of the interest accrued at the
applicable mortgage interest rate and the principal payment required at such
point to amortize the outstanding principal balance over the remaining term of
the loan, the excess is utilized to reduce the then outstanding principal
balance of the ARM.
PRIVATE MORTGAGE PASS-THROUGH SECURITIES. Private mortgage pass-through
securities are structured similarly to the GNMA, FNMA and FHLMC mortgage
pass-through securities and are issued by originators of and investors in
mortgage loans, including savings and loan associations, mortgage banks,
commercial banks, investment banks and special purpose subsidiaries of the
foregoing. These securities usually are backed by a pool of conventional fixed
rate or adjustable rate mortgage
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loans. Since private mortgage pass-through securities typically are not
guaranteed by an entity having the credit status of GNMA, FNMA and FHLMC, such
securities generally are structured with one or more types of credit
enhancement. Types of credit enhancements are described under "Asset-Backed
Securities" below.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTICLASS PASS-THROUGH
SECURITIES. Collateralized mortgage obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities. Typically,
CMOs are collateralized by GNMA, FNMA or FHLMC Certificates, but also may be
collateralized by whole loans or private mortgage pass-through securities (such
collateral collectively hereinafter referred to as "Mortgage Assets").
Multiclass pass-through securities are equity interests in a trust composed of
Mortgage Assets. Payments of principal of and interest on the Mortgage Assets,
and any reinvestment income thereon, provide the funds to pay debt service on
the CMOs or make scheduled distributions on the multiclass pass-through
securities. CMOs may be issued by agencies or instrumentalities of the United
States government, or by private originators of, or investors in, mortgage
loans, including savings and loan associations, mortgage banks, commercial
banks, investment banks and special purpose subsidiaries of the foregoing. The
issuer of a series of CMOs may elect to be treated as a Real Estate Mortgage
Investment Conduit ("REMIC"). REMICs include governmental and/or private
entities that issue a fixed pool of mortgages secured by an interest in real
property. REMICs are similar to CMOs in that they issue multiple classes of
securities, but unlike CMOs, which are required to be structured as debt
securities, REMICs may be structured as indirect ownership interests in the
underlying assets of the REMICs themselves. However, there are no effects on the
Fund from investing in CMOs issued by entities that have elected to be treated
as REMICs, and all future references to CMOs shall also be deemed to include
REMICs.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche", is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. Interest is paid or accrues on all classes of the CMOs on a monthly,
quarterly or semiannual basis. Certain CMOs may have variable or floating
interest rates and others may be stripped (securities which provide only the
principal or interest feature of the underlying security).
The principal of and interest on the Mortgage Assets may be allocated among
the several classes of a CMO series in a number of different ways. Generally,
the purpose of the allocation of the cash flow of a CMO to the various classes
is to obtain a more predictable cash flow to the individual tranches than exists
with the underlying collateral of the CMO. As a general rule, the more
predictable the cash flow is on a CMO tranche, the lower the anticipated yield
will be on that tranche at the time of issuance relative to prevailing market
yields on Mortgage-Backed Securities. As part of the process of creating more
predictable cash flows on most of the tranches in a series of CMOs, one or more
tranches generally must be created that absorb most of the volatility in the
cash flows on the underlying mortgage loans. The yields on these tranches, which
may include Stripped Mortgage-Backed Securities as described below, may be
higher than prevailing market yields on Mortgage-Backed Securities with similar
maturities. As a result of the uncertainty of the cash flows of these tranches,
the market prices of and yield on these tranches tend to be more volatile.
The Fund also may invest in, among other things, parallel pay CMOs and
Planned Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in
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calculating the stated maturity date or final distribution date of each class,
which, as with other CMO structures, must be retired by its stated maturity date
or final distribution date but may be retired earlier. PAC Bonds generally
require payments of a specified amount of principal on each payment date. PAC
Bonds always are parallel pay CMOs with the required principal payment on such
securities having the highest priority after interest has been paid to all
classes.
STRIPPED MORTGAGE-BACKED SECURITIES. Stripped Mortgage-Backed Securities are
derivative multiclass mortgage securities. Stripped Mortgage-Backed Securities
may be issued by agencies or instrumentalities of the United States government,
or by private originators of, or investors in, mortgage loans, including savings
and loan associations, mortgage banks, commercial banks, investment banks and
special purpose subsidiaries of the foregoing.
Stripped Mortgage-Backed Securities usually are structured with two classes
that receive different proportions of the interest and principal distribution on
a pool of Mortgage Assets. A common type of Stripped Mortgage-Backed Securities
will have one class receiving some of the interest and most of the principal
from the Mortgage Assets, while the other class will receive most of the
interest and the remainder of the principal. In the most extreme case, one class
will receive all of the interest (the interest-only or "IO" class), while the
other class will receive all of the principal (the principal-only or "PO"
class). PO classes generate income through the accretion of the deep discount at
which such securities are purchased, and, while PO classes do not receive
periodic payments of interest, they receive monthly payments associated with
scheduled amortization and principal prepayment from the Mortgage Assets
underlying the PO class. The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying Mortgage Assets, and a rapid rate of principal payments may
have a material adverse effect on the Fund's yield to maturity. If the
underlying Mortgage Assets experience greater than anticipated prepayments of
principal, the Fund may fail to fully recoup its initial investment in these
securities even if the securities are rated Aaa by Moody's or AAA by S&P.
The Fund may purchase Stripped Mortgage-Backed Securities for income, or for
hedging purposes to protect the Fund's portfolio against interest rate
fluctuations. For example, since an IO class will tend to increase in value as
interest rates rise, it may be utilized to hedge against a decrease in value of
other fixed-income securities in a rising interest rate environment. The Fund's
management understands that the staff of the Securities and Exchange Commission
considers privately issued Stripped Mortgage-Backed Securities representing
interest only or principal only components of U.S. Government or other debt
securities to be illiquid securities. The Fund will treat such securities as
illiquid so long as the staff maintains such position. Stripped Mortgage-Backed
Securities issued by the U.S. Government or its agencies, and which are backed
by fixed-rate mortgages, will be treated as liquid provided they are so
determined by, or under procedures approved by, the Board of Trustees. The Fund
may not invest more than 10% of its net assets in illiquid securities.
ASSET-BACKED SECURITIES
The securitization techniques used to develop Mortgage-Backed Securities are
also applied to a broad range of other assets. Through the use of trusts and
special purpose corporations, various types of assets, primarily automobile and
credit card receivables and home equity loans, are being securitized in
pass-through structures similar to the mortgage pass-through structures
described above or in a pay-through structure similar to the CMO structure.
New instruments and variations of existing Mortgage-Backed Securities and
Asset-Backed Securities continue to be developed. The Fund may invest in any
such instruments or variations as may be developed, to the extent consistent
with its
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investment objective and policies and applicable regulatory requirements.
TYPES OF CREDIT ENHANCEMENT. Mortgage-Backed Securities and Asset-Backed
Securities are often backed by a pool of assets representing the obligations of
a number of different parties. To lessen the effect of failures by obligors on
underlying assets to make payments, those securities may contain elements of
credit support, which fall into two categories: (i) liquidity protection and
(ii) protection against losses resulting from ultimate default by an obligor on
the underlying assets. Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets, to ensure that the
receipt of payments on the underlying pool occurs in a timely fashion.
Protection against losses resulting from default ensures ultimate payment of the
obligations on at least a portion of the assets in the pool. This protection may
be provided through guarantees, insurance policies or letters of credit obtained
by the issuer or sponsor from third parties, through various means of
structuring the transaction or through a combination of such approaches. The
degree of credit support provided for each issue is generally based on
historical information respecting the level of credit risk associated with the
underlying assets. Delinquencies or losses in excess of those anticipated could
adversely affect the return on an investment in a security. The Fund will not
pay any fees for credit support, although the existence of credit support may
increase the price of a security.
OTHER INVESTMENT POLICIES
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities, from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, including the risks of default or
bankruptcy of the selling financial institution, the Fund follows procedures
designed to minimize such risks. These procedures include effecting repurchase
transactions only with large, well-capitalized and well-established financial
institutions and maintaining adequate collateralization.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. The Fund may also use
reverse repurchase agreements and dollar rolls 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.
The Fund may enter into dollar rolls in which the Fund sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified future
date. During the roll period, the Fund foregoes principal and interest paid on
the securities. The Fund is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale.
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. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
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when-issued, delayed delivery or forward commitment basis may increase the
volatility of the Fund's net asset value. The Fund will establish a segregated
account with its custodian bank in which it will maintain cash, U.S. Government
securities or other liquid high grade debt obligations equal in value to its
obligations in respect of when-issued or delayed delivery securities and forward
commitments. The Fund's ability to enter into such transactions is not otherwise
limited, but the Fund expects that under normal circumstances no more than 15%
of the Fund's total assets will be so invested.
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 buy-out or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. 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 may
also sell securities on a "when, as and if issued" basis provided that the
issuance of a security will result automatically from the exchange or conversion
of a security owned by the Fund at the time of 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 certain notice provisions described in the Statement of
Additional Information), and are at all times secured by cash, U.S. Government
securities or other high grade debt securities, 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.
PRIVATE PLACEMENTS. The Fund may invest 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. 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 and
Sub-Adviser pursuant to procedures adopted by the Trustees of the Fund, will
make a determination as to the liquidity of each restricted security purchased
by the Fund. If a restricted security is determined to be "liquid," such
security will not be included within the category "illiquid securities," which
is limited by the Fund's investment restrictions to 10% of the Fund's total
assets.
OPTIONS AND FUTURES TRANSACTIONS. The Fund is permitted to enter into call
and put options on U.S. Treasury notes, bonds and bills which are listed on
Exchanges and written in over-the-counter transactions ("OTC options"). Listed
options are issued by the Options Clearing Corporation ("OCC"). OTC options are
purchased from or sold (written) to dealers or financial institutions which have
entered into direct agreements with the Fund. The Fund may purchase listed and
over-the-counter call and put options on U.S. Government securities and
Mortgage-Backed Securities in amounts equalling up to 5% of its total assets.
The Fund may purchase call and put options on securities which it holds (or has
the right to acquire) in its portfolio only for hedging purposes.
The Fund may also purchase and sell interest rate futures contracts
("futures contracts") that are traded on U.S. commodity exchanges on such
underlying securities as U.S. Treasury bonds, notes and bills, Eurodollar
instruments and Mortgage-Backed Securities. The Fund will purchase or sell
futures contracts only for the purpose of hedging its portfolio (or anticipated
portfolio) securities against changes in prevailing interest rates, and not for
speculative purposes.
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The Fund may also purchase 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.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in the
market value of the Fund's portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market and political factors which cannot be predicted, in particular movements
in interest rates and, with respect to foreign currencies, currency exchange
rates. A decline in prevailing interest rates generally increases the value of
fixed-income securities, while an increase in rates usually reduces the value of
those securities. (The Fund's yield also will vary based on the yield of the
Fund's portfolio securities.)
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-Backed and
Asset-Backed Securities have certain different characteristics than traditional
debt securities. Among the major differences are that interest and principal
payments are made more frequently, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. As a result, if the Fund purchases such a
security at a premium, a prepayment rate that is faster than expected will
reduce yield to maturity, while a prepayment rate that is slower than expected
will have the opposite effect of increasing yield to maturity. Alternatively, if
the Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity. The Fund may invest a portion of its assets in derivative
Mortgage-Backed Securities such as Stripped Mortgage-Backed Securities which are
highly sensitive to changes in prepayment and interest rates. The Investment
Manager and the Sub-Advisor will seek to manage these risks (and potential
benefits) by investing in a variety of such securities and through hedging
techniques.
Mortgage-Backed Securities and Asset-Backed Securities, like all fixed
income securities, generally decrease in value as a result of increases in
interest rates. In addition, although generally the value of fixed-income
securities increases during periods of falling interest rates and, as stated
above, decreases during periods of rising interest rates, as a result of
prepayments and other factors, this is not always the case with respect to
Mortgage-Backed Securities and Asset-Backed Securities.
Although the extent of prepayments on a pool of mortgage loans depends on
various economic and other factors, as a general rule prepayments on fixed rate
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Accordingly, amounts
available for reinvestment by the Fund are likely to be greater during a period
of declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates. Asset-Backed
Securities, although less likely to experience the same prepayment rates as
Mortgage-Backed Securities, may respond to certain of the same factors
influencing prepayments, while at other times different factors, such as changes
in credit use and payment patterns resulting from social, legal and economic
factors, will predominate. Mortgage-Backed Securities and Asset-Backed
Securities generally decrease in value as a result of increases in interest
rates and may benefit less than other fixed income securities from declining
interest rates because of the risk of prepayment.
The Fund may invest in mortgage derivative securities, such as CMOs, the
average life of which is determined using mathematical models that incorporate
prepayment assumptions and other factors that involve estimates of future
economic and market conditions. These estimates may vary from actual future
results, particularly during periods of extreme market volatility. In addition,
under
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certain market conditions, such as those that developed in 1995, the average
weighted life of mortgage derivative securities may not accurately reflect the
price volatility of such securities. For example, in periods of supply and
demand imbalances in the market for such securities and/or in periods of sharp
interest rate movements, the prices of mortgage derivative securities may
fluctuate to a greater extent than would be expected from interest rate
movements alone.
The Fund's investments in mortgage derivative securities also subject the
Fund to extension risk. Extension risk is the possibility that rising interest
rates may cause prepayments to occur at a slower than expected rate. This
particular risk may effectively change a security which was considered short or
intermediate-term at the time of purchase into a long-term security. Long-term
securities generally fluctuate more widely in response to changes in interest
rates than short or intermediate-term securities.
There are certain risks associated specifically with CMOs. CMOs issued by
private entities are not U.S. Government securities and are not guaranteed by
any government agency, although the securities underlying a CMO may be subject
to a guarantee. Therefore, if the collateral securing the CMO, as well as any
third party credit support or guarantees, is insufficient to make payment, the
holder could sustain a loss. However, as stated above, the Fund will invest only
in CMOs which are rated AAA by S&P or Aaa by Moody's or, if unrated, are
determined to be of comparable quality. Also, a number of different factors,
including the extent of prepayment of principal of the Mortgage Assets, affect
the availability of cash for principal payments by the CMO issuer on any payment
date and, accordingly, affect the timing of principal payments on each CMO
class.
Asset-Backed Securities involve certain risks that are not posed by
Mortgage-Backed Securities, resulting mainly from the fact that Asset-Backed
Securities do not usually contain the complete benefit of a security interest in
the related collateral. For example, credit card receivables generally are
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, some of which may reduce the ability to obtain
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities.
STRIPPED MORTGAGE-BACKED SECURITIES. The yield to maturity on an IO class
is extremely sensitive to the rate of principal payments (including prepayments)
on the related underlying Mortgage Assets, and a rapid rate of principal
payments may have a material adverse effect on the Fund's yield to maturity. If
the underlying Mortgage Assets experience greater than anticipated prepayments
of principal, the Fund may fail to fully recoup its initial investment in these
securities even if the securities are rated Aaa by Moody's or AAA by S&P.
The Fund may purchase Stripped Mortgage-Backed Securities for income, or for
hedging purposes to protect the Fund's portfolio against interest rate
fluctuations. For example, since an IO class will tend to increase in value as
interest rates rise, it may be utilized to hedge against a decrease in value of
other fixed-income securities in a rising interest rate environment. The Fund
understands that the staff of the Securities and Exchange Commission considers
privately issued Stripped Mortgage-Backed Securities representing interest only
or principal only components of U.S. Government or other debt securities to be
illiquid securities. The Fund will treat such securities as illiquid so long as
the staff maintains such position. Stripped Mortgage-Backed Securities issued by
the U.S. Government or its agencies, and which are backed by fixed-rate
mortgages, will be treated as liquid provided they are so determined by, or
under procedures approved by, the Board of Trustees. The Fund may not invest
more than 10% of its total assets in illiquid securities (see "Investment
Restrictions" below).
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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 particpate 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.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. The Fund will establish a
segregated account with its custodian bank in which it will maintain cash, U.S.
Government securities or other liquid high grade debt obligations equal in value
to its obligations in respect of reverse repurchase agreements and dollar rolls.
Reverse repurchase agreements and dollar rolls 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 or dollar roll files for bankruptcy or
becomes insolvent, the Fund's use of the 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.
Reverse repurchase agreements and dollar rolls are speculative techniques
involving leverage, and are considered borrowings by the Fund. The Fund does not
expect to engage in reverse repurchase agreements and dollar rolls with respect
to greater than 25% of the Fund's total assets.
OPTIONS AND FUTURES TRANSACTIONS. Exchanges may 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.
Participation in the options or futures markets involves investment risks
and transaction costs to which the Fund would not be subject absent the use of
these strategies. If the Investment Manager's or Sub-Advisors' prediction of
movements in the direction of the securities, currency or interest rate markets
are inaccurate, the adverse consequences to the Fund (e.g., a reduction in the
Fund's net asset value or a reduction in the amount of income available for
distribution) may leave the Fund in a worse position than if such strategies
were not used. Risks inherent in the use of options, futures contracts
and options on futures contracts include (a) dependence on the Investment
Manager's or Sub-Advisors' ability to predict correctly movements in the
direction of interest rates, as well as securities and/or currency markets; (b)
imperfect correlation between the price of options and futures contracts and
options thereon and movements in the prices of the securities or currencies
being hedged; (c) the fact that skills needed to use these strategies are
different from those needed to select portfolio securities; (d) the possible
absence of a liquid secondary market for any particular instrument at any time;
and (e) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences.
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Another such risk is that the price of the futures contract may not move in
tandem with the change in prevailing interest rates against which the Fund seeks
a hedge. A correlation may 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. See the Statement of Additional Information for further discussion of
such risks.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any such
futures, options or products as may be developed, to the extent consistent with
its investment objective and applicable regulatory requirements.
For additional risk disclosure, please refer to the "Investment Objective
and Policies" and "Portfolio Characteristics" sections of the Prospectus and to
the "Investment Practices and Policies" section of the Statement of Additional
Information.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager and the
Sub-Advisor with a view to achieving the Fund's investment objective. As a
result of the Fund's investment objective and policies, and the nature of the
Mortgage-Backed Securities and Asset-Backed Securities markets, the Fund's
portfolio turnover rate may exceed 200%. 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 trading policy.
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Investment Manager and the Sub-Advisor will rely on
information from various sources, including research, analysis and appraisals of
brokers and dealers, including Dean Witter Reynolds Inc. ("DWR"), a
broker-dealer affiliate of InterCapital; the views of Trustees of the Fund and
others regarding economic developments and interest rate trends; and the
Investment Manager's and Sub-Advisor's own analysis of factors they deem
relevant. The Fund is part of the Dean Witter family of mutual funds and is
managed by its Investment Manager, InterCapital, and by its Sub-Advisor,
BlackRock Financial Management, Inc. ("BlackRock"). BlackRock manages in excess
of $34 billion of net assets on behalf of individual and institutional
investors, including 21 closed-end funds traded on either the New York or
American Stock Exchanges and several open-end funds. Along with BlackRock's
portfolio management team, Scott Amero has been the Fund's primary portfolio
manager since its inception. Mr. Amero is a Managing Director of BlackRock and a
member of its Investment Strategy Committee, and is a specialist in the mortgage
and short duration sectors. His areas of expertise include asset-backed
securities, adjustable rate mortgage securities and other short duration
mortgage products. Prior to joining BlackRock in 1990, Mr. Amero was a Vice
President in Fixed Income Research at The First Boston Corporation, where he
became the firm's primary strategist for short duration securities.
Brokerage commissions are not normally charged on the purchase or sale of
Mortgage-Backed Securities or U.S. Government securities, but such transactions
generally involve costs in the form of spreads between bid and asked prices.
Orders for transactions in portfolio securities are placed for the Fund with a
number of brokers and dealers, which may include DWR. Pursuant to an order of
the Securities and Exchange Commission, the Fund may effect principal
transactions in certain money market instruments with DWR. In addition, the Fund
may incur brokerage commissions on transactions conducted through DWR.
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INVESTMENT RESTRICTIONS
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The investment restrictions listed below are among the restrictions that
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.
The Fund may not:
1. With respect to 75% of its total assets, invest more than 5% of the value
of its total assets in the securities of any one issuer (other than obligations
issued, or guaranteed by, the United States Government, its agencies or
instrumentalities).
2. Purchase more than 10% of all outstanding voting securities of any one
issuer.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry, except that the Fund will invest at least 25% of
its assets in Mortgage-Backed and Asset-Backed Securities under normal market
conditions. This restriction does not apply to obligations issued or guaranteed
by the United States Government or its agencies or instrumentalities.
4. Invest more than 10% of its total assets in "illiquid securities" and
repurchase agreements which have a maturity of longer than seven days. The staff
of the Securities and Exchange Commission has taken the position that OTC
options are illiquid securities. The Investment Manager and Sub-Advisor disagree
with this position. Nevertheless, the Fund has agreed to treat OTC options as
illiquid securities for purposes of this investment restriction so long as the
staff maintains such position.
5. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years of
continuous operation. This restriction shall not apply to Mortgage-Backed
Securities or Asset-Backed Securities or to any obligation of the United States
Government, its agencies or instrumentalities.
6. Purchase or sell commodities or commodities contracts except that the Fund
may purchase and sell interest rate futures contracts and related options
thereon.
7. 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 initial or variation margin for futures are not
deemed to be pledges of assets.)
8. 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.
9. Borrow money in excess of 33 1/3% of the Fund's total assets (including
the proceeds of the borrowings).
If a percentage restriction is adhered to at the time of investment (except
in the case of Restriction 9), 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.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager, pursuant to a
Distribution Agreement between the Fund and the Distributor and offered by DWR
and
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<PAGE>
other dealers who have entered into selected dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000. Subsequent purchases of $100 or more
may be made by sending a check, payable to Dean Witter Premier Income Trust,
directly to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box 1040,
Jersey City, NJ 07303 or by contacting an account executive of DWR or other
Selected Broker-Dealer. The minimum initial purchase in the case of investments
through EasyInvestSM, 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. 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), plus a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:
<TABLE>
<CAPTION>
SALES CHARGE
----------------------------------------
PERCENTAGE APPROXIMATE
AMOUNT OF OF PUBLIC PERCENTAGE OF
SINGLE TRANSACTION OFFERING PRICE AMOUNT INVESTED
- ---------------------- ----------------- ---------------------
<S> <C> <C>
Less than $100,000.... 3.00% 3.09%
$100,000 but less than
$250,000............. 2.50 2.56
$250,000 but less than
$500,000............. 2.00 2.04
$500,000 but less than
$1,000,000........... 1.25 1.27
$1,000,000 and over... -0- -0-
</TABLE>
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or her
spouse and their children under the age of 21 purchasing shares for his or her
own accounts; (c) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account; (d) a pension, profit-sharing or
other employee benefit plan qualified or non-qualified under Section 401 of the
Internal Revenue Code; (e) tax-exempt organizations enumerated in Section
501(c)(3) or (13) of the Internal Revenue Code; (f) employee benefit plans
qualified under Section 401 of the Internal Revenue Code of a single employer or
of employers who are "affiliated persons" of each other within the meaning of
Section 2(a)(3)(c) of the Act and for investments in Individual Retirement
Accounts of employees of a single employer through Systematic Payroll Deduction
Plans, or (g) any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six months and has
some purpose other than the purchase of redeemable securities of a registered
investment company at a discount.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Shares of the
Fund purchased through the Distributor are entitled to any dividends declared
beginning on the next business day following settlement date. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. Shares purchased through the Transfer Agent are entitled to any
dividends declared beginning on the next business day following receipt of an
order. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive capital gains
distributions if their order is received by the close of business on the day
prior to the record date for such distributions. Sales personnel are compensated
for selling
18
<PAGE>
shares of the Fund at the time of their sale by the Distributor and/or Selected
Broker-Dealer. In addition, some sales personnel of the Selected Broker-Dealer
will receive various types of non-cash compensation as special sales incentives,
including trips, educational and/or business seminars and merchandise. The Fund
and/or the Distributor reserve the right to reject any purchase order.
REDUCED SALES CHARGE
RIGHT OF ACCUMULATION. Investors may benefit from a reduction of the sales
charges in accordance with the above schedule if the cumulative net asset value
of shares of the Fund purchased in a single transaction, together with shares
previously purchased which are held at the time of such transaction, amounts to
$100,000 or more.
The Distributor must be notified by the shareholder at the time a purchase
order is placed that the purchase qualifies for the reduced charge under the
Right of Accumulation. Similar notification must be made in writing by the
shareholder when such an order is placed by mail. The reduced sales charge will
not be granted if: (a) such notification is not furnished at the time of the
order; or (b) a review of the records of the Distributor or the Transfer Agent
fails to confirm the investor's represented holdings.
LETTER OF INTENT. The foregoing schedule of reduced sales charges will also
be available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of shares of the Fund from the
Distributor. The cost of shares of the Fund which were previously purchased at a
price including a front-end sales charge during the 90-day period prior to the
date of receipt by the Distributor of the Letter of Intent, which are still
owned by the shareholder, may also be included in determining the applicable
reduction.
For further information concerning purchases of the Fund's shares, contact
the Distributor or consult the Statement of Additional Information.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1
under the Act, whereby the expenses of certain activities and services by the
Distributor and others in the distribution of the Fund's shares, including the
payment of commissions for sales of the Fund's shares and incentive compensation
to and expenses of DWR's account executives and others who engage in or support
distribution of shares or who service shareholder accounts, including overhead
and telephone expenses; printing and distribution of prospectuses and reports
used in connection with the offering of the Fund's shares to other than current
shareholders; and preparation, printing and distribution of sales literature and
advertising materials. Reimbursements for these expenses will be made in monthly
payments by the Fund to the Distributor, which will in no event exceed an amount
equal to a payment at the annual rate of 0.20 of 1% of the average daily net
assets of the Fund. Expenses incurred by the Distributor pursuant to the Plan in
any fiscal year will not be reimbursed by the Fund through payments accrued in
any subsequent fiscal year. No interest or other financial charges will be
incurred on any distribution expense incurred by the Distributor under the Plan
or on any unreimbursed expenses due to the Distributor pursuant to the Plan. The
fee payable pursuant to the Plan, equal to 0.20% of the Fund's average daily net
assets, is characterized as a service fee within the meaning of NASD guidelines.
The Fund accrued $64,994 to the Distributor, pursuant to the Plan of
Distribution, for the year ended October 31, 1995. This is an accrual at the
annual rate of 0.18% of the Fund's average daily net assets.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time on each day that the New York Stock Exchange is open (or, on
days when the New York Stock Exchange closes prior to 4:00 p.m. at such earlier
19
<PAGE>
time), 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 quoted
by NASDAQ is valued at its last sale price on that exchange or quotation service
prior to the time assets are valued; if there were no sales that day, the
security is valued at the latest bid price, (in cases where a security is traded
on more than one exchange, the security is valued on the exchange designated as
the primary market pursuant to procedures adopted by the Trustees), and (2) all
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price prior to the time of valuation.
When market quotations are not readily available, including circumstances under
which it is determined by the Investment Manager and/or the Sub-Advisor that
sale or bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Fund's
Trustees (valuation of securities for which market quotations are not readily
available may also be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors).
Certain of the Fund's portfolio securities for which reliable market
quotations are generally not readily available are valued by an outside pricing
service approved by the Fund's Trustees. The pricing service utilizes a
computerized grid matrix and/ or research and evaluations by its staff in
determining what it believes is the fair value of the portfolio securities
valued by such pricing service.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
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. 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
in shares of the Fund (or in cash if the shareholder so requests) at the net
asset value per share (without sales charge) 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 checks during the
first ten days of the following month.
EASYINVEST. 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").
20
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN. A withdrawal plan is available for shareholders
who own or purchase shares of the Fund having a minimum value of $10,000 based
upon the then current offering price. The plan provides for monthly or quarterly
(March, June, September, December) checks in any dollar amount, not less than
$25 or in any whole percentage of the account balances, on an annualized basis.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
EXCHANGE PRIVILEGE. 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 front-end (at time of purchase) sales charge
("FESC funds"), for shares of Dean Witter Funds sold with a contingent deferred
sales charge ("CDSC funds"), and for shares of Dean Witter Short-Term U.S.
Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term
Bond Fund, Dean Witter Balanced Growth Fund, Dean Witter Balanced Income Fund
and Dean Witter Intermediate Term U.S. Treasury Trust and five Dean Witter Funds
which are money market funds (the foregoing eleven non-FESC and 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. However,
shares of CDSC funds, including shares acquired in exchange for shares of FESC
funds, may not be exchanged for shares of FESC funds. Thus, shareholders who
exchange their Fund shares for shares of CDSC funds may subsequently exchange
those shares for shares of other CDSC funds or Exchange Funds but may not
reacquire FESC fund shares by exchange.
An exchange to another FESC fund, to a CDSC fund or to an Exchange Fund that
is not a money-market fund is on the basis of the next calculated net asset
value per share of each fund after the exchange order is received. 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 Exchange Funds, FESC funds and CDSC funds can be
effected on the same basis (except that CDSC fund shares may not be exchanged
for shares of FESC funds). Shares of a CDSC fund acquired in exchange for shares
of an FESC fund (or in exchange for shares of other Dean Witter Funds for which
shares of an FESC fund have been exchanged) are not subject to any contingent
deferred sales charge upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may be limited by the Fund's refusal to
accept additional purchases and/ or exchanges from the investor. Although the
Fund does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests of
the Fund and its other shareholders, investors should be aware that the Fund and
each of the other Dean Witter Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such restriction will be made by the Fund on a prospective basis
only, upon notice to the shareholder not later than ten days following such
shareholder's most recent exchange. Also, the Exchange Privilege may be
terminated or revised at any time by the Fund and/or any 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. Shareholders maintaining margin
accounts with DWR or another
21
<PAGE>
Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in their margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares, on
which the shareholder may realize a capital gain or loss. However, the ability
to deduct capital losses on an exchange may be limited in situations where there
is an exchange of shares within ninety days after the shares are purchased. The
Exchange Privilege is 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 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.
For additional information about the Exchange Privilege, shareholders should
contact their DWR or other Selected Broker-Dealer account executive or the
Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at
their current net asset value per share (without any redemption or other
charge). 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(s), the shares may be redeemed by surrendering the
certificate(s) with a written request for redemption, along with any additional
information required by the Transfer Agent.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's
22
<PAGE>
account without a share certificate may 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 determined (see "Purchase of Fund Share --
Determination of Net Asset Value") after such repurchase order is received.
Repurchase orders received by DWR and other Selected Broker-Dealers prior to
4:00 p.m., New York time, on any business day will be priced at the net asset
value per share that is based on that day's close. Repurchase orders received
after 4:00 p.m., New York time, will be priced on the basis of the next business
day's close. Selected Broker-Dealers may charge for their services in connection
with the repurchase, but the Fund, DWR and the Distributor do not charge a fee.
Payment for shares repurchased may be made by the Fund to DWR and other Selected
Broker-Dealers for the account of the shareholder. The offer by DWR and other
Selected Broker-Dealers to repurchase shares from dealers or shareholders may be
suspended 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., at times when normal trading is not taking place on
the New York Stock Exchange. If the shares to be redeemed have recently been
purchased by check, payment of the redemption pro-
ceeds 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 30 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 their net asset value (without a sales charge) next
determined after a reinstatement request, together with the proceeds, is
received by the Transfer Agent.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Internal Revenue Code) whose shares have a value of
less than $100 as a result of redemptions or repurchases, or such lesser amount
as may be fixed by the Board of Trustees or, in the case of an account opened
through EasyInvestSM, if after twelve months the shareholder has invested less
than $1,000 in the account. However, before the Fund redeems such shares and
sends the proceeds to the shareholder, it will notify the shareholder that the
value of the shares is less than the applicable amount and allow the shareholder
sixty days to make an additional investment in an amount which will increase the
value of the account to at least the applicable amount before the redemption is
processed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends from net
investment income on each day the New York Stock Exchange is open for business
to shareholders of record as of the close of business the preceding business
day. Such dividends are paid monthly. The Fund intends to distribute all of the
Fund's net investment income on an annual basis.
23
<PAGE>
Net realized short-term and long-term capital gains, if any, will be
distributed at least once per year, although the Investment Manager reserves the
right to retain a portion of long-term gains for reinvestment.
All dividends and capital gains distributions will be paid in additional
Fund shares (without sales charge) and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends 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 remain
qualified as a regulated investment company under Subchapter M of the Internal
Revenue Code, it is not expected that the Fund will be required to pay any
federal income tax on such income and capital gains.
Gains or losses on the Fund's transactions in listed options on securities,
futures and options on futures may be treated as 60% long-term gain or loss and
40% short-term gain or loss. When the Fund engages in options and futures
transactions, various tax regulations applicable to the Fund may have the effect
of causing the Fund to recognize a gain or loss for tax purposes before that
gain or loss is realized, or to defer recognition of a realized loss for tax
purposes. Recognition, for tax purposes, of an unrealized loss may result in a
lesser amount of the Fund's realized net short-term gains being available for
distribution.
Shareholders who are required to pay taxes on their income will normally
have to pay federal income taxes, and any applicable state and/or local income
taxes, on the dividends and distributions they receive from the Fund. Such
dividends and distributions, to the extent that they are derived from net
investment income and net short-term capital gains, are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such 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 received by the shareholder in
the prior year.
After the end of the calendar year, shareholders will be sent full
information on their dividends and any capital gains distributions for tax
purposes, including information as to the portion taxable as ordinary income,
the portion taxable as capital gains and any portion treated as a non-taxable
return of capital. Any such return of capital will reduce the shareholders' tax
basis in their shares. To avoid being subject to a 31% federal backup
withholding tax on taxable dividends, distributions and the proceeds of
redemptions and repurchases, shareholders' taxpayer identification numbers must
be furnished and certified as to their accuracy.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the corporate dividends received deduction.
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 advisor. Shareholders will be notified annually by the Fund as to
the Federal tax status of dividends and distributions paid or retained by the
Fund.
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
24
<PAGE>
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 maximum offering price per share at the end of the period), all in
accordance with applicable regulatory requirements. Such amount is compounded
for six months and then annualized for a twelve-month period to derive the
Fund's yield.
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 periods of one, five and ten
years, or over the life of the Fund, if less than any of the foregoing. Average
annual total return reflects all income earned by the Fund, any appreciation or
depreciation of the Fund's assets, all expenses incurred by the Fund and all
sales charges incurred by shareholders, for the period. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculations may or may not reflect the
deduction of the front-end 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 by adding 1
to the Fund's aggregate total return to date and multiplying by $9,700, $48,500
and $97,500 ($10,000, $50,000 and $100,000 adjusted for 3%, 3% and 2.5% sales
charges, respectively. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations such as Lipper Analytical Services, Inc.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders, and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by the
Shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund and requires that
notice of such disclaimer be given in each instrument entered into or executed
by the Fund, and provides for indemnification and reimbursement of expenses out
of the Fund's property for any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations. Given the above
limitations on shareholder personal liability, and the nature of the Fund's
assets and operations, the possibility of the Fund being unable to meet its
obligations is remote and, in the opinion of Massachusetts counsel to the Fund,
the risk to Fund shareholders of personal liability is remote.
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.
25
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS Dean Witter Short-Term Bond Fund
Dean Witter Liquid Asset Fund Inc. Dean Witter National Municipal Trust
Dean Witter U.S. Government Money Dean Witter High Income Securities
Market Trust Dean Witter Balanced Income Fund
Dean Witter Tax-Free Daily Income Trust Dean Witter Hawaii Municipal Trust
Dean Witter California Tax-Free Daily DEAN WITTER RETIREMENT SERIES
Income Trust Liquid Asset Series
Dean Witter New York Municipal Money U.S. Government Money Market Series
Market Trust U.S. Government Securities Series
EQUITY FUNDS Intermediate Income Securities Series
Dean Witter American Value Fund American Value Series
Dean Witter Natural Resource Capital Growth Series
Development Securities Inc. Dividend Growth Series
Dean Witter Dividend Growth Securities Strategist Series
Inc. Utilities Series
Dean Witter Developing Growth Value-Added Market Series
Securities Trust Global Equity Series
Dean Witter World Wide Investment Trust ASSET ALLOCATION FUNDS
Dean Witter Value-Added Market Series Dean Witter Strategist Fund
Dean Witter Utilities Fund Dean Witter Global Asset Allocation
Dean Witter Capital Growth Securities Fund
Dean Witter European Growth Fund Inc. ACTIVE ASSETS ACCOUNT PROGRAM
Dean Witter Precious Metals and Active Assets Money Trust
Minerals Trust Active Assets Tax-Free Trust
Dean Witter Pacific Growth Fund Inc. Active Assets California Tax-Free Trust
Dean Witter Health Services Trust Active Assets Government Securities
Dean Witter Global Dividend Growth Trust
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 Intermediate Term U.S.
Treasury Trust
Dean Witter California Tax-Free Income
Fund
Dean Witter New York Tax-Free Income
Fund
Dean Witter Convertible Securities
Trust
Dean Witter Federal Securities Trust
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income
Securities
Dean Witter Global Short-Term Income
Fund Inc.
Dean Witter Multi-State Municipal
Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury
Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal
Trust
<PAGE>
Dean Witter
Premier Income Trust
Two World Trade Center Dean Witter
New York, New York 10048
TRUSTEES Premier
Michael Bozic Income
Charles A. Fiumefreddo Trust
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
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
SUB-ADVISOR
BlackRock Financial Management,
Inc.
PROSPECTUS -- FEBRUARY 1, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DEAN WITTER
FEBRUARY 1, 1996
PREMIER INCOME TRUST
- ---------------------------------------------------------
Dean Witter Premier Income Trust (the "Fund") is an open-end, diversified
management investment company, whose investment objective is to earn a high
level of current income consistent with low volatility of principal. The Fund
seeks to achieve its investment objective by investing primarily in high-quality
Mortgage-Backed Securities and securities backed by other assets ("Asset-Backed
Securities").
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
Premier Income Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............................................................ 3
Trustees and Officers.................................................................. 8
Investment Practices and Policies...................................................... 13
Investment Restrictions................................................................ 22
Portfolio Transactions and Brokerage................................................... 22
The Distributor........................................................................ 24
Determination of Net Asset Value....................................................... 27
Shareholder Services................................................................... 27
Redemptions and Repurchases............................................................ 30
Dividends, Distributions and Taxes..................................................... 31
Performance Information................................................................ 32
Description of Shares.................................................................. 33
Custodian and Transfer Agent........................................................... 34
Independent Accountants................................................................ 34
Reports to Shareholders................................................................ 35
Legal Counsel.......................................................................... 35
Experts................................................................................ 35
Registration Statement................................................................. 35
Financial Statements -- October 31, 1995............................................... 36
Report of Independent Accountants...................................................... 47
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund is a Trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts on
March 27, 1991.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc., a Delaware corporation, (the "Investment
Manager" or "InterCapital"), whose address is Two World Trade Center, New York,
New York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware corporation. In
an internal reorganization which took place in January, 1993, InterCapital
assumed the investment advisory, administrative and management activities
previously performed by the InterCapital Division of Dean Witter Reynolds Inc.
("DWR"), a broker-dealer affiliate of InterCapital. (As hereinafter used in this
Statement of Additional Information, the terms "InterCapital" and "Investment
Manager" refer to DWR's InterCapital Division prior to the 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 and Sub-Advisor, subject to review by the
Fund's Board of Trustees. In addition, Trustees of the Fund provide guidance on
economic factors and interest rate trends. Information as to these Trustees and
officers is contained under the caption "Trustees and Officers".
InterCapital is also the investment manager or investment adviser of the
following management investment companies: Active Assets Money Trust, Active
Assets Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, InterCapital Income Securities Inc., InterCapital
Insured Municipal Bond Trust, InterCapital Insured Municipal Trust, InterCapital
Insured Municipal Income Trust, InterCapital Insured Municipal Securities,
InterCapital California Insured Municipal Income Trust, InterCapital Insured
California Municipal Securities, InterCapital Quality Municipal Investment
Trust, InterCapital Quality Municipal Income Trust, InterCapital Quality
Municipal Securities, InterCapital California Quality Municipal Securities,
InterCapital New York Quality Municipal Securities, High Income Advantage Trust,
High Income Advantage Trust II, High Income Advantage Trust III, Dean Witter
Government Income Trust, Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Tax-Exempt Securities Trust, Dean
Witter Dividend Growth Securities Inc., Dean Witter Natural Resource Development
Securities Inc., Dean Witter American Value Fund, Dean Witter Developing Growth
Securities Trust, Dean Witter U.S. Government Money Market Trust, Dean Witter
Variable Investment Series, Dean Witter World Wide Investment Trust, Dean Witter
Select Municipal Reinvestment Fund, Dean Witter U.S. Government Securities
Trust, Dean Witter World Wide Income Trust, Dean Witter California Tax-Free
Income Fund, Dean Witter New York Tax-Free Income Fund, Dean Witter Convertible
Securities Trust, Dean Witter Federal Securities Trust, Dean Witter Value-Added
Market Series, Dean Witter Utilities Fund, Dean Witter California Tax-Free Daily
Income Trust, Dean Witter Strategist Fund, Dean Witter Intermediate Income
Securites, Dean Witter Capital Growth Securities, Dean Witter Precious Metals
and Minerals Trust, Dean Witter New York Municipal Money Market Trust, Dean
Witter European Growth Fund Inc., Dean Witter Global Short-Term Income Fund
Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter Multi-State Municipal
Series Trust, Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Premier
Income Trust, Dean Witter Diversified Income Trust, Dean Witter Health Sciences
Trust, Dean Witter Retirement Series, Dean Witter Global Dividend Growth
Securities, Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term
Bond Fund, Dean Witter Global Utilities Fund, Dean Witter High Income
Securities, Dean Witter National Municipal Trust, Dean Witter International
SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter Select Dimensions
Investment Series, Dean Witter Balanced Growth Fund, Dean Witter Balanced Income
Fund, Dean Witter Hawaii Municipal Trust, Dean Witter Capital Appreciation Fund,
Dean Witter Intermediate Term U.S. Treasury Trust, Dean Witter Information Fund,
Municipal Income Trust, Municipal Income Trust II, Municipal Income Trust III,
Municipal Income Opportunities Trust, Municipal Income Opportunities Trust II,
3
<PAGE>
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 Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Balanced Fund, TCW/DW Mid-Cap Equity Trust, TCW/DW Total Return
Trust, TCW/DW Emerging Markets Opportunities Trust, TCW/DW Term Trust 2000,
TCW/DW Term Trust 2002 and TCW/DW Term Trust 2003 (the "TCW/DW Funds").
InterCapital also serves as: (i) 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 "Management Agreement")
with the Investment Manager, the Fund has retained the Investment Manager to
supervise the investment of the Fund's assets. The Investment Manager, through
consultation with BlackRock Financial Management Inc. (the "Sub-Advisor") and
through its own portfolio management staff, obtains and evaluates such
information and advice relating to the economy, securities markets, and specific
securities as it considers necessary or useful to continuously oversee the
management of the assets of the Fund in a manner consistent with its investment
objective.
Under the terms of the Management Agreement, the Investment Manager also
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 that were previously performed directly by InterCapital. On April 17, 1995,
DWSC was reorganized in the State of Delaware, necessitating the entry into a
new Services Agreement by InterCapital and DWSC on such date. The foregoing
internal reorganizations did not result in any change of the nature or scope of
the administrative services being provided to the Fund or any of the fees being
paid by the Fund for the overall services being performed under the terms of the
existing Management Agreement.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement, by the Sub-Advisor pursuant to the Sub-Advisory Agreement
(see below), 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 share certificates; registration costs of the Fund and its
shares under federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing Prospectuses and Statements of
Additional Information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Trustees or members of any advisory board or
committee who are not employees of the Investment Manager or Sub-Advisor or any
corporate affiliate of the Investment Manager or Sub-Advisor;
4
<PAGE>
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 the Fund's legal counsel, including counsel to the Trustees who
are not interested persons of the Fund or of the Investment Manager or
Sub-Advisor (not including compensation or expenses of attorneys who are
employees of the Investment Manager or Sub-Advisor) and independent accountants;
membership dues of industry associations; interest on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and directors)
of the Fund which inure to its benefit; extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification relating thereto); and all other costs of the Fund's operation.
The Management 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 Management Agreement in no
way restricts the Investment Manager from acting as investment manager or
adviser to others.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the annual
rate of 0.50% to the Fund's daily net assets. For the fiscal years ended October
31, 1995, 1994 and 1993, the Fund accrued to the Investment Manager total
compensation under the Management Agreement in the amounts of $178,248, $306,372
and $657,860, respectively.
Pursuant to a Sub-Advisory Agreement between the Investment Manager and the
Sub-Advisor, the Sub-Advisor has been retained, subject to the overall
supervision of the Investment Manager and the Trustees of the Fund, to
continuously furnish investment advice concerning individual portfolio security
selections.
The Sub-Advisor provides asset management services with respect to high
quality fixed income instruments, with particular emphasis on Mortgage-Backed
Securities. The Sub-Advisor currently serves as the investment adviser to fixed
income investors in the United States and overseas through several funds with
combined net assets under management in excess of $34 billion. These include
twenty-one closed-end investment companies traded on either the New York or
American Stock Exchanges: The BlackRock Income Trust Inc., The BlackRock Target
Term Trust Inc., The BlackRock Advantage Term Trust Inc., The BlackRock
Strategic Term Trust Inc., The BlackRock 1998 Term Trust Inc., The BlackRock
Municipal Term Trust Inc., The BlackRock Insured Municipal Term Trust Inc., The
BlackRock North American Government Income Trust Inc., The BlackRock Investment
Quality Term Trust Inc., The BlackRock Insured Municipal 2008 Term Trust Inc.,
The BlackRock California Insured Municipal 2008 Term Trust Inc., The BlackRock
Florida Insured Municipal 2008 Term Trust Inc., The BlackRock New York Insured
Municipal 2008 Term Trust Inc., The BlackRock 1999 Term Trust Inc., The
BlackRock Investment Quality Municipal Trust Inc., The BlackRock California
Investment Quality Municipal Trust Inc., The BlackRock Florida Investment
Quality Municipal Trust Inc., The BlackRock New York Investment Quality
Municipal Trust Inc., The BlackRock New Jersey Investment Quality Municipal
Trust Inc., The BlackRock Investment Grade 2009 Term Trust Inc. and The
BlackRock 2001 Term Trust Inc., which were designed for individual investors.
Each of these funds is a closed-end management investment company that invests
primarily in investment grade Mortgage-Backed and Asset-Backed Securities and in
securities that are issued or guaranteed by the U.S. government or one of its
agencies or instrumentalities or invests in Municipal Securities. The
Sub-Advisor also serves as the investment advisor to three offshore funds:
BlackRock Fund for Fannie Mae Mortgage Securities, BlackRock Freddie Mac
Mortgage Securities Fund, and BSY Financial Corp. Each of these funds invests
primarily in U.S. Mortgage-Backed Securities. In addition, the Sub-Advisor
serves as investment advisor to several institutional investors in separate
accounts.
5
<PAGE>
The Sub-Advisor's general and limited partners and employees include several
individuals with extensive experience in creating, evaluating and investing in
Mortgage-Backed Securities, Asset-Backed Securities and hedging products. Prior
to co-founding the Sub-Advisor (of which he is a general partner), from July
1976 to March 1988, Laurence D. Fink was employed by The First Boston
Corporation where he had been a Managing Director since January 1979. At First
Boston, he was a member of the Management Committee and co-head of its Taxable
Fixed Income Division. He also managed the Financial Futures and Fixed Income
Options Department and the Mortgage and Real Estate Products Group. Ralph L.
Schlosstein, President and a co-founder of the Sub-Advisor (of which he is a
general partner), was employed by Shearson Lehman Brothers Inc. from February
1981 to March 1988 and became a Managing Director in August, 1984. At Shearson
Lehman, he was co-head of the Mortgage and Savings Institutions Group. Messrs.
Fink and Schlosstein, along with other members of the Sub-Advisor, were
instrumental in many of the major innovations in these securities markets,
including the creation of the fixed and floating rate collateralized mortgage
obligation, asset-backed securities and the senior-subordinated mortgage
pass-through securities.
On June 16, 1994, the partners of the Sub-Adviser entered into a definitive
agreement to sell their partnership interests in the Sub-Advisor to PNC Bank,
N.A. ("PNC"), headquartered in Pittsburgh, Pennsylvania (the "Transaction"). The
Transaction, which was subject to bank regulatory approval, closed on February
28, 1995 and was subject to various conditions, including the following:
BlackRock will retain its name and will continue to operate out of its New York
office. All members of the Sub-Advisor's senior management team agreed to sign
long-term employment contracts and be responsible for managing the day-to-day
affairs of the Sub-Advisor. Following the closing of the Transaction, the Sub-
Advisor became a wholly-owned corporate subsidiary of PNC Asset Management
Group, Inc., the holding company for PNC's asset management business.
PNC is a commercial bank offering a wide range of domestic and international
commercial banking, retail banking and trust services to its customers. Its
principal office is located in Pittsburgh, Pennsylvania. PNC is a wholly-owned
indirect subsidiary of PNC Bank Corp. (the "Holding Company"), a bank holding
company organized under the laws of the Commonwealth of Pennsylvania.
In order to assure continuity of investment advisory services to the Trust
by the Sub-Adviser after the Transaction, the Board met in person on October 20,
1994, for the purpose of considering whether it would be in the best interests
of the Trust and its shareholders for InterCapital to enter into a sub-advisory
agreement with the Sub-Advisor (the "current Sub-Advisory Agreement") to take
effect upon consummation of the Transaction. At its meeting, the Board,
including each of the Trustees who are not "interested persons" of the Trust, as
that term is defined in the 1940 Act (the "Independent Trustees"), unanimously
approved the current Sub-Advisory Agreement and recommended it for approval by
Shareholders. The current Sub-Advisory Agreement is identical to the former
Sub-Advisory Agreement except for the effective date and the stated expiration
date. At the meeting of shareholders which took place on February 17, 1995, the
shareholders of the Fund voted to approve the Sub-Advisory Agreement effective
February 27, 1995.
Both the Investment Manager and the Sub-Advisor have authorized any of their
directors, partners, officers and employees who have been elected as Trustees or
officers of the Fund to serve in the capacities in which they have been elected.
Services furnished by directors, the Investment Manager and the Sub-Advisor may
be furnished by directors, partners, officers and employees of the Investment
Manager and the Sub-Advisor. In connection with the services rendered by the
Sub-Advisor, the Sub-Advisor bears the following expenses: (a) the salaries and
expenses of its personnel; and (b) all expenses incurred by it in connection
with performing the services provided by it as Sub-Advisor, as described above.
As full compensation for the services and facilities furnished to the Fund
and the Investment Manager and expenses of the Fund and the Investment Manager
assumed by the Sub-Advisor, the Investment Manager pays the Sub-Advisor monthly
compensation equal to 40% of the Investment Manager's monthly compensation
payable under the Management Agreement. For the fiscal years
6
<PAGE>
ended October 31, 1995, 1994 and 1993, the Investment Manager informed the Fund
that the Investment Manager accrued to the Sub-Advisor total compensation under
the Sub-Advisory Agreement of $71,299 $122,549 and $263,144, respectively.
Pursuant to the Management Agreement and the Sub-Advisory 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. Pursuant to the Sub-Advisory Agreement, if any
such reimbursement is made by the Investment Manager, the Investment Manager
will, in turn, be reimbursed for 40% of such payment by the Sub-Advisor. The
reimbursement, if any, will be calculated daily and credited on a monthly basis.
The Fund's expenses did not exceed the limitation set forth above during the
fiscal years ended October 31, 1995, 1994 and 1993.
The Investment Manager paid the organizational expenses of the Fund incurred
prior to the offering of the Fund's shares. The Fund reimbursed the Investment
Manager for $150,000 of 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 Management Agreement and the Sub-Advisory Agreement (the "Agreements")
were initially approved by the Board of Trustees on October 30, 1992 and by the
shareholders of the Fund at a Meeting of Shareholders held on January 12, 1993.
The Agreements are substantially identical to the prior investment management
agreement and sub-advisory agreement which were initially approved by the Fund's
Trustees on April 16, 1991 and by DWR as the then sole shareholder on May 15,
1991. The Agreements took effect on June 30, 1993, upon the spin-off of Sears,
Roebuck and Co. of its remaining shares of DWDC. Both Agreements may be
terminated at any time, without penalty, on thirty days notice by the Trustees
of the Fund, by the holders of a majority, as defined in the Investment Company
Act of 1940, as amended (the "Act"), of the outstanding shares of the Fund, by
the Investment Manager, or the Sub-Advisor (Sub-Advisory Agreement only). The
Agreements will automatically terminate in the event of their assignment (as
defined in the Act).
Under its terms, the current Sub-Advisory Agreement had an initial term
ending April 30, 1995 and the Management Agreement had an initial term ending
April 30, 1994, and each provides that it will continue from year to year
thereafter, provided continuance of each Agreement is approved at least annually
by the vote of the holders of a majority, as defined in the Act, of the
outstanding shares of the Fund, or by the Trustees of the Fund; provided that in
either event such continuance is approved annually by the vote of a majority of
the Trustees of the Fund who are not parties to the Agreements or "interested
persons" (as defined in the Act) of any such party (the "Independent Trustees"),
which votes must be cast in person at a meeting called for the purpose of voting
on such approval. At their meeting held on April 20, 1995, the Fund's Board of
Trustees, including a majority of the Independent Trustees, approved
continuation of each 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 Management Agreement is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate the
name "Dean Witter" from its name if DWR or its parent company shall so request.
7
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 79 Dean Witter Funds and the 12 TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Michael Bozic (55) Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of the
c/o Levitz Furniture Corporation Dean Witter Funds; formerly President and Chief Executive Officer
6111 Broken Sound Parkway, N.W. of Hills Department Stores (May, 1991-July, 1995) formerly
Boca Raton, Florida Chairman and Chief Executive Officer (January, 1987-August, 1990)
and President and Chief Operating Officer (August, 1990-February,
1991) of the Sears Merchandise Group of Sears, Roebuck and Co.;
Director of Eaglemark Financial Services, Inc., the United Negro
College Fund, Weirton Steel Corporation and Domain Inc. (home
decor retailer).
Charles A. Fiumefreddo* (62) Chairman, Chief Executive Officer and Director of InterCapital,
Chairman of the Board, Dean Witter Distributors Inc. ("Distributors") and DWSC; Executive
President, Chief Executive Officer Vice President and Director of DWR; Chairman, Director or Trustee,
and Trustee President and Chief Executive Officer of the Dean Witter Funds;
Two World Trade Center Chairman, Chief Executive Officer and Trustee of the TCW/DW Funds;
New York, New York 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 United
Trustee States Senator (R-Utah) (1974-1992) and Chairman, Senate Banking
c/o Huntsman Chemical Corporation Committee (1980-1986); formerly Mayor of Salt Lake City, Utah
500 Huntsman Way (1971-1974); formerly Astronaut, Space Shuttle Discovery (April
Salt Lake City, Utah 12-19, 1985); Vice Chairman, Huntsman Chemical Corporation (since
January, 1993); member of the board of various civic and
charitable organizations.
John R. Haire (70) Chairman of the Audit Committee and Chairman of the Committee of
Trustee the Independent Directors or Trustees and Director or Trustee of
Two World Trade Center the Dean Witter Funds; Trustee of the TCW/DW Funds; formerly
New York, NY President, Council for Aid to Education (1978-October, 1989) and
Chairman and Chief Executive Officer of Anchor Corporation, an
Investment Adviser (1964-1978); Director of Washington National
Corporation (insurance).
</TABLE>
8
<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 consulting
Trustee firm; Koch Professor of International Economics and Director of
c/o Johnson Smick International, Inc. the Center for Global Market Studies at George Mason University
1133 Connecticut Avenue, N.W. (since September, 1990); Co- Chairman and a founder of the Group
Washington, DC of Seven Council (G7C), an international economic commission
(since September, 1990); Director or Trustee of the Dean Witter
Funds; Trustee of the TCW/DW Funds; Director of NASDAQ (since
June, 1995); Director of Greenwich Capital Markets, Inc.
(broker-dealer); formerly Vice Chairman of the Board of Governors
of the Federal Reserve System (February, 1986-August, 1990) and
Assistant Secretary of the U.S. Treasury (1982-1986).
Paul Kolton (72) Director or Trustee of the Dean Witter Funds; Chairman of the
Trustee Audit Committee and Chairman of the Committee of the Independent
c/o Gordon Altman Butowsky Weitzen Trustees and Trustee of the TCW/DW Funds; formerly Chairman of the
Shalov & Wein Financial Accounting Standards Advisory Council; formerly Chairman
Counsel to the Independent Trustees and Chief Executive Officer of the American Stock Exchange;
114 West 47th Street Director of UCC Investors Holding Inc. (Uniroyal Chemical
New York, New York Company); director or trustee of various not-for-profit
organizations.
Michael E. Nugent (59) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership (since April, 1988); Director or Trustee of the Dean
c/o Triumph Capital, L.P. Witter Funds, and Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital Corporation
New York, New York (1984-1988); Director of various business organizations.
Philip J. Purcell* (52) Chairman of the Board of Directors and Chief Executive Officer of
Trustee DWDC, DWR and Novus Credit Services, Inc.; Director of
Two World Trade Center InterCapital, DWSC and Distributors; Director or Trustee of the
New York, New York Dean Witter Funds; Director and/or officer of various DWDC
subsidiaries.
John L. Schroeder (65) Retired; Director or Trustee of the Dean Witter Funds; Director of
Trustee Citizens Utilities Company; Executive Vice President and Chief
c/o Gordon Altman Butowsky Weitzen Investment Officer of the Home Insurance Company (since August,
Shalov & Wein 1991); formerly Chairman and Chief Investment Officer of
Counsel to the Independent Trustees Axe-Houghton Management and the Axe-Houghton Funds (April,
114 West 47th Street 1983-June, 1991) and President of USF&G Financial Services, Inc.
New York, New York (June, 1990-June, 1991).
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel of
Vice President, Secretary and InterCapital and DWSC; Senior Vice President and Secretary of
General Counsel DWTC; Senior Vice President, Assistant Secretary and Assistant
Two World Trade Center General Counsel of Distributors; Assistant Secretary of DWR; Vice
New York, New York President, Secretary and General Counsel of the Dean Witter Funds
and the TCW/DW Funds.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
Thomas F. Caloia (49) First Vice President (since May 1991) and Assistant Treasurer
Treasurer (since January, 1993) of InterCapital; First Vice President and
Two World Trade Center Assistant Treasurer of DWSC; Treasurer of the Dean Witter Funds
New York, New York and the TCW/DW Funds; previously Vice President of InterCapital.
<FN>
- ------------------------
*Denotes Trustees who are "interested persons" of the Fund, as defined in the
Act.
</TABLE>
In addition, Robert M. Scanlan, President 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 and
Director of DWTC and Robert S. Giambrone, Senior Vice President of InterCapital,
DWSC, Distributors and DWTC, Joseph J. McAlinden, Senior Vice Presidents 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 D. McInnis and Ruth Rossi, Vice Presidents and Assistant
General Counsels of InterCapital and DWSC, and Carsten Otto, a Staff Attorney
with InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same individuals
also serve as directors or trustees for all of the Dean Witter Funds, and are
referred to in this section as Trustees. As of the date of this Statement of
Additional Information, there are a total of 79 Dean Witter Funds, comprised of
119 portfolios. As of December 31, 1995, the Dean Witter Funds had total net
assets of approximately $71.5 billion and more than five million shareholders.
Seven Trustees (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own any
stock or other securities issued by InterCapital's parent company, DWDC. These
are the "disinterested" or "independent" Trustees. The other two Trustees (the
"management Trustees") are affiliated with InterCapital. Five of the seven
independent Trustees are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Trustees. The Dean Witter Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee and
the Committee of the Independent Trustees. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1995,
the three Committees held a combined total of fifteen meetings. The Committees
hold some meetings at InterCapital's offices and some outside InterCapital.
Management Trustees or officers do not attend these meetings unless they are
invited for purposes of furnishing information or making a report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well
10
<PAGE>
as other matters that arise from time to time. The Independent Trustees are
required to select and nominate individuals to fill any Independent Trustee
vacancy on the Board of any Fund that has a Rule 12b-1 plan of distribution.
Most of the Dean Witter Funds have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He screens
and/or prepares written materials and identifies critical issues for the
Independent Trustees to consider, develops agendas for Committee meetings,
determines the type and amount of information that the Committees will need to
form a judgment on various issues, and arranges to have that information
furnished to Committee members. He also arranges for the services of independent
experts and consults with them in advance of meetings to help refine reports and
to focus on critical issues. Members of the Committees believe that the person
who serves as Chairman of all three Committees and guides their efforts is
pivotal to the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In effect,
the Chairman of the Committees serves as a combination of chief executive and
support staff of the Independent Trustees.
The Chairman of the Committees is not employed by any other organization and
devotes his time primarily to the services he performs as Committee Chairman and
Independent Trustee of the Dean Witter Funds and as an Independent Trustee of
the TCW/DW Funds. The current Committee Chairman has had more than 35 years
experience as a senior executive in the investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Trustees arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Trustees serve on all Fund Boards
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of Independent Trustees, and a Chairman of their Committees,
of the caliber, experience and business acumen of the individuals who serve as
Independent Trustees of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 ($1,200 prior
to September 30, 1995) plus a per meeting fee of $50 for meetings of the Board
of Trustees or committees of the Board of
11
<PAGE>
Trustees attended by the Trustee (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 Trustees an additional annual fee
of $2,400, in each case inclusive of the Committee meeting fees). The Fund also
reimburses such Trustees for travel and other out-of-pocket expenses incurred by
them in connection with attending such meetings. Trustees and officers of the
Fund who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund.
The Fund has adopted a retirement program under which an Independent Trustee
who retires after serving for at least five years (or such lesser period as may
be determined by the Board) as an Independent Director or Trustee of any Dean
Witter Fund that has adopted the retirement program (each such Fund referred to
as an "Adopting Fund" and each such Trustee referred to as an "Eligible
Trustee") is entitled to retirement payments upon reaching the eligible
retirement age (normally, after attaining age 72). Annual payments are based
upon length of service. Currently, upon retirement, each Eligible Trustee is
entitled to receive from the Fund, commencing as of his or her retirement date
and continuing for the remainder of his or her life, an annual retirement
benefit (the "Regular Benefit") equal to 25.0% of his or her Eligible
Compensation plus 0.166666% of such Eligible Compensation for each full month of
service as an Independent Director or Trustee of any Adopting Fund in excess of
five years up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(1) "Eligible Compensation" is one-fifth
of the total compensation earned by such Eligible Trustee for service to the
Fund in the five year period prior to the date of the Eligible Trustee's
retirement. Benefits under the retirement program are not secured or funded by
the Fund. As of the date of this Statement of Additional Information, 57 Dean
Witter Funds have adopted the retirement program.
The following table illustrates the compensation paid and the retirement
benefits accrued to the Fund's Independent Trustees by the Fund for the fiscal
year ended October 31, 1995 and the estimated retirement benefits for the Fund's
Independent Trustees as of October 31, 1995.
<TABLE>
<CAPTION>
FUND COMPENSATION ESTIMATED RETIREMENT BENEFITS
------------------------------- --------------------------------------------------------------------
ESTIMATED ESTIMATED
RETIREMENT CREDIT YEARS ESTIMATED ANNUAL
AGGREGATE BENEFITS OF SERVICE AT PERCENTAGE OF ESTIMATED BENEFITS
NAME OF INDEPENDENT COMPENSATION ACCRUED AS RETIREMENT ELIGIBLE ELIGIBLE UPON
TRUSTEE FROM THE FUND FUND EXPENSES (MAXIMUM 10) COMPENSATION COMPENSATION(2) RETIREMENT(3)
- -------------------- -------------- -------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic....... 1,900 379 10 57.5 1,950 1,121
Edwin J. Garn....... 2,000 740 10 57.5 1,950 1,121
John R. Haire(4).... 4,600 7,176 10 57.5 5,162 2,968
Dr. Manuel H.
Johnson............ 2,000 291 10 57.5 1,950 1,121
Paul Kolton......... 2,000 3,338 10 57.0 2,155 1,229
Michael E. Nugent... 1,850 553 10 57.5 1,950 1,121
John L. Schroeder... 2,000 744 8 47.9 1,950 934
</TABLE>
- ------------------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of such Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
(2) Based on current levels of compensation.
(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) above.
(4) Of Mr. Haire's compensation from the Fund, $3,400 was paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($1,000).
12
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for services
to the 79 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Kolton
and Nugent, the 11 TCW/DW Funds that were in operation at December 31, 1995.
With respect to Messrs. Haire, Johnson, Kolton and Nugent, the TCW/DW Funds are
included solely because of a limited exchange privilege between those Funds and
five Dean Witter Money Market Funds. Mr. Schroeder was elected as a Trustee of
the TCW/DW Funds on April 20, 1995.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS TOTAL CASH
FOR SERVICE CHAIRMAN OF COMPENSATION
AS DIRECTOR OR COMMITTEES OF FOR SERVICES
TRUSTEE AND FOR SERVICE AS INDEPENDENT TO
COMMITTEE MEMBER TRUSTEE AND DIRECTORS/ 79 DEAN
OF 79 DEAN COMMITTEE MEMBER TRUSTEES AND WITTER
WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- --------------------------- ---------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Michael Bozic.............. 126,050 -- -- 126,050
Edwin J. Garn.............. 136,450 -- -- 136,450
John R. Haire.............. 98,450 $82,038 $217,350(5) 397,838
Dr. Manuel H. Johnson...... 136,450 82,038 -- 218,488
Paul Kolton................ 136,450 54,788 36,900(6) 228,138
Michael E. Nugent.......... 124,200 75,038 -- 199,238
John L. Schroeder.......... 136,450 46,964 -- 183,414
</TABLE>
- ------------------------
(5) For the 79 Dean Witter Funds in operation at December 31, 1995.
(6) For the 11 TCW/DW Funds in operation at December 31, 1995.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES
As discussed in the Prospectus, the Fund may invest in, among other
securities, securities issued by the U.S. Government, its agencies or
instrumentalities. Such securities include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to 30 years.
(3) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but whose issuing
agency or instrumentality has the right to borrow, to meet its obligations,
from an existing line of credit with the U.S. Treasury. Among the agencies
13
<PAGE>
and instrumentalities issuing such obligations are the Tennessee Valley
Authority, the Federal National Mortgage Association ("FNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") and the U.S. Postal Service.
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal Farm
Credit System and the Federal Home Loan Banks.
Neither the value nor the yield of the U.S. Government securities which may
be invested in by the Fund are guaranteed by the U.S. Government. Such values
and yield will fluctuate with changes in prevailing interest rates and other
factors. Generally, as prevailing interest rates rise, the value of any U.S.
Government securities held by the Fund will fall. Such securities with longer
maturities generally tend to produce higher yields and are subject to greater
market fluctuation as a result of changes in interest rates than debt securities
with shorter maturities. The Fund is not limited as to the maturities of the
U.S. Government securities in which it may invest with respect to 35% of its
total assets.
MORTGAGE-BACKED SECURITIES
As discussed in the Prospectus, the Mortgage-Backed Securities purchased by
the Fund evidence an interest in a specific pool of mortgages. Such securities
are issued by GNMA, FNMA and FHLMC.
GNMA CERTIFICATES. GNMA is a wholly-owned corporate instrumentality of the
United States within the Department of Housing and Urban Development. The
National Housing Act of 1934, as amended (the "Housing Act"), authorized GNMA to
guarantee the timely payment of the principal of and interest on certificates
that are based on and backed by a pool of mortgage loans insured by the Federal
Housing Administration under the Housing Act, or Title V of the Housing Act of
1949 ("FHA Loans"), or guaranteed by the Veterans' Administration under the
Servicemen's Readjustment Act of 1944, as amended ("VA Loans"), or by pools of
other eligible mortgage loans. The Housing Act provides that the full faith and
credit of the U.S. Government is pledged to the payment of all amounts that may
be required to be paid under any guarantee. In order to meet its obligations
under such guarantee, GNMA is authorized to borrow from the U.S. Treasury with
no limitations as to amount.
The GNMA Certificates will represent a pro rata interest in one or more
pools of the following types of mortgage loans; (i) fixed rate level payment
mortgage loans; (ii) fixed rate graduated payment mortgage loans; (iii) fixed
rate growing equity mortgage loans; (iv) fixed rate mortgage loans secured by
manufactured (mobile) homes; (v) mortgage loans on multifamily residential
properties under construction; (vi) mortgage loans on completed multifamily
projects; (vii) fixed rate mortgage loans as to which escrowed funds are used to
reduce the borrower's monthly payments during the early years of the mortgage
loans ("buydown" mortgage loans); (viii) mortgage loans that provide for
adjustments in payments based on periodic changes in interest rates or in other
payment terms of the mortgage loans; and (ix) mortgage-backed serial notes. All
of these mortgage loans will be FHA Loans or VA Loans and, except as otherwise
specified above, will be fully-amortizing loans secured by first liens on one-to
four-family housing units.
FNMA CERTIFICATES. FNMA is a federally chartered and privately owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act. FNMA was originally established in 1938 as a U.S.
Government agency to provide supplemental liquidity to the mortgage market and
was transformed into a stockholder owned and privately managed corporation by
legislation enacted in 1968. FNMA provides funds to the mortgage market
primarily by purchasing home mortgage loans from local lenders, thereby
replenishing their funds for additional lending. FNMA acquires funds to purchase
home mortgage loans from many capital market investors that may not ordinarily
invest in mortgage loans directly, thereby expanding the total amount of funds
available for housing.
Each FNMA Certificate will entitle the registered holder thereof to receive
amounts representing such holder's pro rata interest in scheduled principal
payments and interest payments (at such FNMA Certificate's pass-through rate,
which is net of any servicing and guarantee fees on the underlying
14
<PAGE>
mortgage loans), and any principal prepayments on the mortgage loans in the pool
represented by such FNMA Certificate and such holder's proportionate interest in
the full principal amount of any foreclosed or otherwise finally liquidated
mortgage loan. The full and timely payment of principal of and interest on each
FNMA Certificate will be guaranteed by FNMA, which guarantee is not backed by
the full faith and credit of the U.S. Government.
Each FNMA Certificate will represent a pro rata interest in one or more
pools of FHA Loans, VA Loans or conventional mortgage loans (i.e., mortgage
loans that are not insured or guaranteed by any governmental agency) of the
following types: (i) fixed rate level payment mortgage loans; (ii) fixed rate
growing equity mortgage loans; (iii) fixed rate graduated payment mortgage
loans; (iv) variable rate California mortgage loans; (v) other adjustable rate
mortgage loans; and (vi) fixed rate mortgage loans secured by multifamily
projects.
FHLMC CERTIFICATES. FHLMC is a corporate instrumentality of the United
States created pursuant to the Emergency Home Finance Act of 1970, as amended
(the "FHLMC Act"). FHLMC was established primarily for the purpose of increasing
the availability of mortgage credit for the financing of needed housing. The
principal activity of FHLMC currently consists of the purchase of first lien,
conventional, residential mortgage loans and participation interests in such
mortgage loans and the resale of the mortgage loans so purchased in the form of
mortgage securities, primarily FHLMC Certificates.
FHLMC guarantees to each registered holder of a FHLMC Certificate the timely
payment of interest at the rate provided for by such FHLMC Certificate, whether
or not received. FHLMC also guarantees to each registered holder of a FHLMC
Certificate ultimate collection of all principal of the related mortgage loans,
without any offset or deduction, but does not, generally, guarantee the timely
payment of scheduled principal. FHLMC may remit the amount due on account of its
guarantee of collection of principal at any time after default on an underlying
mortgage loan, but not later than 30 days following (i) foreclosure sale, (ii)
payment of a claim by any mortgage insurer or (iii) the expiration of any right
of redemption, whichever occurs later, but in any event no later than one year
after demand has been made upon the mortgagor for accelerated payment of
principal. The obligations of FHLMC under its guarantee are obligations solely
of FHLMC and are not backed by the full faith and credit of the U.S. Government.
FHLMC Certificates represent a pro rata interest in a group of mortgage
loans (a "FHLMC Certificate group") purchased by FHLMC. The mortgage loans
underlying the FHLMC Certificates will consist of fixed rate or adjustable rate
mortgage loans with original terms to maturity of between ten and thirty years,
substantially all of which are secured by first liens on one- to four-family
residential properties or multifamily projects. Each mortgage loan must meet the
applicable standards set forth in the FHLMC Act. A FHLMC Certificate group may
include whole loans, participation interests in whole loans and undivided
interests in whole loans and participations comprising another FHLMC Certificate
group.
CORPORATE DEBT SECURITIES
As described in the Prospectus, the Fund may purchase corporate debt
securities rated Aaa by Moody's or AAA by S&P or, if unrated, deemed to be of
comparable quality by the Fund's Trustees. These debt securities may have
adjustable or fixed rates of interest and in certain instances may be secured by
assets of the issuer. Adjustable rate corporate debt securities, which the Fund
may purchase up to 5% of its total assets, may have features similar to those of
adjustable rate Mortgage-Backed Securities, but corporate debt securities,
unlike Mortgage-Backed Securities, are not subject to prepayment risk other than
through contractual call provisions which generally impose a penalty for
prepayment. Fixed rate debt securities also may be subject to call provisions.
MUNICIPAL OBLIGATIONS
The Fund may invest up to 5% of its total assets in Municipal Obligations
(consisting of Municipal Bonds, Municipal Notes and Municipal Commercial Paper)
rated in the highest rating category by Moody's Investor Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P"). The Municipal Obligations
in which the Fund may invest include "zero coupon" Municipal Obligations. Any
Municipal Obligation which depends directly or indirectly on the credit of the
United States Government shall be considered to have the highest rating by
Moody's and S&P.
15
<PAGE>
Municipal Bonds and Municipal Notes are debt obligations of a state, its
cities, municipalities and municipal agencies which generally have maturities,
at the time of their issuance, of either one year or more (Bonds) or from six
months to three years (Notes). Municipal Commercial Paper consists of short-term
obligations of municipalities which may be issued at a discount and are
sometimes referred to as Short-Term Discount Notes. An obligation shall be
considered a Municipal Bond, Municipal Note or Municipal Commercial Paper only
if, in the opinion of bond counsel, the interest payable thereon is exempt from
federal income tax.
The two principal classifications of Municipal Bonds, Notes and Commercial
Paper are "general obligation" and "revenue" bonds, notes or commercial paper.
General obligation bonds, notes or commercial paper are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. Issuers of general obligation bonds, notes or commercial paper include
a state, its counties, cities, towns and other governmental units. Revenue
bonds, notes or commercial paper are payable from the revenues derived from a
particular facility or class of facilities or, in some cases, from specific
revenue sources. Revenue bonds, notes or commercial paper are issued for a wide
variety of purposes, including the financing of electric, gas, water and sewer
systems and other public utilities; industrial development and pollution control
facilities; single and multi-family housing units; public buildings and
facilities; air and marine ports, transportation facilities such as toll roads,
bridges and tunnels; and health and educational facilities such as hospitals and
dormitories. They rely primarily on user fees to pay debt service, although the
principal revenue source is often supplemented by additional security features
which are intended to enhance the creditworthiness of the issuer's obligations.
In some cases, particularly revenue bonds issued to finance housing and public
buildings, a direct or implied "moral obligation" of a governmental unit may be
pledged to the payment of debt service. In other cases, a special tax or other
charge may augment user fees.
Included within the revenue bonds category are participations in lease
obligations or installment purchase contracts (hereinafter collectively called
"lease obligations") of municipalities. State and local governments issue lease
obligations to acquire equipment and facilities.
Lease obligations may have risks not normally associated with general
obligation or other revenue bonds. Leases and installment purchase or
conditional sale contracts (which may provide for title to the leased asset to
pass eventually to the issuer) have developed as a means for governmental
issuers to acquire property and equipment without the necessity of complying
with the constitutional and statutory requirements generally applicable for the
issuance of debt. Certain lease obligations contain "non-appropriation" clauses
that provide that the governmental issuer has no obligation to make future
payments under the lease or contract unless money is appropriated for such
purpose by the appropriate legislative body on an annual or other periodic
basis. Consequently, continued lease payments on those lease obligations
containing "non-appropriation" clauses are dependent on future legislative
actions. If such legislative actions do not occur, the holders of the lease
obligation may experience difficulty in exercising their rights, including
disposition of the property.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund (subject to notice
provisions described below), and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are 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. The Fund did not lend any of its portfolio securities during
its fiscal year ended October 31, 1995.
16
<PAGE>
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 Trust 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 Investment Manager pursuant to
procedures adopted and reviewed, on an ongoing basis, by the Board of Trustees
of the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative
and custodial fees in connection with a loan of its securities.
OPTIONS AND FUTURES TRANSACTIONS
OPTIONS ON TREASURY BONDS AND NOTES. Because trading interest in options
written on Treasury bonds and notes tends to center mostly on the most recently
auctioned issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options on particular issues. Instead, the expirations introduced at the
commencement of options trading on a particular issue will be allowed to run
their course, with the possible addition of a limited number of new expirations
as the original ones expire. Options trading on each issue of bonds or notes
will thus be phased out as new options are listed on more recent issues, and
options representing a full range of expirations will not ordinarily be
available for every issue on which options are traded.
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 put options on securities which it holds
(or has the right to acquire) in its portfolio only to protect itself against a
decline in the value of the security. If the value of the underlying security
were to fall below the exercise price of the put purchased in an amount greater
than the premium paid for the option, the Fund would incur no additional loss.
In addition, the Fund may sell a put option which it has previously purchased
prior to the sale of the securities underlying such option. Such a sale would
result in a net gain or loss depending on whether the amount received on the
sale is more or less than the premium and other transaction costs paid on the
put option which is sold. Any such gain or loss could be offset in whole or in
part by a change in the market value of the underlying security. If a put option
purchased by the Fund expired without being sold or exercised, the premium would
be lost.
RISKS OF OPTIONS TRANSACTIONS. In the event of the bankruptcy of a broker
through which the Fund engages in transactions in options, the Fund could
experience delays and/or losses in liquidating open positions purchased or sold
through the broker and/or incur a loss of all or part of its margin deposits
with the broker. Similarly, in the event of the bankruptcy of the writer of an
OTC option purchased by the Fund, the Fund could experience a loss of all or
part of the value of the option. Transactions are entered into by the Fund only
with brokers or financial institutions deemed creditworthy by the Investment
Manager and the Sub-Advisor.
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.
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INTEREST RATE FUTURES CONTRACTS. As a purchaser of an interest rate futures
contract ("futures contract"), the Fund incurs an obligation to take delivery of
a specified amount of the obligation underlying the futures 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 futures contracts for the purpose of hedging
its portfolio (or anticipated portfolio) securities against changes in
prevailing interest rates. If the Investment Manager and the Sub-Advisor
anticipate that interest rates may rise and, concomitantly, the price of U.S.
Government or other debt securities fall, the Fund may sell a futures contract.
If declining interest rates are anticipated, the Fund may purchase a futures
contract to protect against a potential increase in the price of U.S. Government
or other debt securities the Fund intends to purchase. Subsequently, appropriate
U.S. Government or other debt 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. In addition, futures
contracts will be bought or sold in order to close out a short or long position
in a corresponding futures contract.
As discussed in the Prospectus, the Fund may invest in Mortgage-Backed
Securities, such as floating rate CMOs or adjustable rate Mortgage-Backed
Securities, which have interest rates subject to periodic adjustment based on
changes to a designated index. One index which may serve as such a benchmark is
the London Interbank Offered Rate, or LIBOR. In order for the Fund to hedge its
exposure to fluctuations in short-term interest rates for its portfolio
securities subject to the LIBOR rate, the Fund may purchase or sell futures
contracts on U.S. dollar denominated Eurodollar instruments linked to the LIBOR
rate.
Although most 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 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 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.
When the Fund enters into a futures contract it is initially required to
deposit with its Custodian, in a segregated account in the name of the broker
performing the transaction an "initial margin" of cash or U.S. Government
securities equal to approximately 2-3% of the contract amount. Initial margin
requirements are established by the Exchanges on which futures contracts trade
and may, from time to time, change. In addition, brokers may establish margin
deposit requirements in excess of those required by the Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a brokers' client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits into the segregated account,
maintained at its Custodian for that purpose, of cash or U.S. Government
securities, called "variation margin", in the name of the 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, Eurodollar instruments, U.S. Treasury Notes with Maturities
between 6 1/2 and 10 years, GNMA Certificates and Bank Certificates of Deposit.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase call and put options on
futures contracts which are traded on an Exchange and enter into closing
transactions with respect to such options to
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terminate an existing position. An option on a futures contract gives the
purchaser the right (in return for the premium paid), and the writer the
obligation, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option is accompanied by delivery of the accumulated balance in
the writer's futures 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 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 and
the Sub-Advisor wished to protect against an increase in interest rates and the
resulting negative impact on the value of a portion of its U.S. Government
securities portfolio, it might purchase a put 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.
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.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. As stated
in the Prospectus, the Fund may sell a futures contract to protect against the
decline in the value of U.S. Government securities held by the Fund. However, it
is possible that the futures market may advance and the value of securities held
in the Fund's portfolio may decline. If this were to occur, the Fund would lose
money on the futures contracts and also experience a decline in value in its
portfolio securities. However, while this could occur for a very brief period or
to a very small degree, over time the market prices of the securities of a
diversified portfolio will tend to move in the same direction as the prices of
futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of U.S. Government securities it intends to buy, and the value of such
securities decreases, then the Fund may determine not to invest in the
securities as planned and will realize a loss on the futures contract that is
not offset by a reduction in the price of the securities.
If the Fund maintains a short position in a futures contract, it will cover
this position by holding, in a segregated account maintained at its Custodian,
cash, U.S. Government securities or other high grade debt obligations equal in
value (when added to any initial or variation margin on deposit) to the market
value of the securities underlying the futures contract. Such a position may
also be covered by owning the securities 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
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would continue to be required to make daily cash payments of variation margin on
open futures positions. In such situations, if the Fund has insufficient cash,
it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition, the
Fund may be required to take or make delivery of the instruments underlying
interest rate futures contracts it holds at a time when it is disadvantageous to
do so. The inability to close out options and futures positions could also have
an adverse impact on the Fund's ability to effectively hedge its portfolio.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
Transactions are entered into by the Fund only with broker or financial
institutions deemed creditworthy by the Investment Manager and the Sub-Advisor.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities is that the prices of securities
subject to futures contracts (and thereby the futures contract prices) may
correlate imperfectly with the behavior of the cash prices of the Fund's
portfolio securities. Another such risk is that prices of interest rate futures
contracts may not move in tandem with the changes in prevailing interest rates
against which the Fund seeks a hedge. A correlation may also be distorted by the
fact that the futures market is dominated by short-term traders seeking to
profit from the difference between a contract or security price objective and
their cost of borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
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 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 relationships between the debt securities and futures
market could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of underlying securities rather than
engage in closing transactions due to the resultant reduction in the liquidity
of the futures market. In addition, due to the fact that, from the point of view
of speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the cash market, increased participation by
speculators in the futures market could cause temporary price distortions. Due
to the possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of U.S. Government
securities and movements in the prices of futures contracts, a correct forecast
of interest rate trends by the Investment Manager may still not result in a
successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Fund may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position, and in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures contracts
are traded may compel or prevent the Fund from closing out a contract which may
result in reduced gain or increased loss to the Fund. The absence of a liquid
market in futures contracts might cause the Fund to make or take delivery of the
underlying securities at a time when it may be disadvantageous to do so.
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund
notwithstanding that the purchase or sale of a futures contract would not result
in a loss, as in the instance where there is no movement in the prices of the
futures contracts or underlying U.S. Government securities.
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REPURCHASE AGREEMENTS
When cash may be available for only a few days, it may be invested by the
Fund in repurchase agreements until such time as it may otherwise be invested or
used for payments of obligations of the Fund. These agreements, which may be
viewed as a type of secured lending by the Fund, typically involve the
acquisition by the Fund of debt securities from a selling financial institution
such as a bank, savings and loan association or broker-dealer. The agreement
provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral") at a
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. The collateral will be maintained in a
segregated account and will be marked to market daily to determine that the
value of the collateral, as specified in the agreement, does not decrease below
the purchase price plus accrued interest. If such decrease occurs, additional
collateral will be requested and, when received, added to the account to
maintain full collateralization. The Fund will accrue interest from the
institution until the time when the repurchase is to occur. Although such date
is deemed by the Fund to be the maturity date of a repurchase agreement, the
maturities of securities subject to repurchase agreements are not subject to any
limits.
While repurchase agreements involve certain risks not associated with direct
investment in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions whose
financial condition will be continually monitored by the Investment Manager and
Sub-Advisor subject to procedures established by the Board of Trustees of the
Fund. In addition, as described above, the value of the collateral underlying
the repurchase agreement will be at least equal to the repurchase price,
including any accrued interest earned on the repurchase agreement. In the event
of a default or bankruptcy by a selling financial institution, the Fund will
seek to liquidate such collateral. However, the exercising of the Fund's right
to liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss. It
is the current policy of the Fund not to invest in repurchase agreements that do
not mature within seven days if any such investment, together with any other
illiquid assets held by the Fund, amounts to more than 10% of its total assets.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
As discussed in the Prospectus, from time to time, in the ordinary course of
business, the Fund may purchase securities on a when-issued or delayed delivery
basis -- i.e., delivery and payment can take place a month or more after the
date of the transactions. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during this period. While
the Fund will only purchase securities on a when-issued, delayed delivery or
forward commitment basis with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date, if it is deemed
advisable. At the time the Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, the Fund will record the transaction and
thereafter reflect the value, each day, of such security in determining the net
asset value of the Fund. At the time of delivery of the securities, the value
may be more or less than the purchase price. The Fund will also establish a
segregated account with the Fund's custodian bank in which it will continuously
maintain cash, U.S. Government securities or other high grade debt portfolio
securities equal in value to commitments for such when-issued or delayed
delivery securities; subject to this requirement, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued or
delayed delivery basis may increase the volatility of the Fund's net asset
value. The Investment Manager and the Sub-Advisor and the Board of Trustees do
not believe that the Fund's net asset value or income will be adversely affected
by its purchase of securities on such basis.
PORTFOLIO TURNOVER
The Fund may sell portfolio securities without regard to the length of time
they have been held whenever such sale will, in the opinions of the Investment
Manager and the Sub-Advisor, strengthen the Fund's position and contribute to
its investment objective. As a result of the Fund's investment objective
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and policies, and the nature of the Mortgage-Backed Securities and Asset-Backed
Securities markets, the Fund's portfolio turnover rate may exceed 200%. During
the fiscal years ended October 31, 1994 and 1995, the Fund's portfolio turnover
rates were 393% and 366%, respectively.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus, the
investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at a
meeting of shareholders, if the holders of 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Fund.
The Fund may not:
1. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of issuers
which engage in real estate operations and securities secured by real estate
or interests therein.
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. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets. For this purpose, Mortgage-Backed Securities and Asset-Backed
Securities are not deemed to be investment companies.
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 reverse repurchase agreement or dollar roll; (b) borrowing
money or other leveraging; or (c) purchasing any securities on a when-
issued, delayed delivery or forward commitment basis.
5. Make loans of money or securities, except: (a) by the purchase of
portfolio securities in which the Fund may invest consistent with its
investment objective and policies; (b) by investment in repurchase or
reverse purchase 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. Make short sales of securities or maintain a short position.
9. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or trustee of the Fund, or any officer, director or partner of
the Investment Manager or Sub-Advisor owns more than 1/2 of 1% of the
outstanding voting securities of such issuer, and such officers, trustees
and directors who own more than 1/2 of 1% own in the aggregate more than 5%
of the outstanding voting securities of such issuers.
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 the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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Subject to the general supervision of the Trustees of the Fund, the
Investment Manager and the Sub-Advisor are responsible for the investment
decisions and the placing of the orders for portfolio transactions for the Fund.
The Fund's portfolio transactions will occur primarily with issuers,
underwriters or major dealers acting as principals. Such transactions are
normally on a net basis and do not involve
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payment of brokerage commissions. The cost of securities purchased from an
underwriter usually includes a commission paid by the issuer to the
underwriters; transactions with dealers normally reflect the spread between bid
and asked prices. Options and futures transactions will usually be effected
through a broker and a commission will be charged. During the fiscal years ended
October 31, 1995, 1994 and 1993, the Fund did not pay any brokerage commissions.
The Investment Manager and the Sub-Advisor currently serve 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 and the Sub-Advisor to cause purchase or 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 and
futures contracts for its portfolio is that primary consideration will be given
to obtaining the most favorable prices and efficient execution of transactions.
In seeking to implement the Fund's policies, the Investment Manager and the
Sub-Advisor effect transactions with those brokers and dealers who the
Investment Manager and the Sub-Advisor believe provide the most favorable prices
and are capable of providing efficient executions. If the Investment Manager or
the Sub-Advisor believes such price and execution 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 and/or the Sub-Advisor. Such
services may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities.
The information and services received by the Investment Manager and the
Sub-Advisor from brokers and dealers may be of benefit to the Investment Manager
and the Sub-Advisor 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 the Sub-Advisor and thereby reduce its expenses, it is of indeterminable
value and the fees paid to the Investment Manager and the Sub-Advisor are 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. During the fiscal year ended October 31, 1995, the Fund did
not effect any principal transactions with DWR.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR. In order for DWR to effect portfolio transactions for the
Fund, the commissions, fees or other remuneration received by DWR must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow DWR to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Trustees of the Fund,
including a majority of the Trustees who are not "interested" Trustees, 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.
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THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of DWDC. The Trustees of the
Fund, including a majority of the Trustees who are not, and were not at the time
they voted, interested persons of the Fund, as defined in the Act (the
"Independent Trustees"), approved, at their meeting held on October 30, 1992,
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
took effect on June 30, 1993, upon the spin-off by Sears, Roebuck and Co. of its
remaining shares of DWDC. The current Distribution Agreement is substantively
identical to the Fund's previous distribution agreement in all material
respects, except for the dates of effectiveness. 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 Trustees,
including a majority of the Independent Trustees.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws. The Fund and the Distributor
have agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. Under the Distribution
Agreement, the Distributor uses its best efforts in rendering services to the
Fund, but in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations, the Distributor is not liable to the Fund
or any of its shareholders for any error of judgment or mistake of law or for
any act or omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan"). The Plan was approved by the Trustees on April 16, 1991, and
by DWR as the Fund's then sole shareholder on May 15, 1991 and by the
shareholders holding a majority, as defined in the Act, of the outstanding
voting securities of the Fund at a Special Meeting of Shareholders of the Fund
held on June 29, 1992. The vote of the Trustees, which was cast in person at a
meeting called for the purpose of voting on such Plan, included a majority of
the Trustees who are not and were not at the time of their voting interested
persons of the Fund and who have and had at the time of their votes no direct or
indirect financial interest in the operation of the Plan (the "Independent 12b-1
Trustees"). In making their decision to adopt the Plan, the Trustees requested
from DWR and received such information as they deemed necessary to make an
informed determination as to whether or not adoption of the Plan was in the best
interests of the shareholders of the Fund. After due consideration of the
information received, the Trustees, including the Independent 12b-1 Trustees,
determined that adoption of the Plan would benefit the shareholders of the Fund.
At their meeting held on October 30, 1992, the Trustees of the Fund, including
all of the independent 12b-1 Trustees, approved certain amendments to the Plan
which took effect in January, 1993 and were designed to reflect the fact that
upon the reorganization described above, the share distribution activities
theretofore performed for the Fund by DWR were assumed by the Distributor and
DWR's sales activities are now being performed pursuant to the terms of a
selected dealer agreement between the Distributor and DWR. The amendments
provide that payments under the Plan will be made to the Distributor rather than
to DWR as before the amendment, and that the Distributor in turn is authorized
to
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<PAGE>
make payments to DWR, its affiliates or other selected broker-dealers (or direct
that the Fund pay such entities directly). The Distributor is also authorized to
retain part of such fee as compensation for its own distribution-related
expenses.
The Fund is authorized to reimburse the Distributor for specific expenses
the distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. Reimbursement is made through monthly payments in amounts
determined in advance of each fiscal quarter by the Trustees, including a
majority of the Independent 12b-1 Trustees. The amount of each monthly payment
may in no event exceed an amount equal to a payment at the annual rate of 0.20
of 1% of the average daily net assets of the shares of the Fund during the
month. Such payment is treated by the Fund as an expense in the year it is
accrued. No interest or other financing charges will be incurred by the
Distributor for which reimbursement payments under the Plan will be made. In
addition, no interest charges, if any, incurred on any distribution expense
incurred by the Distributor pursuant to the Plan, will be reimbursable under the
Plan.
The Distributor has informed the Fund that the fee payable by the Fund each
year pursuant to the Plan not to exceed to 0.20% 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). The fee is a payment made for personal service and/or the
maintenance of shareholder accounts.
Under the Plan, the Distributor uses its best efforts in rendering services
to the Fund, but in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations, the Distributor is not
liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
For the fiscal year ended October 31, 1995, the Fund paid a total of $64,994
pursuant to the Plan. Such payment amounted to an annual rate of 0.18% of the
Fund's average daily net assets for such fiscal period. It is estimated that the
amount paid by the Fund for distribution was for expenses which relate to
compensation of sales personnel and associated overhead expenses. The
Distributor has informed the Fund that it received sales charges on sales of the
Fund's shares in the approximate amounts of $224,000, $19,200 and $6,600 for the
fiscal years ended 1993, 1994 and 1995, respectively.
The Plan has an initial term which ended April 30, 1992, and provides that
from year to year thereafter it will continue in effect, provided such
continuance is approved annually by a vote of the Trustees, including a majority
of the Independent 12b-1 Trustees. Most recent continuance of the Plan for one
year, until April 30, 1994, was approved by the Board of Trustees of the Fund,
including a majority of the Independent 12b-1 Trustees, at a Board meeting held
on April 28, 1993. At that meeting, the Trustees, including a majority of the
Independent 12b-1 Trustees, also approved certain technical amendments to the
Plan in connection with recent amendments adopted by the National Association of
Securities Dealers, Inc. to its Rules of Fair Practice. Prior to approving the
continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated: (2)
the benefits the Fund had obtained, was 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 Trustees of the Fund, including each of the independent 12b-1
Trustees, determined that continuation of the Plan would be in the best interest
of the Fund and would have a reasonable likelihood of continuing to benefit the
Fund and its shareholders. In the Trustees' quarterly review of the Plan, they
will consider its continued appropriateness and the level of compensation
provided herein. An amendment to increase materially the maximum amount
authorized to be spent under the Plan and Agreement on behalf of the Fund must
be approved by the shareholders of the Fund, and all material amendments to the
Plan must be approved by the Trustees in the manner described above. The Plan
may be terminated on behalf of the Fund at any time, without payment of any
penalty, by vote of the holders of a majority of the
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<PAGE>
Independent 12b-1 Trustees or by a vote of a majority of the outstanding voting
securities of the Fund (as defined in the Act) on not more than 30 days written
notice to any other party to the Plan. So long as the Plan is in effect, the
selection or nomination of the Independent 12b-1 Trustees is committed to the
discretion of the Independent 12b-1 Trustees.
Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each fiscal
quarter, a written report regarding the incremental distribution expenses
incurred by the Distributor on behalf of the Fund during such fiscal quarter,
which report includes (1) an itemization of the types of expenses and the
purposes therefor; (2) the amounts of such expenses; and (3) a description of
the benefits derived by the Fund. In the Trustees' quarterly review of the Plan
they consider its continued appropriateness and the level of compensation
provided therein.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, had any direct or indirect
financial interest in the operation of the Plan except to the extent that the
Investment Manager or certain of its 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.
REDUCED SALES CHARGE
RIGHT OF ACCUMULATION. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $100,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds shares
of the Fund having a current value of $25,000 and purchases $75,000 of
additional shares of the Fund, the sales charge applicable to the $75,000
purchase would be 2.50% of the offering price.
The Distributor must be notified by the dealer or the shareholder at the
time a purchase order is placed that the purchase qualifies for the reduced
charge under the Right of Accumulation. Similar notification must be made in
writing by the dealer or shareholder when such an order is placed by mail. The
reduced sales charge will not be granted if: (a) such notification is not
furnished at the time of the order; or (b) a review of the records of the
Distributor or Dean Witter Trust Company (the "Transfer Agent") fails to confirm
the investor's represented holdings.
LETTER OF INTENT. As discussed in the prospectus under the caption "Reduced
Sales Charges," reduced sales charges are available to investors who enter into
a written Letter of Intent providing for the purchase, within a thirteen-month
period, of shares of the Fund from the Distributor or from a single dealer which
has entered into a Selected Dealer Agreement with the Distributor.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of purchases over a thirteen-month period. Each
purchase made during the period will receive the reduced sales commission
applicable to the amount represented by the goal, as if it were a single
purchase. A number of shares equal in value to 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Transfer Agent, in the name of
the shareholder. The initial purchase under a Letter of Intent must be equal to
at least 5% of the stated investment goal.
The Letter of Intent does not obligate the Investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Distributor or, if not paid, the Distributor is authorized
by the shareholder to liquidate a sufficient number of his or her escrowed
shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level, the
sales charge on the entire amount of the purchase that results in passing that
level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under RIGHT OF ACCUMULATION, but
there will be no retroactive reduction of sales charges on previous purchases.
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<PAGE>
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction. The
5% escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase shares of the Fund pursuant to a Letter of
Intent should carefully read such Letter of Intent.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
As stated in the Prospectus, short-term debt securities with remaining
maturities of sixty days or less at the time of purchase are valued at amortized
cost, unless the Trustees determine such does not reflect the securities' market
value, in which case these securities will be valued at their fair value as
determined by the Trustees. Other short-term debt securities will be valued on a
mark-to-market basis until such time as they reach a remaining maturity of sixty
days, whereupon they will be valued at amortized cost using their value on the
61st day unless the Trustees determine such does not reflect the securities'
market value, in which case these securities will be valued at their fair value
as determined by the Trustees. Listed options are valued at the latest sale
price on the exchange on which they are listed unless no sales of such options
have taken place that day, in which case they will be valued at the mean between
their latest bid and asked prices. Unlisted options are valued at the mean
between their latest bid and asked prices. Futures are valued at the latest sale
price on the commodities exchange on which they trade unless the Trustees
determine such price does not reflect their market value, in which case they
will be valued at their fair value as determined by the Trustees. All other
securities and other assets are valued at their fair value as determined in good
faith under procedures established by and under the supervision of the Trustees.
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time on each day that the New York Stock Exchange is open or, on
days when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time 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 computed on a day on which no orders have been received to
purchase, or tenders to sell or redeem, Fund shares, by taking the value of all
assets of the Fund, subtracting its liabilities, dividing by the number of
shares outstanding and adjusting to the nearest cent. The New York Stock
Exchange currently observes the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund and maintained by 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 transaction takes place in
the Shareholder Investment Account, the shareholder will be mailed a
confirmation of the transaction from the Fund or from DWR or another selected
broker-dealer.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. 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 sales charge, by
returning the check or the proceeds to the Transfer Agent within thirty days
after the payment date. If the shareholder returns the proceeds of a dividend or
distribution, such funds must be accompanied by a signed statement indicating
that the proceeds constitute a dividend or distribution to be invested. Such
investment will be made at the net asset value per share next determined after
receipt of the check or proceeds by the Transfer Agent.
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<PAGE>
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current offering price.
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.
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
Systematic Withdrawal Plan, withdrawals made concurrently with purchases of
additional shares are inadvisable because of the sales charges applicable to the
purchase of additional shares.
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her Account Executive or by written notification to the Transfer Agent.
In addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature guarantees
required in the manner described above. The shareholder may also terminate the
Withdrawal Plan at any time by written notice to the Transfer Agent. In the
event of such termination, the account will be continued as a regular
shareholder investment account. The shareholder may also redeem all or part of
the shares held in the Withdrawal Plan account (see "Redemptions and
Repurchases" in the Prospectus) at any time.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. As discussed in the Prospectus,
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
Premier Income Trust, directly to the Fund's Transfer Agent. Such amounts will
be applied to the purchase of Fund shares at the net asset value per share next
computed after receipt of the check or purchase payment by the Transfer Agent.
The shares so purchased will be credited to the investor's account.
EXCHANGE PRIVILEGE. As discussed in the Prospectus, the Fund makes
available to its shareholders an Exchange Privilege whereby shareholders of the
Fund may exchange their shares for shares of other Dean Witter FESC Funds, for
shares of Dean Witter CDSC Funds, and for shares of Dean Witter Short-Term U.S.
Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term
Bond Fund, 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 CDSC fund or FESC fund acquired by purchase (not by exchange
or dividend reinvestment) have been held for thirty days. There is no holding
period for exchanges of shares acquired by exchange or dividend reinvestment.
However, shares of CDSC funds, including shares acquired in exchange for shares
of FESC funds, may not be exchanged for shares of FESC funds. Thus, shareholders
who exchange their Fund shares for shares of CDSC funds may subsequently
exchange
28
<PAGE>
those shares for shares of other CDSC funds or Exchange Funds but may not
reacquire FESC fund shares by exchange. An exchange will be treated for federal
income tax purposes the same as a repurchase or redemption of shares, on which
the shareholder may realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed).
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of other
fund shares. In the absence of negligence on its part, neither the Transfer
Agent nor the Fund shall be liable for any redemption of Fund shares caused by
unauthorized telephone instructions. Accordingly, in such event, the investor
shall bear the risk of loss. The staff of the Securities and Exchange Commission
is currently considering the propriety of such a policy.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. The
Transfer Agent shall be liable for its own negligence and not for the default or
negligence of its correspondents or for losses in transit. The Fund shall not be
liable for any default or negligence of the Transfer Agent, the Distributor or
any selected broker-dealer.
The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
fund and the general administration of the Exchange Privilege. No commission or
discounts will be paid to the Distributor or any selected broker-dealer for any
transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000 for
Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income Trust,
Dean Witter New York Municipal Money Market 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
for Dean Witter Short-Term U.S. Treasury Trust is $10,000, although that fund,
in its discretion, may accept initial investments of as low as $5,000. The
minimum initial investment for all other Dean Witter Funds for which the
Exchange Privilege is available is $1,000.) Upon exchange into an Exchange Fund,
the shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of those funds, including the check writing feature, will not be
available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days prior written notice for
termination or material revision), provided that six months' prior written
notice of termination will be given to the shareholders who hold shares of 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
29
<PAGE>
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 current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss. However, the ability to deduct capital losses on
an exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
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 for the certificate and/or
written request in good order. The term "good order" means that the share
certificate, if any, and request for redemption are properly signed, accompanied
by any documentation required by the Transfer Agent, and bear signature
guarantees when required by the Fund or the Transfer Agent. Such payment may be
postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the Securities
and Exchange Commission by order so permits; provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist. If the shares to be redeemed have
recently been purchased by check (including a certified 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 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 accounts.
REINSTATEMENT PRIVILEGE. As described 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 (without
sales charge) 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.
INVOLUNTARY REDEMPTION. As described in the Prospectus, due to the
relatively high cost of handling small investments, the Fund reserves the right
to redeem, at net asset value, the shares of any shareholder whose shares have a
value of less than $100, or such lesser amount as may be fixed by the Board of
Trustees. However, before the Fund redeems such shares and sends the proceeds to
the shareholder,
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<PAGE>
it will notify the shareholder that the value of the shares is less than $100
and allow him or her 60 days to make an additional investment in an amount which
will increase the value of his or her account to $100 or more before the
redemption is processed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment. If any such gains are retained, the Fund will pay federal income
tax thereon, and will notify shareholders that, following an election by the
Fund, the shareholders will be required to include such undistributed gains in
determining their taxable income and may claim their share of the tax paid by
the Fund as a credit against their individual federal income tax.
Because the Fund intends to distribute all of its net investment income and
capital gains to shareholders and otherwise continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, it is not
expected that the Fund will be required to pay any federal income tax.
Shareholders will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from net
investment income or short-term capital gains, are taxable to the shareholder as
ordinary income regardless of whether the shareholder receives such payments in
additional shares or in cash. Any dividends declared in the last quarter of any
year which are paid in the following calendar year prior to February 1 will be
deemed received by the shareholder in the prior year.
Gains or losses on the sales of securities by the Fund generally will be
long-term capital gains or losses if the securities have been held by the Fund
for more than twelve months. Gains or losses on the sale of securities held for
twelve months or less will be short-term capital gains or losses.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction.
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of the gross income be derived from
gains from the sale or other disposition of securities held for less than three
months. Accordingly, the Fund may be restricted in the writing of options on
securities held for less than three months, in the writing of options which
expire in less than three months, and in effecting closing transactions with
respect to call or put options which have been written or purchased less than
three months prior to such transactions. The Fund may also be restricted in its
ability to engage in transactions involving futures contracts.
Under current federal law, the Fund will receive net investment income in
the form of interest cash payments by virtue of holding fixed-income securities,
including Treasury bills, notes and bonds, and will recognize income
attributable to it from holding original issue discount securities, including
zero coupon Treasury securities. Current federal tax law requires that a holder
(such as the Fund) of an original issue discount security accrue a portion of
the discount at which the security was purchased as income each year even though
the Fund receives no interest payment in cash on the security during the year.
As an investment company, the Fund must pay out substantially all of its net
investment income each year. Accordingly, the Fund, to the extent it invests in
original issue discount securities, may be required to pay out as an income
distribution each year an amount which is greater than the total amount of cash
receipts of interest the Fund actually received. Such distributions will be made
from the available cash of the Fund or by the liquidation of portfolio
securities if necessary. If a distribution of cash necessitates the liquidation
of portfolio securities, the Investment Manager will select which securities to
sell. The Fund may realize a gain or loss from such sales. In the event the Fund
realizes net capital gains from such transactions, its shareholders may receive
a larger capital gain distribution, if any, than they would in the absence of
such transactions.
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In computing net investment income, the Fund will amortize premiums or
accrue discounts on fixed-income securities in the portfolio. Realized gains and
losses on security transactions are determined on the identified cost method.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or the distribution of realized long-term capital gains, such
payment or distribution would be in part a return of the shareholder's
investment to the extent of such reduction below the shareholder's cost, but
nonetheless would be fully taxable at either ordinary or capital gain rates.
Therefore, an investor should consider the tax implications of purchasing Fund
shares immediately prior to a dividend or distribution record date.
The straddle rules of Section 1092 of the Internal Revenue Code where
applicable (i) require the Fund to defer losses incurred on certain transactions
involving securities, options and futures contracts, (ii) may affect the Fund's
holding period on the asset underlying an option or futures contract and (iii)
in certain instances, may convert a short-term capital loss to a long-term
capital loss.
Exchange-traded futures contracts, listed options on futures contracts and
listed options on U.S. Government securities are classified as "Section 1256"
contracts under the Internal Revenue Code. Section 1256 contracts are required
to be marked-to-market at the end of the Fund's fiscal year, for purpose of
Federal income tax calculations. The character of gain or loss resulting from
the sale, disposition, closing out, expiration, other termination or
mark-to-market of Section 1256 contracts is generally treated as long-term
capital gain or loss to the extent of 60 percent thereof and short-term capital
gain or loss to the extent of 40 percent thereof.
Over-the-counter options are not classified as Section 1256 contracts and
are not subject to the mark-to-market or 60 percent-40 percent taxation rules.
When put options purchased by the Fund are exercised, the gain or loss realized
on the sales of the underlying securities may be either short-term or long-term,
generally depending upon the holding period of the securities. In determining
the amount of gain or loss, the sales proceeds are reduced by the premium paid
for over-the-counter puts or increased by the premium received for
over-the-counter calls.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes,
including information as to the portion taxable as ordinary income, any portion
taxable as long-term capital gains and any portion treated as a non-taxable
return of capital. Any such return of capital will reduce the shareholders' tax
basis in their shares. 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 should consult their attorneys or tax advisers regarding
specific questions as to state or local taxes and as to the applicability of the
foregoing to their current federal tax situation.
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 maximum offering price per share on the last
day of the period multiplied by the average number of Fund shares outstanding
during the period
32
<PAGE>
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 this formula, was
5.33%.
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. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment, taking a root of the quotient (where the root is equivalent to the
number of years in the period) and subtracting 1 from the result. The average
annual total returns of the Fund for the fiscal year ended October 31, 1995 and
for the period from July 1, 1991 (commencement of operations) through October
31, 1995 were 4.73% and 4.76%, 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 calculation may or may not reflect the
imposition of the maximum front end sales charge. In addition, the Fund may also
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 by the initial $1,000
investment and subtracting 1 from the result. Based on this calculation, the
average annual total return of the Fund, excluding the imposition of the
front-end sales charge, for the fiscal year ended October 31, 1995 and for the
period from July 1, 1991 through October 31, 1994 were 7.97% and 5.50%,
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 by the
initial $1,000 investment and subtracting 1 from the result. Based on the
foregoing calculation, the Fund's total return for the fiscal year ended October
31, 1995 and for the period from July 1, 1991 through October 31, 1995 were
7.97% and 26.12%, 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 and multiplying by $9,700, $48,500 or $97,500
($10,000, $50,000 or $100,000 adjusted for a 3%, 3% and 2.5% sales charge,
respectively). Investments of $10,000 and $50,000 adjusted for a 3% sales charge
in the Fund at inception would have grown to $12,234 and $61,168 respectively
and an investment of $100,000 adjusted for a 2.5% sales charge, in the Fund from
inception would have grown to $122,967 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 SHARES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
held. All of the Trustees except for Messrs. Bozic, Purcell and Schroeder have
been elected by the shareholders of the Fund, most recently at a special meeting
of shareholders held on January 12, 1993. Messrs. Bozic, Purcell and Schroeder
were elected by the other Trustees of the Fund on April 8, 1994. The Trustees
themselves have the power to alter the number and the terms of office of the
Trustees, and they may at any time lengthen their own terms or make their terms
of unlimited duration and appoint their own successors,
33
<PAGE>
provided that always at least a majority of the Trustees has been elected by the
shareholders of the Fund. Under certain circumstances the Trustees may be
removed by action of the Trustees. The shareholders also have the right under
certain circumstances to remove the Trustees. The voting rights of shareholders
are not cumulative, so that holders of more than 50 percent of the shares voting
can, if they choose, elect all Trustees being selected, while the holders of the
remaining shares would be unable to elect any Trustees.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances). However, the Trustees have not authorized
any such additional series or classes of shares.
The Declaration of Trust further provides that no Trustee, officer, employee
or agent of the Fund is liable to the Fund or to a shareholder, nor is any
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Fund, except as such liability may arise from his/her or
its own bad faith, willful misfeasance, gross negligence, or reckless disregard
of his/her or its duties. It also provides that all third persons shall look
solely to the Fund's property for satisfaction of claims arising in connection
with the affairs of the Fund. With the exceptions stated, the Declaration of
Trust provides that a Trustee, officer, employee or agent is entitled to be
indemnified against all liability in connection with the affairs of the Fund.
The Fund is authorized to issue an unlimited number of shares of beneficial
interest. The Fund shall be of unlimited duration subject to the provisions in
the Declaration of Trust concerning termination by action of the shareholders.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager, and of Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts; 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 from the Fund.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
34
<PAGE>
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on 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 Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund included in this Statement of
Additional Information and incorporated by reference in the Prospectus have been
so included and incorporated in reliance on the report of Price Waterhouse 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.
35
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (99.0%)
U.S. GOVERNMENT AGENCIES
$ 929 Federal Home Loan Mortgage Corp. ARM............... 6.67+ % 02/01/18 $ 931,994
1,391 Federal Home Loan Mortgage Corp. ARM............... 7.90+ 09/01/23 1,419,899
1,805 Federal Home Loan Mortgage Corp. PC GOLD........... 8.50 02/01/00 1,867,849
2,726 Federal Home Loan Mortgage Corp. PC GOLD++......... 9.00 05/01/06 2,866,400
--------------
7,086,142
--------------
1,065 Federal National Mortgage Assoc.................... 8.00 * 1,093,131
2,773 Federal National Mortgage Assoc. ARM............... 6.63+ 04/01/19 2,775,937
1,218 Federal National Mortgage Assoc. ARM............... 7.86+ 12/01/20 1,244,237
1,034 Federal National Mortgage Assoc. ARM............... 7.45+ 12/01/22 1,057,378
554 Federal National Mortgage Assoc. ARM............... 7.19+ 07/01/24 566,269
1,391 Federal National Mortgage Assoc. ARM............... 6.82+ 12/01/24 1,416,156
935 Federal National Mortgage Assoc. ARM............... 6.81+ 01/01/25 955,165
896 Federal National Mortgage Assoc. ARM............... 7.08+ 01/01/25 916,291
887 Federal National Mortgage Assoc. ARM............... 7.41+ 01/01/25 907,664
1,500 Federal National Mortgage Assoc. ARM............... 6.34+ 09/01/25 1,534,688
--------------
12,466,916
--------------
1,517 Government National Mortgage Assoc................. 7.25 11/05/04-
04/15/06 1,547,794
2,171 Government National Mortgage Assoc. II ARM......... 6.50+ 02/20/21-
05/20/25 2,210,657
1,500 Government National Mortgage Assoc. II ARM......... 6.50+ * 1,516,875
927 Government National Mortgage Assoc. II ARM......... 7.25+ 07/20/24 945,576
5,051 Government National Mortgage Assoc. II ARM++....... 7.50+ 03/01/25-
06/20/25 5,170,381
--------------
11,391,283
--------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $30,789,954)............................................... 30,944,341
--------------
ASSET-BACKED SECURITIES (12.1%)
1,160 Chase Manhattan Credit Card........................ 6.00 09/17/01 1,161,183
1,457 First Chicago Master Trust......................... 7.30 10/15/99 1,480,057
1,113 General Motors Acceptance Corp..................... 7.15 03/15/00 1,129,287
--------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $3,765,242)................................................ 3,770,527
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS (9.8%)
U.S. GOVERNMENT AGENCIES (7.5%)
790 Federal National Mortgage Assoc. 1990-60 J (PAC)... 9.00 06/25/17 793,535
340 Federal National Mortgage Assoc. 1991-49 D (PAC)... 8.00 05/25/05 340,776
1,087 Federal National Mortgage Assoc. Strip Series I
Class 2............................................ 11.50 04/01/09 1,213,668
--------------
2,347,979
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PRIVATE ISSUES (2.3%)
$ 733 Collateralized Mortgage Obligation Trust 59 G...... 9.00 % 07/01/17 $ 737,391
1 Resolution Funding Corp. 1992-S2 A17 (TAC I/O)..... 7.98+ 01/25/22 415
--------------
737,806
--------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $6,304,729)................................................ 3,085,785
--------------
U.S. GOVERNMENT OBLIGATIONS (7.6%)
1,800 U.S. Treasury Note ++.............................. 6.00 08/31/97 1,810,406
230 U.S. Treasury Note................................. 6.75 04/30/00 238,266
315 U.S. Treasury Note ++.............................. 6.125 09/30/00 318,790
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $2,364,823)................................................ 2,367,462
--------------
SHORT-TERM INVESTMENT (1.1%)
REPURCHASE AGREEMENT
350 Nikko Securities Co. International, Inc. (Japan)
(dated 10/31/95; proceeds $350,057; collateralized
by $353,147 Federal Home Loan Mortgage Corp. 7.00%
due 08/01/99 valued at $358,003) (Identified Cost
$350,000).......................................... 5.90 11/01/95 350,000
--------------
TOTAL INVESTMENTS
(IDENTIFIED COST $43,574,748) (A)............... 129.6% 40,518,115
LIABILITIES IN EXCESS OF OTHER ASSETS........... (29.6) (9,259,225)
----- -----------
NET ASSETS...................................... 100.0% $31,258,890
----- -----------
----- -----------
<FN>
- ---------------------
ARM Adjustable rate mortgage.
I/O Interest-only security.
PC Participation Certificate.
PAC Planned Amortization Class.
TAC Targeted Amortization Class.
* Securities purchased on a forward commitment basis with an approximate
principal amount and no definite maturity date; the actual principal
amount and maturity date will be determined upon settlement.
+ Floating rate securities. Rate shown is the rate in effect at October 31,
1995.
++ Some or all of these securities are pledged as collateral in connection
with reverse repurchase agreements.
(a) The aggregate cost of investments for federal income tax purposes is
$43,574,748; the aggregate gross unrealized appreciation is $438,577 and
the aggregate gross unrealized depreciation is $3,495,210, resulting in
net unrealized depreciation of $3,056,633.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $43,574,748)............................. $40,518,115
Receivable for:
Investments sold........................................ 948,678
Interest................................................ 258,714
Principal paydowns...................................... 149,629
Shares of beneficial interest sold...................... 6,209
Deferred organizational expenses............................ 19,981
Prepaid expenses and other assets........................... 17,593
-----------
TOTAL ASSETS........................................... 41,918,919
-----------
LIABILITIES:
Reverse repurchase agreements............................... 7,863,188
Payable for:
Investments purchased................................... 2,618,826
Shares of beneficial interest repurchased............... 26,172
Dividends to shareholders............................... 18,560
Investment management fee............................... 13,818
Interest................................................ 12,161
Plan of distribution fee................................ 5,527
Accrued expenses and other payables......................... 101,777
-----------
TOTAL LIABILITIES...................................... 10,660,029
-----------
NET ASSETS:
Paid-in-capital............................................. 40,453,131
Net unrealized depreciation................................. (3,056,633)
Accumulated undistributed net investment income............. 41,898
Accumulated net realized loss............................... (6,179,506)
-----------
NET ASSETS............................................. $31,258,890
-----------
-----------
NET ASSET VALUE PER SHARE,
3,556,853 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$8.79
-----------
-----------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 3.09% OF NET ASSET VALUE)*..........
$9.06
-----------
-----------
</TABLE>
<TABLE>
<S> <C>
<FN>
- ---------------------
* On sales of $100,000 or more, the offering price is reduced.
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $2,871,101
----------
EXPENSES
Investment management fee................................... 178,248
Professional fees........................................... 92,129
Shareholder reports and notices............................. 67,163
Plan of distribution fee.................................... 64,994
Transfer agent fees and expenses............................ 40,013
Registration fees........................................... 38,233
Organizational expenses..................................... 29,936
Trustees' fees and expenses................................. 21,870
Custodian fees.............................................. 15,941
Other....................................................... 11,244
----------
TOTAL OPERATING EXPENSES............................... 559,771
Interest expense............................................ 232,495
----------
TOTAL EXPENSES......................................... 792,266
----------
NET INVESTMENT INCOME.................................. 2,078,835
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 238,067
Net change in unrealized depreciation....................... 367,857
----------
NET GAIN............................................... 605,924
----------
NET INCREASE................................................ $2,684,759
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 2,078,835 $ 3,268,827
Net realized gain (loss).................................... 238,067 (1,183,176)
Net change in unrealized depreciation....................... 367,857 (1,276,352)
---------------- ----------------
NET INCREASE........................................... 2,684,759 809,299
Dividends from net investment income........................ (2,713,438) (3,900,882)
Net decrease from transactions in shares of beneficial
interest.................................................. (12,587,691) (43,293,361)
---------------- ----------------
TOTAL DECREASE......................................... (12,616,370) (46,384,944)
NET ASSETS:
Beginning of period......................................... 43,875,260 90,260,204
---------------- ----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$41,898 AND $676,501, RESPECTIVELY)..................... $ 31,258,890 $ 43,875,260
---------------- ----------------
---------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net investment income................................................................. $ 2,078,835
Adjustments to reconcile net investment income to net cash from operating activites:
Decrease in receivables and other assets related to operations........................ 132,205
Increase in payables related to operations............................................ 16,214
Net amortization of premium/discount.................................................. (21,927)
---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................................ 2,205,327
---------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Purchases of investments.............................................................. (143,207,512)
Principal prepayments/sales of investments............................................ 144,781,748
Net sales of short-term investments................................................... 3,752,385
---------------
NET CASH PROVIDED BY INVESTING ACTIVITIES........................................ 5,326,621
---------------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Net proceeds from shares of beneficial interest sold.................................. 492,733
Net payments from shares of beneficial interest repurchased........................... (14,831,196)
Net proceeds from issuance of reverse repurchase agreements........................... 7,863,188
Dividends to shareholders from net investment income.................................. (1,062,353)
---------------
NET CASH USED FOR FINANCING ACTIVITIES........................................... (7,537,628)
---------------
NET DECREASE IN CASH.................................................................. (5,680)
CASH AT BEGINNING OF YEAR............................................................. 5,680
---------------
CASH BALANCE AT END OF YEAR........................................................... $ --
---------------
---------------
CASH PAID DURING THE YEAR FOR INTEREST................................................ $ 220,334
---------------
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Premier Income Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Fund was organized as a Massachusetts
business trust on March 27, 1991 and commenced operations on July 1, 1991.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) 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; (2) when market
quotations are not readily available, portfolio securities are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Trustees (valuation of debt securities for which
market quotations are not readily available may be based upon current market
prices of securities which are comparable in coupon, rating and maturity or an
appropriate matrix utilizing similar factors); (3) certain of the Fund's
portfolio securities may be valued by an outside pricing service approved by the
Trustees. The pricing service utilizes a matrix system incorporating security
quality, maturity and coupon as the evaluation model parameters, and/or research
and evaluations by its staff, including review of broker-dealer market price
quotations, if available, in determining what it believes is the fair valuation
of the portfolio securities valued by such pricing service; and (4) short-term
debt securities having a maturity date of more than sixty days at time of
purchase are valued on a mark-to-market basis until sixty days prior to maturity
and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
The Fund amortizes premiums and accretes discounts based on the respective life
of the securities. Interest income is accrued daily.
C. DOLLAR ROLLS -- The Fund may enter into dollar rolls in which the Fund sells
securities for delivery and simultaneously contracts to repurchase substantially
similar securities at the current sales price on a specified future date. The
difference between the current sales price and the lower forward price for the
future purchase (often referred to as the "drop") is amortized over the life of
the dollar roll.
41
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1995, CONTINUED
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
F. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Fund in the amount of
approximately $150,000 which have been reimbursed for the full amount thereof.
Such expenses have been deferred and are being amortized on the straight-line
method over a period not to exceed five years from the commencement of
operations.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays a management fee,
accrued daily and payable monthly, by applying the annual rate of 0.50% to the
net assets of the Fund determined as of the close of each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
42
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1995, CONTINUED
Under a Sub-Advisory Agreement between BlackRock Financial Management Inc. (the
"Sub-Advisor") and the Investment Manager, the Sub-Advisor provides the Fund
with investment advice and portfolio management relating to the Fund's
investment in securities, subject to the overall supervision of the Investment
Manager. As compensation for its services provided pursuant to the Sub-Advisory
Agreement, the Investment Manager pays the Sub-Advisor monthly compensation
equal to 40% of its monthly compensation.
On February 28, 1995, the Sub-Advisor was acquired by PNC Bank, NA ("PNC").
Following the acquisition, the Sub-Advisor has become a wholly-owned corporate
subsidiary of PNC Asset Management Group, the holding company for PNC's asset
management businesses.
3. PLAN OF DISTRIBUTION
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, is the distributor of the Fund's shares and, in accordance
with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act,
finances certain expenses in connection with the distribution of shares of the
Fund.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses that
the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor under the Plan: (1)
compensation to, and expenses of, account executives of Dean Witter Reynolds
Inc., an affiliate of the Investment Manager and Distributor, and other
employees and selected broker-dealers; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales of
the Fund's shares; (3) expenses incurred in connection with promoting sales of
the Fund's shares; (4) preparing and distributing sales literature; and (5)
providing advertising and promotional activities, including direct mail
solicitation and television, radio, newspaper, magazine and other media
advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the Fund's
shares. The amount of each monthly reimbursement payment may in no event exceed
an amount equal to a payment at the annual rate of 0.20% of the Fund's average
daily net assets during the month. For the year ended October 31, 1995, the
distribution fee was accrued at the annual rate of 0.18%.
43
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1995, CONTINUED
The Distributor has informed the Fund that for the year ended October 31, 1995,
it received approximately $6,600 in commissions from the sale of the Fund's
shares of beneficial interest. Such commissions are not an expense of the Fund;
they are deducted from the proceeds of sales of beneficial interest.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/prepayments of portfolio
securities, excluding short-term investments, for the year ended October 31,
1995 were $141,460,352, and $141,900,701, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$126,482,829 and $119,915,639, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At October 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $3,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended October 31, 1995 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$2,186. At October 31, 1995, the Fund had an accrued pension liability of
$11,000 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 56,943 $ 496,711 188,157 $ 1,689,901
Reinvestment of dividends........................................ 191,193 1,658,690 251,787 2,249,370
----------- -------------- ----------- ------------
248,136 2,155,401 439,944 3,939,271
Repurchased...................................................... (1,692,442) (14,743,092) (5,271,058) (47,232,632)
----------- -------------- ----------- ------------
Net decrease..................................................... (1,444,306) $ (12,587,691) (4,831,114) $(43,293,361)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
During the year ended October 31, 1995, the Fund utilized approximately $228,000
of its net capital loss carryover.
44
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1995, CONTINUED
At October 31, 1995, the Fund had a net capital loss carryover of approximately
$6,180,000 of which $5,009,000 will be available through October 31, 2001 and
$1,171,000 will be available through October 31, 2002 to offset future capital
gains to the extent provided by regulations.
7. REVERSE REPURCHASE AND DOLLAR ROLL AGREEMENTS
Reverse repurchase and dollar roll 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 or dollar roll agreement files for bankruptcy or
becomes insolvent, the Fund's use of proceeds may be restricted pending a
determination by the other party, its trustee or receiver, whether to enforce
the Fund's obligation to repurchase the securities.
Reverse repurchase agreements are collateralized by Fund securities with a
market value in excess of the Fund's obligation under the contract. Securities
valued at $8,025,466 were pledged as collateral.
At October 31, 1995, the reverse repurchase agreements outstanding* were
$7,863,188 with a weighted average interest rate of 5.80% maturing within 22
days. The maximum and average daily amounts outstanding during the period were
$11,409,000 and $5,574,786, respectively. The weighted average interest rate
during the period was 5.88%*.
- -------
* Computation is based on those days when such agreements were outstanding.
45
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 1,
1991*
FOR THE YEAR ENDED OCTOBER 31 THROUGH
------------------------------------------ OCTOBER
1995 1994 1993 1992 31, 1991
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period............... $ 8.77 $ 9.18 $ 9.69 $ 9.95 $ 9.60
--------- --------- --------- --------- ---------
Net investment income.............. 0.53 0.54 0.73 0.71 0.26
Net realized and unrealized gain
(loss)............................ 0.14 (0.41) (0.45) (0.21) 0.37
--------- --------- --------- --------- ---------
Total from investment operations... 0.67 0.13 0.28 0.50 0.63
--------- --------- --------- --------- ---------
Dividends and distributions from:
Net investment income........... (0.65) (0.54) (0.61) (0.71) (0.26)
Net realized gain............... -- -- (0.18) (0.05) (0.02)
--------- --------- --------- --------- ---------
Total dividends and
distributions..................... (0.65) (0.54) (0.79) (0.76) (0.28)
--------- --------- --------- --------- ---------
Net asset value, end of period..... $ 8.79 $ 8.77 $ 9.18 $ 9.69 $ 9.95
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 7.97% 1.44% 2.87% 5.18% 6.41%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses:
Operating.......................... 1.57% 1.24% 0.95% 0.99% 0.85%(2)
Interest........................... 0.65% 0.34% 0.65% 0.61% 0.84%(2)
Total.............................. 2.22% 1.58% 1.60% 1.60% 1.69%(2)(3)
Net investment income.............. 5.83% 5.32% 7.32% 7.05% 7.50%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $31,259 $43,875 $90,260 $154,860 $132,219
Portfolio turnover rate............ 366% 393% 412% 254% 91%(1)
<FN>
- ---------------------
* Commencement of operations.
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all expenses that were assumed or waived by the the
Investment Manager, the above annualized expense and net investment income
ratios would have been 1.85% and 7.34%, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER PREMIER INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of cash
flows and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Dean Witter Premier Income
Trust (the "Fund") at October 31, 1995, the results of its operations and its
cash flows for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the four years in the period then ended and for the period July 1, 1991
(commencement of operations) through October 31, 1991, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
DECEMBER 14, 1995
47
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
----------
Financial highlights for the period ended
July 1, 1991 through October 31, 1991 and
for the fiscal years ended October 31, 1992,
1993, 1994 and 1995 ................................ 4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
--------
Portfolio of Investments at October 31, 1995 ...... 36
Statement of assets and liabilities at
October 31, 1995 .................................. 38
Statement of operations for the year ended
October 31, 1995................................... 38
Statement of changes in net assets for
the years ended October 31, 1994 and 1995.......... 39
Notes to Financial Statements ..................... 41
Financial highlights for the period July 1, 1991
through October 31, 1991 and for the fiscal years
ended October 31, 1992, 1993 and 1995 ............. 46
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
1. -- Declaration of Trust of Registrant
2. -- Amended and Restated By-Laws of Registrant
5. -- Form of Sub-Advisory Agreement between Dean
Witter InterCapital Inc. and BlackRock Financial
Management, Inc.
6. -- Form of Selected Dealer Agreement
8. -- Form of Custody Agreement between The Bank of New York
and Registrant
<PAGE>
9. -- Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services Inc.
11. -- Consent of Independent Accountants
16. -- Schedules for Computation of Performance
Quotations
27. -- Financial Data Schedule
All other exhibits previously filed and incorporated by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at November 30, 1995
-------------- ------------------------
Shares of Beneficial Interest 2,189
Item 27. INDEMNIFICATION.
Pursuant to Section 5.3 of the Registrant's Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the indemnification of
the Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was not
unlawful. In addition, indemnification is permitted only if it is determined
that the actions in question did not render them liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be indemnified for
the expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they give
their undertakings to repay the Registrant unless their conduct is later
determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to
2
<PAGE>
act, except in the case of bad faith, willful misfeasance, gross negligence or
reckless disregard of duties to the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment adviser. The following information is given regarding
officers of Dean Witter InterCapital Inc. 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:
3
<PAGE>
CLOSED-END INVESTMENT COMPANIES
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
OPEN-END INVESTMENT COMPANIES:
(1) Dean Witter Short-Term Bond Fund
(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 American Value Fund
(20) Dean Witter Strategist Fund
(21) Dean Witter Utilities Fund
(22) Dean Witter World Wide Income Trust
(23) Dean Witter New York Municipal Money Market Trust
(24) Dean Witter Capital Growth Securities
(25) Dean Witter Precious Metals and Minerals Trust
4
<PAGE>
(26) Dean Witter European Growth Fund Inc.
(27) Dean Witter Global Short-Term Income Fund Inc.
(28) Dean Witter Pacific Growth Fund Inc.
(29) Dean Witter Multi-State Municipal Series Trust
(30) Dean Witter Premier Income Trust
(31) Dean Witter Short-Term U.S. Treasury Trust
(32) Dean Witter Diversified Income Trust
(33) Dean Witter U.S. Government Money Market Trust
(34) Dean Witter Global Dividend Growth Securities
(35) Active Assets California Tax-Free Trust
(36) Dean Witter Natural Resource Development Securities Inc.
(37) Active Assets Government Securities Trust
(38) Active Assets Money Trust
(39) Active Assets Tax-Free Trust
(40) Dean Witter Limited Term Municipal Trust
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter High Income Securities
(45) Dean Witter National Municipal Trust
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Mid-Cap Growth Fund
(48) Dean Witter Select Dimensions Investment Series
(49) Dean Witter Global Asset Allocation Fund
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
5
<PAGE>
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee, President
and Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co. ("DWDC"); Director and/or officer
of various DWDC subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds; Member (since
January, 1993) and Chairman (since January, 1995)
of the Board of Directors of NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
David A. Hughey Executive Vice President and Chief Administrative
Executive Vice Officer of DWSC, Distributors and DWTC; Director
President and Chief of DWTC; Vice President of the Dean Witter Funds
Administrative Officer and the TCW/DW Funds.
Edmund C. Puckhaber Director of DWTC; Vice President of the Dean
Executive Vice Witter Funds.
President
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone
Senior Vice President Senior Vice President of DWSC, Distributors and
DWTC; Vice President of the Dean Witter Funds and
the TCW/DW Funds.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Joseph J. McAlinden
Senior Vice President Vice President of the Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira Ross
Senior Vice President Vice President of various Dean Witter Funds.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors; First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Douglas Brown
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Peter W. Gurman
Vice President
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
Stanley Kapica
Vice President
Michael Knox Vice President of Dean Witter Convertible
Vice President Securities Trust.
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Hugh Rose
Vice President
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Marianne Zalys
Vice President
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
11
<PAGE>
(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 Natural Resource Development Securities Inc.
(22) Dean Witter World Wide Income Trust
(23) Dean Witter Utilities Fund
(24) Dean Witter Strategist Fund
(25) Dean Witter New York Municipal Money Market Trust
(26) Dean Witter Intermediate Income Securities
(27) Prime Income Trust
(28) Dean Witter European Growth Fund Inc.
(29) Dean Witter Developing Growth Securities Trust
(30) Dean Witter Precious Metals and Minerals Trust
(31) Dean Witter Pacific Growth Fund Inc.
(32) Dean Witter Multi-State Municipal Series Trust
(33) Dean Witter Federal Securities Trust
(34) Dean Witter Short-Term U.S. Treasury Trust
(35) Dean Witter Diversified Income Trust
(36) Dean Witter Health Sciences Trust
(37) Dean Witter Global Dividend Growth Securities
(38) Dean Witter American Value Fund
(39) Dean Witter U.S. Government Money Market Trust
(40) Dean Witter Global Short-Term Income Fund Inc.
(41) Dean Witter Premier Income Trust
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter High Income Securities
(45) Dean Witter National Municipal Trust
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Balanced Growth Fund
(48) Dean Witter Balanced Income Fund
(49) Dean Witter Hawaii Municipal Trust
(50) Dean Witter Limited Term Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
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<PAGE>
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service
contract.
Item 32. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State of
New York on the 25th day of January, 1996.
DEAN WITTER PREMIER INCOME TRUST
By /s/ Sheldon Curtis
----------------------------
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 5 has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 1/25/96
---------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 1/25/96
---------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 1/25/96
---------------------------
Sheldon Curtis
Attorney-in-Fact
Manuel H. Johnson
Michael Bozic Paul Kolton
Edwin J.Garn Michael E. Nugent
John R. Haire John L. Schroeder
By /s/ David M. Butowsky 1/25/96
---------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1. - Declaration of Trust of Registrant
2. - Amended and Restated By-Laws of Registrant
5. - Form of Sub-Advisory Agreement between Dean Witter
InterCapital Inc. and BlackRock Financial Management,
Inc.
6. - Form of Selected Dealer Agreement
8. - Form of Custody Agreement between The Bank of New York
and the Registrant
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services Company Inc.
11. - Consent of Independent Accountants
16. - Schedules for Computation of Performance
Quotations
27. - Financial Data Schedule
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
Two World Tade Center
New York, New York 10048
DECLARATION OF TRUST
Dated: March 26, 1991
<PAGE>
TABLE OF CONTENTS
PAGE
------
ARTICLE I -- NAME AND DEFINITIONS . . . . . . . . . . . . . . . . . 2
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II -- TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Number of Trustees . . . . . . . . . . . . . . . . . . 3
Section 2.2 Election and Term . . . . . . . . . . . . . . . . . . 3
Section 2.3 Resignation and Removal . . . . . . . . . . . . . . . 3
Section 2.4 Vacancies . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.5 Delegation of Power to Other Trustees . . . . . . . . 4
ARTICLE III -- POWERS OF TRUSTEES . . . . . . . . . . . . . . . . . . 4
Section 3.1 General . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2 Investments . . . . . . . . . . . . . . . . . . . . . 4
Section 3.3 Legal Title . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4 Issuance and Repurchase of Securities . . . . . . . . 5
Section 3.5 Borrowing Money; Lending Trust Assets . . . . . . . . 5
Section 3.6 Delegation: Committees . . . . . . . . . . . . . . . . 5
Section 3.7 Collection and Payment . . . . . . . . . . . . . . . . 5
Section 3.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.9 Manner of Acting: By-Laws . . . . . . . . . . . . . . 6
Section 3.10 Miscellaneous Powers . . . . . . . . . . . . . . . . . 6
Section 3.11 Principal Transactions . . . . . . . . . . . . . . . . 6
Section 3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV -- INVESTMENT ADVISER, DISTRIBUTOR,
CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . 7
Section 4.1 Investment Adviser . . . . . . . . . . . . . . . . . . 7
Section 4.2 Administrative Services . . . . . . . . . . . . . . . 7
Section 4.3 Distributor . . . . . . . . . . . . . . . . . . . . . 7
Section 4.4 Transfer Agent . . . . . . . . . . . . . . . . . . . . 7
Section 4.5 Custodian . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.6 Parties to Contract . . . . . . . . . . . . . . . . . 7
ARTICLE V -- LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS . . . . . . . . . . . . . . . . . . 8
Section 5.1 No Personal Liability of Shareholders, Trustees, etc. . 8
Section 5.2 Non-Liability of Trustees, etc. . . . . . . . . . . . 8
Section 5.3 Indemnification . . . . . . . . . . . . . . . . . . . . 8
Section 5.4 No Bond Required of Trustees . . . . . . . . . . . . . 9
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments, etc. . . . . . . . . . . . . . . . . . . 9
Section 5.6 Reliance on Experts, etc. . . . . . . . . . . . . . . 10
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PAGE
------
ARTICLE VI -- SHARES OF BENEFICIAL INTEREST . . . . . . . . . . . . . 9
Section 6.1 Beneficial Interest . . . . . . . . . . . . . . . . . . 9
Section 6.2 Rights of Shareholders . . . .. . . . . . . . . . . . . 9
Section 6.3 Trust Only . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.4 Issuance of Shares . . . . . . . . . . . . . . . . . . 10
Section 6.5 Register of Shares . . . . . . . . . . . . . . . . . . 10
Section 6.6 Transfer of Shares . . . . . . . . . . . . . . . . . . 10
Section 6.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.8 Voting Powers . . . . . . . . . . . . . . . . . . . . . 11
Section 6.9 Series or Classes of Shares . . . . . . . . . . . . . . 11
ARTICLE VII -- REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.1 Redemptions . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.2 Redemptions at the Option of the Trust . . . . . . . . 13
Section 7.3 Effect of Suspension of Determination
of Net Asset Value . . . . . . . . . . . . . . . . . . 14
Section 7.4 Suspension of Right of Redemption . . . . . . . . . . . 14
ARTICLE VIII -- DETERMINATION OF NET ASSET VALUE, NET INCOME AND
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 14
Section 8.1 Net Asset Value . . . . . . . . . . . . . . . . . . . . 14
Section 8.2 Distribution to Shareholders . . . . . . . . . . . . . 15
Section 8.3 Determination of Net Income . . . . . . . . . . . . . . 15
Section 8.4 Power of Modify Foregoing Procedures . . . . . . . . . 15
ARTICLE IX -- DURATION; TERMINATION OF TRUST; AMENDMENT;
MERGERS, ETC. . . . . . . . . . . . . . . . . . . . . . 15
Section 9.1 Duration . . . . . . . . . . . . . . . . . . . . . . . 15
Section 9.2 Termination of Trust or a Series . . . . . . . . . . . 15
Section 9.3 Amendment Procedure . . . . . . . . . . . . . . . . . . 15
Section 9.4 Merger, Consolidation and Sale of Assets . . . . . . . 16
Section 9.5 Incorporation . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE X -- REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . 17
ARTICLE XI -- MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 17
Section 11.1 Filing . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.2 Resident Agent . . . . . . . . . . . . . . . . . . . . 18
Section 11.3 Governing Law . . . . . . . . . . . . . . . . . . . . . 18
Section 11.4 Counterparts . . . . . . . . . . . . . . . . . . . . . 18
Section 11.5 Reliance by Third Parties . . . . . . . . . . . . . . . 18
Section 11.6 Provisions in Conflict with Law or Regulations. . . . . 18
Section 11.7 Use of the Name "Dean Witter" . . . . . . . . . . . . . 18
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ii
<PAGE>
DECLARATION OF TRUST
OF
DEAN WITTER PREMIER INCOME TRUST
Dated: March 26, 1991
THE DECLARATION OF TRUST of Dean Witter Premier Income Trust is made the
26th day of March, 1991 by the parties signatory hereto, as trustees (such
persons, so long as they shall continue in office in accordance with the terms
of this Declaration of Trust, and all other persons who at the time in question
have been duly elected or appointed as trustees in accordance with the
provisions of this Declaration of Trust and are then in office, being herein
after called the "Trustees").
W I T N E S S E T H :
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachsuetts for the investment and reinvestment of funds contributed
thereto; and
WHEREAS, it is provided that the beneficial interest in the trust assets
be divided into transferable shares of beneficial interest as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof,
to wit:
1
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. NAME. The name of the trust created hereby is the "Dean
Witter Premier Income Trust," and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be
sued under that name, which name (and the word "Trust" wherever herein used)
shall refer to the Trustees as Trustees, and not as individuals, or personally,
and shall not refer to the officers, agents, employees or Shareholders of the
Trust. Should the Trustees determine that the use of such name is not advisable,
they may use such other name for the Trust as they deem proper and the Trust
may hold its property and conduct its activities under such other name.
Section 1.2. DEFINITIONS. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "BY-LAWS" means the By-Laws referred to in Section 3.9 hereof, as
from time to time amended.
(b) the terms "COMMISSION," "AFFILIATED PERSON" and "INTERESTED
PERSON," have the meanings given them in the 1940 Act.
(c) "DECLARATION" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "DECLARATION," "HEREOF,"
"HEREIN" and "HEREUNDER" shall be deemed to refere to this Declaration
rather than the article or section in which such words appear.
(d) "DISTRIBUTOR" means the party, other than the Trust, to a contract
described in Section 4.3 hereof.
(e) "FUNADAMENTAL POLICIES" shall mean the investment policies and
restrictions set forth in the Prospectus and Statement of Additional
Information and designated as fundamental policies therein.
(f) "INVESTMENT ADVISER" means any party, other than the Trust, to
a contract described in Section 4.1 hereof.
(g) "MAJORITY SHAREHOLDER VOTE" means the vote of the holders of a
majority of Shares, which shall consist of: (i) a majority of Shares
represented in person or by proxy and entitled to vote at a meeting of
Shareholders at which a quorum, as determined in accordance with the
By-Laws, is present: (ii) a majority of Shares issued and outstanding
and entitled to vote when action is taken by written consent of
Shareholders; and (iii) a "majority of the outstanding voting securities,"
as the phrase is defined in the 1940 Act, when any action is required by
the 1940 Act by such majority as so defined.
(h) "1940 ACT" means the Investment Company Act of 1940 and the rules
and regulations thereunder as amended from time to time.
(i) "PERSON" means and includes individuals, corporations,
partnerships, trusts, assocations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
(j) "PROSPECTUS" means the Prospectus and Statement of Additional
Information constituting parts of the Registration Statement of the Trust
under the Securities Act of 1933 as such Prospectus and Statement of
Additional Information may be amended or supplemented and filed with the
Commission from time to time.
(k) "SERIES" means one of the separately managed components of the
Trust (or, if the Trust shall have only one such component, then that one)
as set forth in Section 6.1 hereof or as may be established and designated
from time to time by the Trustees pursuant to that section.
(l) "SHAREHOLDER" means a record owner of outstanding Shares.
2
<PAGE>
(m) "SHARES" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the
shares of any and all series or classes which may be established by the
Trustees, and includes fractions of Shares as well as whole Shares.
(n) "TRANSFER AGENT" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.
(o) "TRUST" means the Dean Witter Premier Income Trust.
(p) "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(q) "TRUSTEES" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms hereof,
and all other persons who may from time to time be duly elected or
appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and reference herein to a Trustee or the Trustees
shall refer to such person or persons in their capacity as trustees
hereunder.
ARTICLE II
TRUSTEES
Section 2.1. NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by
a majority of the Trustees, provided, however, that the number of Trustees
shall in no event be less than three (3) nor more than fifteen (15).
Section 2.2. ELECTION AND TERM. The Trustees shall be elected by a
Majority Shareholder Vote at the first meeting of Shareholders following the
public offering of Shares of the Trust. The Trustees shall have the power
to set and alter the terms of office of the Trustees, and they may at any
time lengthen or lessen their own terms or make their terms of unlimited
duration, subject to the resignation and removal provisions of Section 2.3
hereof. Subject to Section 16(a) of the 1940 Act, the Trustees may elect
their own successors and may, pursuant to Section 2.4 hereof, appoint
Trustees to fill vacancies. The Trustees shall adopt By-Laws not inconsistent
with this Declaration or any provision of law to provide for election of
Trustees by Shareholders at such time or times as the Trustees shall determine
to be necessary or advisable.
Section 2.3. RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such
resignation shall be effective upon such delivery, or at a later date
according to the terms of the instrument. Any of the Trustees may be removed
(provided the aggregate number of Trustees after such removal shall not be
less than the number required by Section 2.1 hereof) by the action of
two-thirds of the remaining Trustees or by the action of the Shareholders of
record of not less than two-thirds of the Shares outstanding (for purposes of
determining the circumstances and procedures under which such removal by the
Shareholders may take place, the provisions of Section 16(c) of the 1940 Act
shall be applicable to the same extent as if the Trust were subject to the
provisions of that Section). Upon the resignation or removal of a Trustee, or
his otherwise ceasing to be a Trustee, he shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the incapacity or death of
any Trustee, his legal representative shall execute and deliver on his behalf
such documents as the remaining Trustees shall require as provided in the
preceding sentence.
Section 2.4. VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy existing by reason of an
increase in the number of Trustees, subject to the
3
<PAGE>
provisions of Section 16(a) of the 1940 Act, the remaining Trustees or, prior
to the public offering of Shares of the Trust, if only one Trustee shall then
remain in office, the remaining Trustee, shall fill such vacancy by the
appointment of such other person as they or he, in their or his discretion,
shall see fit, made by a written instrument signed by a majority of the
remaining Trustees or by the remaining Trustee, as the case may be. Any such
appointment shall not become effective, however, until the person named in
the written instrument of appointment shall have accepted in writing such
appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the
number of Trustees. Whenever a vacancy in the number of Trustees shall occur,
until such vacancy is filled as provided in this Section 2.4, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by the
Declaration. A written instrument certifying the existence of such vacancy
signed by a majority of the Trustees shall be conclusive evidence of the
existence of such vacancy.
Section 2.5. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees: provided that in no
case shall less than two (2) Trustees personally exercise the powers granted
to the Trustees under the Declaration except as herein otherwise expressly
provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the
same extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the Commonwealth of
Massachusetts, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities
wheresoever in the world they may be located as they deem necessary, proper
or desirable in order to promote the interests of the Trust although such
things are not herein specifically mentioned. Any determination as to what is
in the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. INVESTMENTS. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of negotiable or nonnegotiable
instruments, obligations, evidences of indebtedness, certificates of
deposit or indebtedness, commercial paper, repurchase agreements, reverse
repurchase agreements, options, commodities, commodity futures contracts
and related options, currencies, currency futures and forward contracts,
and other securities, investment contracts and other instruments of any
kind, including, without limitation, those issued, guaranteed or sponsored
by any and all Persons including, without limitation, states, territories
and possessions of the United States, the District of Columbia and any of
the political subdivisions, agencies or instrumentalities thereof, and by
the United States Government or its agencies or instrumentalities, foreign
or international instrumentalities, or by any bank or savings institution,
or by any corporation or organization
4
<PAGE>
organized under the laws of the United States or of any state, territory
or possession thereof, and of corporations or organizations organized
under foreign laws, or in "when issued" contracts for any such securities,
or retain Trust assets in cash and from time to time change the
investments of the assets of the Trust; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any
and all such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more persons, firms, associations or
corporations to exercise any of said rights, powers and privileges in
respect of any of said instruments; and the Trustees shall be deemed to
have the foregoing powers with respect to any additional securities in
which the Trust may invest should the Fundamental Policies be amended.
The Trustees shall not be limited in investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by
any law limiting the investments which may be made by fiduciaries.
Section 3.3. LEGAL TILE. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants except that the Trustees shall
have power to cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust, or in the
name of any other Person as nominee, on such terms as the Trustees may
determine, provided that the interest of the Trust therein is appropriately
protected. The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each Person who may hereafter become a
Trustee. Upon the resignation, removal or death of a Trustee he shall
automatically cease to have any right, title or interest in any of the Trust
Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustee [UNREADABLE PER
NYC] be effective whether or not conveyancing documents have been executed
and delivered.
Section 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares
and, subject to the provisions set forth in Articles VII, VIII and IX and
Section 6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust,
[UNREADABLE PER NYC] extent now or hereafter permitted by the laws of the
Commonwealth of Massachusetts governing business corporations.
Section 3.5. BORROWING MONEY; LENDING TRUST ASSETS. Subject to the
Fundamental Policies, the Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person and to lend Trust assets.
Section 3.6. DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of
the Trust and the Trust Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Trustees or otherwise as the Trustees may deem
expedient.
Section 3.7. COLLECTION AND PAYMENT. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay
all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which
any property is owed to the Trust; and to enter into releases, agreements and
other instruments.
Section 3.8. EXPENSES. Subject to Section 6.9 hereof, the Trustees
shall have the power to incur and pay any expenses which in the opinion of
the Trustees are necessary or incidental to carry
5
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out any of the purposes of the Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees.
Section 3.9. MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken
by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment
by means of which all persons participating in the meeting can hear each
other, or by written consents of all the Trustees. The Trustees may adopt
By-Laws not inconsistent with this Declaration to provide for the conduct of
the business of the Trust and may amend or repeal such By-Laws to the extent
such power is not reserved to the Shareholders.
Section 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust or any Series
thereof; (b) enter into joint ventures, partnerships and any other
combinations or associations; (c) remove Trustees or fill vacancies in or add
to their number, elect and remove such officers and appoint and terminate
such agents or employees as they consider appropriate, and appoint from their
own number, and terminate, any one or more committees which may exercise some
or all of the power and authority of the Trustees as the Trustees may
determine; (d) purchase, and pay for out of Trust Property or the property of
the appropriate Series of the Trust, insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment advisers,
distributors, selected dealers or independent contractors of the Trust
against all claims arising by reason of holding any such position or by
reason of any action taken or omitted to be taken by any such Person in such
capacity, whether or not constituting negligence, or whether or not the Trust
would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents
of the Trust; (f) to the extent permitted by law, indemnify any person with
whom the Trust or any Series thereof has dealings, including any Investment
Adviser, Distributor, Transfer Agent and selected dealers, to such extent as
the Trustees shall determine; (g) guarantee indebtedness or contractual
obligations of others; (h) determine and change the fiscal year of the Trust
or any Series thereof and the method by which its accounts shall be kept; and
(i) adopt a seal for the Trust but the absence of such seal shall not impair
the validity of any instrument executed on behalf of the Trust.
Section 3.11. PRINCIPAL TRANSACTIONS. Except in transactions permitted
by the 1940 Act or any rule or regulation thereunder, or any order of
exemption issued by the Commission, or effected to implement the provisions
of any agreement to which the Trust is a party, the Trustees shall not, on
behalf of the Trust, buy any securities (other than Shares) from or sell any
securities (other than Shares) to, or lend any assets of the Trust or any
Series thereof to, any Trustee or officer of the Trust or any firm of which
any such Trustee or officer is a member acting as principal, or have any such
dealings with any Investment Adviser, Distributor or Transfer Agent or with
any Affiliated Person of such Person; but the Trust or any Series thereof may
employ any such Person, or firm or company in which such Person is an
Interested Person, as broker, legal counsel, registrar, transfer agent,
dividend disbursing agent or custodian upon customary terms.
Section 3.12. LITIGATION. The Trustees shall have the power to engage
in and to prosecute, defend, compromise, abandon, or adjust, by arbitration,
or otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series
thereof to pay or to satisfy any debts, claims or expenses incurred in
connection therewith, including those of litigation, and such power shall
include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business
judgment, to dismiss any action, suit, proceeding, dispute, claim, or demand,
derivative or otherwise, brought by any person, including a Shareholder in
its own name or the name of the Trust, whether or not the Trust or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
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ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
Section 4.1. INVESTMENT ADVISER. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time
enter into one or more investment advisory or management contracts or, if the
Trustees establish multiple Series, separate investment advisory or
management contracts with respect to one or more Series whereby the other
party or parties to any such contracts shall undertake to furnish the Trust
or such Series such management, investment advisory, administration,
accounting, legal, statistical and research facilities and services,
promotional or marketing activities, and such other facilities and services,
if any, as the Trustees shall from time to time consider desirable and all
upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of the Declaration, the Trustees
may authorize the Investment Advisers, or any of them, under any such
contracts (subject to such general or specific instructions as the Trustees
may from time to time adopt) to effect purchases, sales, loans or exchanges
of portfolio securities and other investments of the Trust on behalf of the
Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of such
Investment Advisers, or any of them (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees. The Trustees may, in their sole
discretion, call a meeting of Shareholders in order to submit to a vote of
Shareholders at such meeting the approval or continuance of any such
investment advisory or management contract. If the Shareholders of any one or
more of the Series of the Trust should fail to approve any such investment
advisory or management contract, the Investment Adviser may nonetheless serve
as Investment Adviser with respect to any Series whose Shareholders approve
such contract.
Section 4.2. ADMINISTRATIVE SERVICES. The Trustees may in their
discretion from time to time contract for administrative personnel and
services whereby the other party shall agree to provide the Trustees or the
Trust administrative personnel and services to operate the Trust on a daily
or other basis, on such terms and conditions as the Trustees may in their
discretion determine. Such services may be provided by one or more persons or
entities.
Section 4.3. DISTRIBUTOR. The Trustees may in their discretion from
time to time enter into one or more contracts, providing for the sale of
Shares to net the Trust or the applicable Series of the Trust not less than
the net asset value per Share (as described in Article VIII hereof) and
pursuant to which the Trust may either agree to sell the Shares to the other
parties to the contracts, or any of them, or appoint any such other party its
sales agent for such Shares. In either case, any such contract shall be on
such terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article IV, including, without
limitation, the provision for the repurchase or sale of shares of the Trust
by such other party as principal or as agent of the Trust.
Section 4.4. TRANSFER AGENT. The Trustees may in their discretion
from time to time enter into a transfer agency and shareholder service
contract whereby the other party to such contract shall undertake to furnish
transfer agency and shareholder services to the Trust. The contract shall
have such terms and conditions as the Trustees may in their discretion
determine not inconsistent with the Declaration. Such services may be
provided by one or more Persons.
Section 4.5. CUSTODIAN. The Trustees may appoint or otherwise engage
one or more banks or trust companies, each having an aggregate capital,
surplus and undivided profits (as shown in its last published report) of at
least five million dollars ($5,000,000) to serve as Custodian with authority
as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the By-Laws of the Trust.
Section 4.6. PARTIES TO CONTRACT. Any contract of the character
described in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any
other contract may be entered into with any Person, although one or more of
the Trustees or officers of the Trust may be an officer, director, trustee,
shareholder,
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or member of such other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship; nor shall any Person holding such relationship be liable merely
by reason of such relationship for any loss or expense to the Trust under or
by reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article IV. The same Person may be
the other party to any contracts entered into pursuant to Sections 4.1, 4.2,
4.3, 4.4 or 4.5 above or otherwise, and any individual may be financially
interested or otherwise affiliated with Persons who are parties to any or all
of the contracts mentioned in this Section 4.6.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs
of the Trust. No Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever to any Person, other than the
Trust or its Shareholders, in connection with the Trust Property or the
affairs of the Trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard for his duty to such
Person; and all such Persons shall look solely to the Trust Property, or to
the Property of one or more specific Series of the Trust if the claim arises
from the conduct of such Trustee, officer, employee or agent with respect to
only such Series, for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee,
officer, employee or agent, as such, of the Trust is made a party to any suit
or proceeding to enforce any such liability, he shall not, on account
thereof, be held to any personal liability. The Trust shall indemnify and
hold each Shareholder harmless from and against all claims and liabilities,
to which such Shareholder may become subject by reason of his being or having
been a Shareholder, and shall reimburse such Shareholder for all legal and
other expenses reasonably incurred by him in connection with any such claim
or liability; provided that, in the event the Trust shall consist of more
than one Series. Shareholders of a particular Series who are faced with
claims or liabilities solely by reason of their status as Shareholders of
that Series shall be limited to the assets of that Series for recovery of
such loss and related expenses. The rights accruing to a Shareholder under
this Section 5.1 shall not exclude any other right to which such Shareholder
may be lawfully entitled, nor shall anything herein contained restrict the
right of the Trust to indemnify or reimburse a Shareholder in any appropriate
situation even though not specifically provided herein.
Section 5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee, or agent
thereof for any action or failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to redress any
breach of trust) except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties.
Section 5.3. INDEMNIFICATION. (a) The Trustees shall provide for
indemnification by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, of any
person who is, or has been, a Trustee, officer, employee or agent of the
Trust against all liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been a Trustee, officer, employee or agent and against amounts paid or
incurred by him in the settlement thereof, in such manner as the Trustees may
provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other liabilities.
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Section 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be
obligated to give any bond or other security for the performance of any of
his duties hereunder.
Section 5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust or a Series thereof
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent
or be liable for the application of money or property paid, loaned or
delivered to or on the order of the Trustees or of said officer, employee or
agent. Every obligation, contract, instrument, certificate, Share, other
security of the Trust or a Series thereof or undertaking, and every other act
or thing whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as officers, employees or agents of the Trust or a
Series thereof. Every written obligation, contract, instrument, certificate,
Share, other security of the Trust or undertaking made or issued by the
Trustees shall recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the obligations
of the Trust or a Series thereof under any such instrument are not binding
upon any of the Trustees or Shareholders, individually, but bind only the
Trust Estate (or, in the event the Trust shall consist of more than one
Series, in the case of any such obligation which relates to a specific
Series, only the Series which is a party thereto), and may contain any
further recital which they or he may deem appropriate, but the omission of
such recital shall not affect the validity of such obligation, contract
instrument, certificate, Share, security or undertaking and shall not operate
to bind the Trustees or Shareholders individually. The Trustees shall at all
times maintain insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
Section 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by any Investment Adviser,
Distributor, Transfer Agent, selected dealers, accountants, appraisers or
other experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or
expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.01 par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the authority to establish
and designate one or more Series of classes or shares. Each share of any
Series shall represent an equal proportionate share in the assets of that
Series with each other Share in that Series. The Trustees may divide or
combine the shares of any Series into a greater or lesser number of shares
in that Series without thereby changing the proportionate interests in the
assets of that Series. Subject to the provisions of Section 6.9 hereof, the
Trustees may also authorize the creation of additional series of shares (the
proceeds of which may be invested in separate, independently managed
portfolios) and additional classes of shares within any series. All Shares
issued hereunder including, without limitation, Shares issued in connection
with a dividend in Shares or a split in Shares, shall be fully paid and
nonassessable.
Section 6.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust
Property of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial
interest conferred by their Shares, and they shall have no right to call for
any partition or division of any property, profits,
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rights or interests of the Trust nor can they be called upon to assume any
losses of the Trust or suffer an assessment of any kind by virtue of their
ownership of Shares. The Shares shall be personal property giving only the
rights in the Declaration specifically set forth. The Shares shall not
entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights, except as the Trustees may determine with respect to any
series of Shares.
Section 6.3. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the Trustees
to create a general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal relationship other
than a trust. Nothing in the Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members
of a joint stock association.
Section 6.4. ISSUANCE OF SHARES. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares of any
Series, in addition to the then issued and outstanding Shares and Shares held
in the treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection
with the assumption of liabilities) and businesses. In connection with any
issuance of Shares, the Trustees may issue fractional Shares. The Trustees
may from time to time divide or combine the Shares of any Series into a
greater or lesser number without thereby changing the proportionate
beneficial interests in that Series. Contributions to the Trust may be
accepted for, and Shares shall be redeemed as, whole Shares and/or fractions
of a Share as described in the Prospectus.
Section 6.5. REGISTER OF SHARES. A register shall be kept in respect
of each Series at the principal office of the Trust or at an office of the
Transfer Agent which shall contain the names and addresses of the
Shareholders and the number of Shares of each Series held by them
respectively and a record of all transfers thereof. Such register may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled
to receive dividends or distributions or otherwise to exercise or enjoy the
rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or
in the By-Laws provided, until he has given his address to the Transfer Agent
or such other officer or agent of the Trustees as shall keep the said
register for entry thereon. It is not contemplated that certificates will be
issued for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate appropriate rules
and regulations as to their use.
Section 6.6. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent
thereunto duly authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer, together with such
evidence of the genuineness of each such execution and authorization and of
other matters as may reasonably be required. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such record is made,
the Shareholder of record shall be deemed to be the holder of such Shares for
all purposes hereunder and neither the Trustees nor any Transfer Agent or
registrar nor any officer, employee or agent of the Trust shall be affected
by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the
Transfer Agent, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder
and neither the Trustees nor any Transfer Agent or registrar nor any officer
or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law, except as may
otherwise be provided by the laws of the Commonwealth of Massachusetts.
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Section 6.7. NOTICES. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record at
his last known address as recorded on the register of the Trust. Annual
reports and proxy statements need not be sent to a shareholder if: (i) an
annual report and proxy statement for two consecutive annual meetings, or
(ii) all, and at least two, checks (if sent by first class mail) in payment
of dividends or interest and shares during a twelve month period have been
mailed to such shareholder's address and have been returned undelivered.
However, delivery of such annual reports and proxy statements shall resume
once a Shareholder's current address is determined.
Section 6.8. VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.2 hereof, (ii)
for the removal of Trustees as provided in Section 2.3 hereof, (iii) with
respect to any investment advisory or management contract as provided in
Section 4.1, (iv) with respect to termination of the Trust as provided in
Section 9.2, (v) with respect to any amendment of the Declaration to the
extent and as provided in Section 9.3, (vi) with respect to any merger,
consolidation or sale of assets as provided in Section 9.4, (vii) with
respect to incorporation of the Trust to the extent and as provided in
Section 9.5, (viii) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class
action on behalf of the Trust or the Shareholders (provided that Shareholders
of a Series are not entitled to vote in connection with the bringing of a
derivative or class action with respect to any matter which only affects
another other Series or its Shareholders), (ix) with respect to any plan
adopted pursuant to Rule 12b-1 (or any successor rule) under the 1940 Act and
(x) with respect to such additional matters relating to the Trust as may be
required by law, the Declaration, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as and
when the Trustees may consider necessary or desirable. Each whole Share shall
be entitled to one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate fractional vote,
except that Shares held in the treasury of the Trust as of the record date,
as determined in accordance with the By-Laws, shall not be voted. On any
matter submitted to a vote of Shareholders, all Shares shall be voted by
individual Series except (1) when required by the 1940 Act, Shares shall be
voted in the aggregate and not by individual Series; and (2) when the
Trustees have determined that the matter affects only the interests of one or
more Series, then only the Shareholders of such Series shall be entitled to
vote thereon. The Trustees may, in conjunction with the establishment of any
further Series or any classes of Shares, establish conditions under which the
several series or classes of Shares shall have separate voting rights or no
voting rights. There shall be no cumulative voting in the election of
Trustees. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, the Declaration or the
By-Laws to be taken by Shareholders. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
Section 6.9. SERIES OR CLASSES OF SHARES. The following provisions are
applicable regarding the Series of Shares of the Trust established in Section
6.1 hereof and shall be applicable if the Trustees shall establish additional
Series or shall divide the shares of any Series into two or more classes,
also as provided in Section 6.1 hereof, and all provisions relating to the
Trust shall apply equally to each Series thereof except as the context
requires:
(a) The number of authorized shares and the number of shares of
each Series or of each class that may be issued shall be unlimited. The
Trustees may classify or reclassify any unissued shares or any shares
previously issued and reacquired of any Series or class into one or more
Series or one or more classes that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or
some other Series or class), reissue for such consideration and on such
terms as they may determine, or cancel any shares of any Series or any
class reacquired by the Trust at their discretion from time to time.
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(b) The power of the Trustees to invest and reinvest the Trust
Property shall be governed by Section 3.2 of this Declaration with
respect to any one or more Series which represents the interests in the
assets of the Trust immediately prior to the establishment of any
additional Series and the power of the Trustees to invest and reinvest
assets applicable to any other Series shall be as set forth in the
instrument of the Trustees establishing such series which is hereinafter
described.
(c) All consideration received by the Trust for the issue or sale of
shares of a particular Series or class together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that Series or class for all
purposes, subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Trust. In the event that there
are any assets, income, earnings, profits, and proceeds thereof, funds,
or payments which are not readily identifiable as belonging to any
particular Series or class, the Trustees shall allocate them among any
one or more of the Series or classes established and designated from
time to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable. Each such allocation by the Trustees
shall be conclusive and binding upon the shareholders of all Series or
classes for all purposes. No holder of Shares of any Series shall have
any claim on or right to any assets allocated or belonging to any other
Series.
(d) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series and all
expenses, costs, charges and reserves attributable to that Series.
All expenses and liabilities incurred or arising in connection with a
particular Series, or in connection with the management thereof, shall
be payable solely out of the assets of that Series and creditors of a
particular Series shall be entitled to look solely to the property of
such Series for satisfaction of their claims. Any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable.
Each allocation of liabilities, expenses, costs, charges and reserves by
the Trustees shall be conclusive and binding upon the holders of all Series
for all purposes. The Trustees shall have full discretion, to the extent
not inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such determination
and allocation shall be conclusive and binding upon the shareholders.
(e) The power of the Trustees to pay dividends and make
distributions shall be governed by Section 8.2 of this Declaration with
respect to any one or more Series or classes which represents the
interests in the assets of the Trust immediately prior to the
establishment of any additional Series or classes. With respect to any
other Series or class, dividends and distributions on shares of a
particular Series or class may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise, pursuant to a
standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, to the holders of shares
of that Series or class, from such of the income and capital gains,
accrued or realized, from the assets belonging to that Series or class,
as the Trustees may determine, after providing for actual and accrued
liabilities belonging to that Series or class. All dividends and
distributions on shares of a particular Series or class shall be
distributed pro rata to the holders of that Series or class in
proportion to the number of shares of that Series or class held by such
holders at the date and time of record established for the payment
of such dividends or distributions.
(f) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and
dividend rights, of each class and Series of Shares.
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(g) Subject to compliance with the requirements of the 1940 Act,
the Trustees shall have the authority to provide that the holders of
Shares of any Series or class shall have the right to convert or
exchange said Shares into Shares of one or more Series of Shares in
accordance with such requirements and procedures as may be established
by the Trustees.
(h) The establishment and designation of any Series or class of
shares in addition to those established in Section 6.1 hereof shall be
effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the
relative rights, preferences, voting powers, restrictions, limitations
as to dividends, qualifications, and terms and conditions of redemption
of such Series or class, or as otherwise provided in such instrument. At
any time that there are no shares outstanding of any particular Series
or class previously established and designated, the Trustees may be an
instrument executed by a majority of their number abolish that Series or
class and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment to
this Declaration.
(i) Shareholders of a Series shall not be entitled to participate
in a derivative or class action with respect to any matter which only
affects another Series or its Shareholders.
(j) Each Share of a Series of the Trust shall represent a
beneficial interest in the net assets of such Series. Each holder of
Shares of a Series shall be entitled to receive his pro rata share of
distributions of income and capital gains made with respect to such
Series. In the event of the liquidation of a particular Series, the
Shareholders of that Series which has been established and designated
and which is being liquidated shall be entitled to receive, when and as
declared by the Trustees, the excess of the assets belonging to that
Series over the liabilities belonging to that Series. The holders of
Shares of any Series shall not be entitled hereby to any distribution
upon liquidation of any other Series. The assets so distributable to the
Shareholders of any Series shall be distributed among such Shareholders
in proportion to the number of Shares of that Series held by by them and
recorded on the books of the Trust. The liquidation of any particular
Series in which there are Shares then outstanding may be authorized by an
instrument in writing, without a meeting, [COPY UNREADABLE] the outstanding
voting securities of that Series, as that phrase is defined in the 1940
Act.
ARTICLE VII
REDEMPTIONS
Section 7.1. REDEMPTIONS. Each Shareholder of a particular Series shall
have the right at such times as may be permitted by the Trust to require the
Trust to redeem all or any part of his Shares of that Series, upon and
subject to the terms and conditions provided in this Article VII. The Trust
shall, upon application of any Shareholder or pursuant to authorization from
any Shareholder, redeem or repurchase from such Shareholder outstanding
shares for an amount per share determined by the Trustees in accordance with
any applicable laws and regulations; provided that (a) such amount per share
shall not exceed the cash equivalent of the proportionate interest of each
share or of any class or Series of shares in the assets of the Trust at the
time of the redemption or repurchase and (b) if authorized by the Trustees,
the Trust may, at any time and from time to time charge fees for effecting
such redemption or repurchase, at such rates as the Trustees may establish,
as and to the extent permitted under the 1940 Act and the rules and
regulations promulgated thereunder, and may, at any time and from time to
time, pursuant to such Act and such rules and regulations, suspend such right
of redemption. The procedures for effecting and suspending redemption shall
be as set forth in the Prospectus from time to time. Payment will be made in
such manner as described in the Prospectus.
Section 7.2. REDEMPTION AT THE OPTION OF THE TRUST. Each Share of the
Trust or any Series of the Trust shall be subject to redemption at the option
of the Trust at the redemption price which would be applicable if such Share
were then being redeemed by the Shareholder pursuant to Section 7.1.:
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(i) at any time, if the Trustees determine in their sole discretion that
failure to so redeem may have materially adverse consequences to the holders
of the Shares of the Trust or of any Series, or (ii) upon such other
conditions with respect to maintenance of Shareholder accounts of a minimum
amount as may from time to time be determined by the Trustees and set forth
in the then current Prospectus of the Trust. Upon such redemption the holders
of the Shares so redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price.
Section 7.3. EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE.
If, pursuant to Section 7.4 hereof, the Trustees shall declare a suspension
of the determination of net asset value with respect to Shares of the Trust
or of any Series thereof, the rights of Shareholders (including those who
shall have applied for redemption pursuant to Section 7.1 hereof but who
shall not yet have received payment) to have Shares redeemed and paid for by
the Trust or a Series thereof shall be suspended until the termination of
such suspension is declared. Any record holder who shall have his redemption
right so suspended may, during the period of such suspension, by appropriate
written notice of revocation at the office or agency where application was
made, revoke any application for redemption not honored and withdraw any
certificates on deposit. The redemption price of Shares for which redemption
applications have not been revoked shall be the net asset value of such
Shares next determined as set forth in Section 8.1 after the termination of
such suspension, and payment shall be made within seven (7) days after the
date upon which the application was made plus the period after such
application during which the determination of net asset value was suspended.
Section 7.4. SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare
a suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday
closings. (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which
disposal by the Trust or a Series thereof of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust or a
Series thereof fairly to determine the value of its net assets, or (iv)
during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the rights of
redemption or postponement of the date of payment or redemption; provided
that applicable rules and regulations of the Commission shall govern as to
whether the conditions prescribed in (ii), (iii) or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of
redemption or payment on redemption until the Trust shall declare the
suspension at an end, except that the suspension shall terminate in any event
on the first day on which said stock exchange shall have reopened or the
period specified in (ii) or (iii) shall have expired (as to which in the
absence of an official ruling by the Commission, the determination of the
Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination
of the suspension.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 8.1 NET ASSET VALUE. The net asset value of each outstanding
Share of each Series of the Trust shall be determined on such days and at
such time or times as the Trustees may determine. The method of determination
of net asset value shall be determined by the Trustees and shall be as set
forth in the Prospectus. The power and duty to make the daily calculations
may be delegated by the Trustees to any Investment Advisor, the Custodian,
the Transfer Agent or such other person as the Trustees by resolution may
determine. The Trustees may suspend the daily determination of net asset
value to the extent permitted by the 1940 Act.
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Section 8.2. DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from
time to time distribute ratably among the Shareholders of the Trust or of any
Series such proportion of the net income, earnings, profits, gains, surplus
(including paid-in surplus), capital, or assets of the Trust or of such
Series held by the Trustees as they may deem proper. Such distribution may be
made in cash or property (including without limitation any type of
obligations of the Trust or of such Series or any assets thereof), and the
Trustees may distribute ratably among the Shareholders of the Trust or of
that Series additional Shares issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem proper. Such distributions
may be among the Shareholders of record (determined in accordance with the
Prospectus) of the Trust or of such Series at the time of declaring a
distribution or among the Shareholders of record of the Trust or of such
Series at such later date as the Trustees shall determine. The Trustees may
always retain from the net income, earnings, profits or gains of the Trust of
such Series such amount as they may deem necessary to pay the debts or
expenses of the Trust or of such Series or to meet obligations of the Trust
of such Series, or as they may deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders of the Trust or of any
Series such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees deem appropriate.
Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
Section 8.3. DETERMINATION OF NET INCOME. The Trustees shall have the
power to determine the net income of any Series of the Trust and from time to
time to distribute such net income ratably among the Shareholders as
dividends in cash or additional Shares of such Series issuable hereunder. The
determination of net income and the resultant declaration of dividends shall
be as set forth in the Prospectus. The Trustees shall have full discretion to
determine whether any cash or property received by any Series of the Trust
shall be treated as income or as principal and whether any item of expense
shall be charged to the income or the principal account, and their
determination made in good faith shall be conclusive upon the Shareholders.
In the case of stock dividends received, the Trustees shall have full
discretion to determine, in the light of the particular circumstances, how
much, if any, of the value thereof shall be treated as income, the balance,
if any, to be treated as principal.
Section 8.4. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe,
in their absolute discretion, such other bases and times for determining the
per Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or
desirable to enable the Trust to comply with any provision of the 1940 Act,
or any rule or regulation thereunder, including any rule or regulation
adopted pursuant to Section 22 of the 1940 Act by the Commission or any
securities association registered under the Securities Exchange Act of 1934,
or any order of exemption issued by said Commission, all as in effect now or
hereafter amended or modified. Without limiting the generality of the
foregoing, the Trustees may establish classes or additional Series of Shares
in accordance with Section 6.9.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. DURATION. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
Section 9.2. TERMINATION OF TRUST. (a) The Trust or any Series may be
terminated (i) by the affirmative vote of the holders of not less than
two-thirds of the Shares outstanding and entitled to
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vote at any meeting of Shareholders of the Trust or the appropriate Series
thereof, (ii) by an instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of not less than
two-thirds of such Shares of the Trust or the appropriate Series thereof, or
by such other vote as may be established by the Trustees with respect to any
class or Series of Shares, or (iii) with respect to a Series as provided in
Section 6.9(h). Upon the termination of the Trust or the Series:
(i) The Trust of the Series shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust
or the Series and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust shall have
been wound up, including the power to fulfill or discharge the contracts
of the Trust or the Series, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property or Trust Property allocated or belonging to
such Shares to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities
or other property of any kind, discharge or pay its liabilities, and to
do all other acts appropriate to liquidate its business; provided that
any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property or Trust
Property allocated or belonging to such Series shall require Shareholder
approval in accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property or Trust Property
allocated or belonging to such Series, in cash or in kind or partly
each, among the Shareholders of the Trust according to their respective
rights.
Section 9.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended
by a Majority Shareholder Vote, at a meeting of Shareholders, or by written
consent without a meeting. The Trustees may also amend this Declaration
without the vote or consent of Shareholders (i) to change the name of the
Trust or any Series or classes of Shares, (ii) to supply any omission, or
cure, correct or supplement any ambiguous, defective or inconsistent
provision hereof, (iii) if they deem it necessary to conform this Declaration
to the requirements of applicable federal or state laws or regulations or the
requirements of the Internal Revenue Code, or to eliminate or reduce any
federal, state or local taxes which are or may be payable by the Trust or the
Shareholders, but the Trustees shall not be liable for failing to do so, or
(iv) for any other purpose which does not adversely affect the rights of any
Shareholder with respect to which the amendment is or purports to be
applicable.
(b) No amendment may be made under this Section 9.3 which would change
any rights with respect to any Shares of the Trust or of any Series of the
Trust by reducing the amount payable thereon upon liquidation of the Trust or
of such Series of the Trust or by diminishing or eliminating any voting
rights pertaining thereto, except with the vote or consent of the holders of
two-thirds of the Shares of the Trust or of such Series outstanding and
entitled to vote, or by such other vote as may be established by the Trustees
with respect to any Series or class of Shares. Nothing contained in this
Declaration shall permit the amendment of this Declaration to impair the
exemption from personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the
Secretary or any Assistant Secretary of the Trust, setting forth an amendment
and reciting that it was duly adopted by the Shareholders or by the Trustees
as aforesaid or a copy of the Declaration, as amended, and executed by a
majority of the Trustees or certified by the Secretary or any Assistant
Secretary of the Trust, shall be conclusive evidence of such amendment when
lodged among the records of the Trust. Unless such amendment or such
certificate sets forth some later time for the effectiveness of such
amendment, such amendment shall be effective when lodged among the records of
the Trust.
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Nothwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by
the affirmative vote of a majority of the Trustees or by an instrument signed
by a majority of the Trustees.
Section 9.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust or any
Series thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all
or substantially all of the Trust Property or Trust Property allocated or
belonging to such Series, including its good will, upon such terms and
conditions and for such consideration when and as authorized, at any meeting of
Shareholders called for the purpose, by the affirmative vote of the holders
of not less than two-thirds of the Shares of the Trust or such Series
outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of not less than
two-thirds of such Shares, or by such other vote as may be established by the
Trustees with respect to any series or class of Shares; provided, however,
that, if such merger, consolidation, sale, lease or exchange is recommended
by the Trustees, a Majority Shareholder Vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange
shall be deemed for all purposes to have been accomplished under and pursuant
to the laws of the Commonwealth of Massachusetts.
Section 9.5. INCORPORATION. With approval of a Majority Shareholder
Vote, or by such other vote as may be established by the Trustees with
respect to any Series or class of Shares, the Trustees may cause to be
organized or assist in organizing a corporation or corporations under the
laws of any jurisdiction or any other trust, partnership, association or
other organization to take over all of the Trust Property or the Trust
Property allocated or belonging to such Series or to carry on any business in
which the Trust shall directly or indirectly have any interest, and to sell,
convey and transfer the Trust Property or the Trust Property allocated or
belonging to such Series to any such corporation, trust, partnership,
association or organization in exchange for the shares or securities thereof
or otherwise, and to lend money to, subscribe for the shares or securities
of, and enter into any contracts with any such corporation, trust,
partnership, association or organization in which the Trust or such Series
holds or is about to acquire shares or any other interest. The Trustees may
also cause a merger or consolidation between the Trust or any successor thereto
and any such corporation, trust, partnership, association or other
organization if and to the extent permitted by law, as provided under the law
then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to such organization or entities.
ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit or cause the officers
of the Trust to submit to the Shareholders a written financial report of each
Series of the Trust, including financial statements which shall at least
annually be certified by independent public accountants.
ARTICLE XI
MISCELLANEOUS
Section 11.1. FILING. This Declaration and any amendment hereto shall
be filed in the office of the Secretary of the Commonwealth of Massachusetts
and in such other places as may be required under the laws of Massachusetts
and may also be filed or recorded in such other places as the Trustees deem
appropriate. Each amendment so filed shall be accompanied by a certificate
signed and acknowledged by a Trustee or by the Secretary or any Assistant
Secretary of the Trust stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and
operative, may be
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executed from time to time by a majority of the Trustees and shall, upon
filing with the Secretary of the Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may thereafter be referred to
in lieu of the original Declaration and the various amendments thereto.
Section 11.2. RESIDENT AGENT. The Prentice-Hall Corporation System,
Inc., 84 State Street, Boston, Massachusetts 02109 is the resident agent of
the Trust in the Commonwealth of Massachusetts.
Section 11.3. GOVERNING LAW. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with
reference to the laws thereof and the rights of all parties and the validity
and construction of every provision hereof shall be subject to and construed
according to the laws of said State.
Section 11.4. COUNTERPARTS. The Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.5. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a
Trustee hereunder, or Secretary or Assistant Secretary of the Trust,
certifying to: (a) the number or identity of Trustees or Shareholders, (b)
the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Shareholders, (d) the
fact that the number of Trustees or Shareholders present at any meeting or
executing any written instrument satisfies the requirements of this
Declaration (e) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with
the Trustees and their successors.
Section 11.6. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of
the Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation
to the extent necessary to eliminate such conflict; provided, however, that
such determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior
to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any
manner affect such provision in any other jurisdiction or any other provision
of the Declaration in any jurisdiction.
Section 11.7. USE OF THE NAME "DEAN WITTER." Dean Witter Reynolds Inc.
("DWR") has consented to the use by the Trust of the identifying name "Dean
Witter," which is a property right of DWR. The Trust will only use the name
"Dean Witter" as a component of its name and for no other purpose, and will
not purport to grant to any third party the right to use the name "Dean
Witter" for any purpose. DWR, or any corporate affiliate of the parent of
DWR, may use or grant to others the right to use the name "Dean Witter", or
any combination or abbreviation thereof, as all or a portion of a corporate
or business name or for any commercial purpose, including a grant of such
right to any other investment company. At the request of DWR or its parent,
the Trust will take such action as may be required to provide its consent to
the use by DWR or its parent, or any corporate affiliate of DWR's parent, or
by any person to whom DWR or its parent or an affiliate of DWR's parent shall
have granted the right to the use, of the name "Dean Witter," or any
combination or abbreviation thereof. Upon the termination of any investment
advisory or investment management agreement into which DWR and the Trust may
enter, the Trust shall, upon request by DWR or its parent, cease to use the
name "Dean Witter" as a component of its name, and shall not use the name, or
any combination or abbreviation thereof, as a part of its name or for any
other commercial purpose, and shall cause its officers, trustees and
shareholders to take any and all actions which DWR or its parent may request
to effect the foregoing and to reconvey to DWR or its parent any and all
rights to such name.
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IN WITNESS WHEREOF, the undersigned have executed this Declaration of Trust
this 26th day of March, 1991.
/s/ Charles A. Fiumefreddo /s/ Andrew J. Melton, Jr.
- -------------------------------------- --------------------------------------
Charles A. Fiumefreddo, as Andrew J. Melton, Jr., as
Trustee and not individually Trustee and not individually
Two World Trade Center Five World Trade Center
New York, New York 10048 New York, New York 10048
/s/ Sheldon Curtis
- --------------------------------------
Sheldon Curtis, as Trustee
and not individually
Two World Trade Center
New York, New York 10048
STATE OF NEW YORK )
):SS.:
COUNTY OF NEW YORK )
On this 26th day of March, 1991, ANDREW J. MELTON, JR., CHARLES A.
FIUMEFREDDO and SHELDON CURTIS, known to me and known to be the individuals
described in and who executed the foregoing instrument, personally appeared
before me and they severally acknowledged the foregoing instrument to be their
free act and deed.
/s/ Barry Fink
--------------------------------------
Notary Public
BARRY FINK
Notary Public, State of New York
No. 41-4711960
Qualified in Suffolk County
Certificate filed in New York County
Commission Expires Dec. 31, 1995
My commission expires: December 31, 1992
-----------------
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IN WITNESS WHEREOF, the undersigned has executed this instrument this 27th
day of March 1991.
/s/ David M. Elwood
---------------------------------------
, as Trustee
and not individually
One Federal Street
Boston, MA 02110
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. Boston, MA
March 27, 1991
Then personally appeared the above-named David M. Elwood
---------------------------------
who acknowledged the foregoing instrument to be his free act and deed.
before me.
/s/ Concetta M. Baulger
----------------------------------------
Notary Public
My commission expires: Aug. 16, 1996
-------------
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BY-LAWS
OF
DEAN WITTER PREMIER INCOME TRUST
(AMENDED AND RESTATED AS OF JANUARY 25, 1995)
ARTICLE I
DEFINITIONS
The terms "COMMISSION", "DECLARATION", "DISTRIBUTOR", "INVESTMENT
ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SHAREHOLDER", "SHARES",
"TRANSFER AGENT", "TRUST", "TRUST PROPERTY", and "TRUSTEES" have the
respective meanings given them in the Declaration of Trust of Dean Witter
Premier Income Trust dated March 26, 1991.
ARTICLE II
OFFICES
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. OTHER OFFICES. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. MEETINGS. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote not less than twenty-five percent
(25%) of all the votes entitled to be cast at such meeting, except to the
extent otherwise required by Section 16(c) of the 1940 Act, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
Such request shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. Except to the extent otherwise
required by Section 16(c) of the 1940 Act, as made applicable to the Trust by
the provisions of Section 2.3 of the Declaration, the Secretary shall inform
such Shareholders of the reasonable estimated cost of preparing and mailing
such notice of the meeting, and upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of Shareholders
held during the preceding twelve months.
SECTION 3.3. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
<PAGE>
SECTION 3.4. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the Shareholders present or represented
by proxy and entitled to vote thereat shall have power to adjourn the meeting
from time to time. Any adjourned meeting may be held as adjourned without
further notice. At any adjourned meeting at which a quorum shall be present,
any business may be transacted as if the meeting had been held as originally
called.
SECTION 3.5. VOTING RIGHTS, PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. VOTE REQUIRED. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. INSPECTION OF BOOKS AND RECORDS. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under the Corporations and Associations Law of
the State of Maryland.
SECTION 3.9. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
ARTICLE IV
TRUSTEES
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any
two (2) Trustees.
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SECTION 4.2. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. TELEPHONE MEETINGS. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. ACTION BY TRUSTEES WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. EXPENSES AND FEES. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
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(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists
of Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person
shall be entitled to indemnification for any liability, whether or not
there is an adjudication of liability, arising by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties
as described in Section 17(h) and (i) of the Investment Company Act of
1940 ("disabling conduct"). A person shall be deemed not liable by reason
of disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit
or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the
Trustee, officer, employee or agent of the Trust to repay the advance if
it is not ultimately determined that such person is entitled to be
indemnified by the Trust; and
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(3) either, (i) such person provides a security for his
undertaking, or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
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SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the President the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. TERM AND REMOVAL AND VACANCIES. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to
the extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. POWER AND DUTIES. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. THE CHAIRMAN. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, shall be a signatory on all Annual and
Semi-Annual Reports as may be sent to shareholders, and he shall perform such
other duties as the Trustees may from time to time prescribe.
SECTION 6.7. THE PRESIDENT. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the
Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time prescribe.
SECTION 6.8. THE VICE PRESIDENTS. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.
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SECTION 6.9. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the President.
SECTION 6.10. THE SECRETARY. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
President may from time to time prescribe.
SECTION 6.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the President, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the President, may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the President, may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of
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the Trust by the President, or a Vice President, and countersigned by the
Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. APPOINTMENT AND DUTIES. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
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ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
Shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. LOCATION OF BOOKS AND RECORDS. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. RECORD DATE. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. SEAL. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. FISCAL YEAR. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
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ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter Premier Income Trust,
dated March 26, 1991, a copy of which is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Premier Income Trust refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no
Trustee, Shareholder, officer, employee or agent of Dean Witter Premier
Income Trust shall be held to any personal liability, nor shall resort be had
to their private property for the satisfaction of any obligation or claim or
otherwise, in connection with the affairs of said Dean Witter Premier Income
Trust, but the Trust Estate only shall be liable.
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SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 28th day of February, 1995 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as the
"Investment Manager"), and BlackRock Financial Management, Inc., a Delaware
corporation (herein referred to as the "Sub-Advisor").
WHEREAS, Dean Witter Premier Income Trust (herein referred to as the "Fund")
is engaged in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, the Investment Manager has entered into an Investment
Management Agreement with the Fund (the "Investment Management
Agreement") wherein the Investment Manager has agreed to provide investment
management services to the Fund; and
WHEREAS, the Sub-Advisor is registered as an investment adviser as under the
Investment Advisers Act of 1940 and engages in the business of acting as an
investment advisor; and
WHEREAS, the Investment Manager desires to retain the services of the
Sub-Advisor to render investment advisory services for the Fund in the manner
and on the terms and conditions hereinafter set forth; and
WHEREAS, the Sub-Advisor desires to be retained by the Investment Manager to
perform services on said terms and conditions:
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. Subject to the supervision of the Fund, its officers and
Trustees, and the Investment Manager, and in accordance with the investment
objective, policies and restrictions set forth in the then-current
Registration Statement relating to the Fund, and such investment
objective, policies and restrictions from time to time prescribed by the
Trustees of the Fund and communicated by the Investment Manager to the
Sub-Advisor, the Sub-Advisor agrees to provide the Fund with investment
advisory services with respect to investments in the Fund's portfolio
securities, as follows: to obtain and evaluate such information and advice
relating to the economy, securities markets and securities as it deems
necessary or useful to discharge its duties hereunder; to continuously
manage the assets of the Fund in a manner consistent with the investment
objective and policies of the Fund; to determine the securities to be
purchased, sold or otherwise disposed of by the Fund and the timing of
such purchases, sales and dispositions; to take such further action,
including the placing of purchase and sale orders on behalf of the Fund, as
it shall deem necessary or appropriate; and to furnish to or place at the
disposal of the Fund and the Investment Manager such of the information,
evaluations, analyses and opinions formulated or obtained by it in the
discharge of its duties as the Fund and the Investment Manager may, from
time to time, reasonably request. The Investment Manager and the Sub-Advisor
shall each make its officers and employees available to the other from
time to time at reasonable times to review investment policies of the Fund
and to consult with each other.
2. The Sub-Advisor shall, at its own expense, maintain such staff and
employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting
the generality of the foregoing, the staff and personnel of the Sub-Advisor
shall be deemed to include persons employed or otherwise retained by the
Sub-Advisor to furnish statistical and other factual data, advice
regarding economic factors and trends, information with respect to
technical and scientific developments, and such other information, advice
and assistance as the Investment Manager may reasonably request,
PROVIDED, that nothing contained herein shall require the Sub-Advisor to
transfer proprietary technology to the Investment Manager. The Sub-Advisor
shall maintain whatever records as may be required to be maintained by it
under the Act. All such records so maintained shall be retained for the
period of time required under the Act and shall remain the property of the
Fund and be made available to the Fund, upon the request of the Investment
Manager or the Fund.
3. The Fund will, from time to time, furnish or otherwise make available to
the Sub-Advisor such financial reports, proxy statements and other information
relating to the business and affairs of the Fund as
<PAGE>
the Sub-Advisor may reasonably require in order to discharge its duties and
obligations hereunder or to comply with any applicable law and regulations and
the investment objectives, policies and restrictions from time to time
prescribed by the Trustees of the Fund.
4. The Sub-Advisor shall bear the cost of rendering the investment
advisory 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 the Sub-Advisor, and such clerical help
and bookkeeping services as the Sub-Advisor shall reasonably require in
performing its duties hereunder.
5. The Fund assumes and shall pay or cause to be paid all other expenses
of the Fund, including, without limitation: any fees paid to the
Investment Manager; fees pursuant to any plan of distribution that the Fund
may adopt; the charges and expenses of any registrar, any custodian,
sub-custodian or depository appointed by the Fund for the safekeeping
of its cash, portfolio securities and other property, and any stock
transfer or dividend agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; all taxes, including securities
issuance and transfer taxes, and fees payable by the Fund to federal, state
or other governmental agencies or pursuant to any foreign laws; the cost
and expense of engraving or printing certificates representing shares
of the Fund; all costs and expenses in connection with the registration and
maintenance of registration of the Fund and its shares with the Securities
and Exchange Commission and various states and other jurisdictions or
pursuant to any foreign laws (including filing fees and legal fees
and disbursements of counsel); the cost and expense of printing
(including typesetting) and distributing prospectuses of the Fund and
supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and
mailing proxy statements and reports to shareholders; fees and travel
expenses of Trustees or members of any advisory board or committee who
are not employees of the Investment Manager or Sub-Advisor; all expenses
incident to the payment of any dividend, distribution, withdrawal or
redemption whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of
legal counsel, including counsel to the Trustees of the Fund who are not
"interested persons" (as defined in the Act) of the Fund, the Investment
Manager or the Sub-Advisor, and of independent accountants, in connection
with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the
Fund which inure to its benefit; extraordinary expenses (including
but not limited to legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs
of the Fund's operation unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and
the expenses assumed by the Sub-Advisor, the Investment Manager shall
pay to the Sub-Advisor monthly compensation equal to 40% of its monthly
compensation receivable pursuant to the Investment Management Agreement.
Any subsequent change in the Investment Management Agreement which has the
effect of raising or lowering the compensation of the Investment Manager
will have the concomitant effect of raising or lowering the fee payable
to the Sub-Advisor under this Agreement. In addition, if the Investment
Manager has undertaken in the Fund's Registration Statement as filed under
the Act or elsewhere to waive all or part of its fee under the Investment
Management Agreement, the Sub-Advisor's fee payable under this Agreement
will be proportionately waived in whole or in part. The calculation of the
fee payable to the Sub-Advisor pursuant to this Agreement will be made, each
month, at the time designated for the monthly calculation of the fee payable
to the Investment Manager pursuant to the Investment Management Agreement.
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 the part
of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fee as set forth above. Subject to
the provisions of paragraph 7 hereof, payment of the Sub-Advisor's
compensation for the preceding month shall be made as promptly as possible
after completion of the computations contemplated by paragraph 7 hereof.
7. In the event the operating expenses of the Fund, including
amounts payable to the Investment Manager pursuant to 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 imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Sub-
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<PAGE>
Advisor shall reduce its advisory fee (but not lower than zero) to the extent of
40% of such excess, it being understood that the Investment Manager has agreed
to effect a reduction and reimbursement of 60% of such excess in accordance with
the terms of the Investment Management Agreement; provided, however, there shall
be excluded from such expenses the amount of any interest, taxes, brokerage
commissions, distribution fees and extraordinary expenses (including but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Fund. Such reduction, if
any, shall be computed and accrued daily, shall be settled on a monthly basis,
and shall be based upon the expense limitation applicable to the Fund as at the
end of the last business day of the month. Should two or more such expense
limitations be applicable as at the end of the last business day of the month,
that expense limitation which results in the largest reduction in the Investment
Manager's fee or the largest expense reimbursement shall be applicable.
For purposes of this provision, should any applicable expense limitation be
based upon the gross income of the Fund, such gross income shall include, but
not be limited to, interest on debt securities in the Fund's portfolio accrued
to and including the last day of the Fund's fiscal year, and dividends declared
on equity securities, if any, in the Fund's portfolio, the record dates for
which fall on or prior to the last day of such fiscal year, but shall not
include gains from the sale of securities.
8. The Sub-Advisor will use its best efforts in the performance
of investment activities on behalf of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations hereunder, the Sub-Advisor shall not be liable to the
Investment Manager or the Fund or any of its investors for any error of
judgment or mistake of law or for any act or omission by the Sub-Advisor or
for any losses sustained by the Fund or its investors.
9. It is understood that any of the shareholders, Trustees, officers
and employees of the Fund may be a shareholder, director, officer or employee
of, or be otherwise interested in, the Sub-Advisor, and in any person
controlled by or under common control with the Sub-Advisor, and that the
Sub-Advisor and any person controlled by or under common control with the
Sub-Advisor may have an interest in the Fund. It is also understood that
the Sub-Advisor and any affiliated persons thereof or any persons controlled
by or under common control with the Sub-Advisor have and may have
advisory, management 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;
PROVIDED, HOWEVER, that, unless expressly consented to in writing by the
Investment Manager or the Sub-Advisor, as the case may be, for so long as the
Sub-Advisor shall serve as sub-advisor to the Fund, neither (i) the
Sub-Advisor nor any of its affiliates which contains the name "Blackstone"
or (ii) the Investment Manager nor any of its affiliates which contains the
name "Dean Witter" shall undertake to act as investment advisor or
sub-advisor for any other U.S. registered open-end investment company, sold
primarily to retail investors, which utilizes the same investment
techniques utilized by the Sub-Advisor in connection with its sub-advisory
services to the Fund and whose investment objective and policies and
general asset allocation are the same as those of the Fund and which is
sponsored, distributed or managed by a U.S. registered broker-dealer or
one of its affiliates.
10. (a) The Fund, to the full extent permitted by applicable law,
shall indemnify the Sub-Advisor and each of the Sub-Advisor's
partners, officers, employees and agents 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 Fund) by
reason of the fact that he is or was a Trustee, partner, officer,
employee, or agent of the Fund or the Sub-Advisor acting in its capacity
as Sub-Advisor (each such person hereinafter referred to as an Indemnified
Person). The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement,
actually and reasonably incurred by him in connection with the action, suit,
or proceeding, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Fund, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did
3
<PAGE>
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Fund, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The Fund shall indemnify any Indemnified 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 Fund to obtain a judgment or decree in its favor
by reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Fund or the Sub-Advisor acting in its capacity as Sub-Advisor. The
indemnification shall be against expenses, including attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement of
the action or suit, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Fund; except that
no indemnification shall be made in respect of any claim, issue, or matter as to
which the person has been adjudged to be liable for negligence or misconduct in
the performance of his duty to the Fund, except to the extent that the court in
which the action or suit was brought, or a court of equity in the county in
which the Fund has its principal office, determines upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, the person is fairly and reasonably entitled to indemnity for those
expenses which the court shall deem proper, provided such Indemnified Person 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 an Indemnified Person has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
subsection (a) or (b) or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Fund only as
authorized in the specific case after a determination that indemnification of
the Indemnified Person is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
Trustees who are not "interested persons" of the Fund (as defined in the
Act) so directs, by independent legal counsel in a written opinion; or
(iii) By the Fund's shareholders.
(3) Notwithstanding any provision of this paragraph 10, no person shall
be entitled to indemnification for any liability, whether or not there is an
adjudication of liability, arising by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as described in
Section 17(h) and (i) of the Act ("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 Indemnified Person 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 Indemnified Person was not
liable by reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Fund, (as defined in the Act), nor
parties to the action, suit or proceeding, or
(B) an independent legal counsel in a written opinion.
4
<PAGE>
(e) Expenses, including attorneys' fees, incurred by an Indemnified Person
in defending a civil or criminal action, suit or proceeding may be paid by the
Fund in advance of the final disposition thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Fund receives an undertaking by or on behalf of the Indemnified
Person to repay the advance if it is not ultimately determined that such
person is entitled to be indemnified by the Fund; and
(3) either, (i) such person provides a security for his undertaking, or
(ii) the Fund is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available facts,
that there is reason to believe that such person ultimately will be found
entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Fund (as defined in the Act), nor
parties to the action, suit or proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this paragraph 10 shall not be deemed
exclusive of any other rights to which an Indemnified Person may be entitled
under any by-law, agreement, vote of Fund shareholders or Trustees who are not
"interested persons" of the Fund or otherwise, both as to action in his official
capacity and as to action in another capacity while a partner, officer, employee
or agent of the Sub-Advisor, and shall continue as to a person who has ceased to
be an Indemnified Person and inure to the benefit of the heirs, executors and
administrators of such person; provided that no person may satisfy any right of
indemnity or reimbursement granted herein or to which he may be otherwise
entitled except out of the property of the Fund, and no shareholder shall be
personally liable with respect to any claim for indemnity or reimbursement or
otherwise.
(g) The Fund may purchase and maintain insurance on behalf of any
Indemnified Person, 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 Fund purchase insurance to indemnify any Indemnified Person
against liability for any act for which the Fund itself is not permitted to
indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Indemnified Person of the Fund against any liability to the Fund 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) The provisions of this paragraph 10 shall survive the termination of
this Agreement.
11. This Agreement shall remain in effect until April 30, 1995 and from year
to year thereafter provided such continuance is approved at least
annually by the vote of holders of a majority, as defined in the Act, of the
outstanding voting securities of the Fund or by the Trustees of the Fund;
provided, that in either event such continuance is also approved annually by the
vote of a majority of the Trustees of the Fund who are not parties to this
Agreement or "interested persons" (as defined in the Act) of any such party,
which vote must be cast in person at a meeting called for the purpose of voting
on such approval; provided, however, that (a) the Fund may, at any time and
without the payment of any penalty, terminate this Agreement upon thirty days'
written notice to the Investment Manager and the Sub-Advisor, either by majority
vote of the Trustees of the Fund or by the vote of a majority of the outstanding
voting securities of the Fund; (b) this Agreement shall immediately terminate in
the event of its assignment (within the meaning of the Act) unless such
automatic termination shall be prevented by an exemptive order of the Securities
and Exchange Commission; (c) this Agreement shall immediately terminate in the
event of the termination of the Investment Management Agreement; (d) the
Investment Manager may terminate this Agreement without payment of penalty on
thirty days' written notice to the Fund and the Sub-Advisor and; (e) the Sub-
Advisor may terminate this Agreement without the payment of penalty on thirty
days' written notice to the Fund and the Investment Manager. Any notice under
this Agreement shall be given in writing, addressed and delivered, or mailed
post-paid, to the other party at the principal office of such party.
5
<PAGE>
12. This Agreement may be amended by the parties without the vote or consent
of the shareholders of the Fund to supply any omission, to cure, correct
or supplement any ambiguous, defective or inconsistent provision hereof, or if
they deem it necessary to conform this Agreement to the requirements of
applicable federal laws or regulations, but neither the Fund, the Investment
Manager nor the Sub-Advisor shall be liable for failing to do so.
13. This Agreement shall be construed in accordance with the law of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
14. The Declaration of Trust establishing Dean Witter Premier Income Trust,
dated March 26, 1991, a copy of which is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Premier Income Trust refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
Shareholder, officer, employee or agent of Dean Witter Premier Income Trust
shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise,
in connection with the affairs of said Dean Witter Premier Income Trust, but the
Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By ___________________________________
Attest: ______________________________
BLACKROCK FINANCIAL
MANAGEMENT, INC.
By ___________________________________
Attest: ______________________________
Accepted and agreed to as of
the day and year first above written:
DEAN WITTER PREMIER INCOME
TRUST
By ___________________________________
Attest: ______________________________
6
<PAGE>
DEAN WITTER DISTRIBUTORS INC.
Gentlemen:
Dean Witter Distributors Inc. (the "Distributor") has a distribution
agreement (the "Distribution Agreement") with Dean Witter Premier Income
Trust, a Massachusetts business trust (the "Fund"), pursuant to which it acts
as the Distributor for the sale of the Fund's shares of beneficial interest,
par value $0.01 per share (the "Shares"). Under the Distribution Agreement,
the Distributor has the right to distribute Shares for resale.
The Fund is an open-end management investment company registered under
the Investment Company Act of 1940, as amended, and the Shares being offered
to the public are registered under the Securities Act of 1933, as amended.
You have received a copy of the Distribution Agreement between us and the
Fund and reference is made herein to certain provisions of such Distribution
Agreement. The terms used herein, including "Prospectus" and "Registration
Statement" of the Fund and "Selected Dealer" shall have the same meaning in
this Agreement as in the Distribution Agreement. As principal, we offer to
sell shares to your customers, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act on behalf of your
customers, and in no transaction shall you have any authority to act as agent
for the Fund, for us or for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order, as set forth in the
current Prospectus. The procedure relating to the handling of orders shall be
subject to instructions which we or the Fund shall forward from time to time
to you. All orders are subject to acceptance or rejection by the Distributor
or the Fund in the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable net asset values
and subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and
offers to sell Shares you will furnish to each person to whom any such sale
or offer is made a copy of the Prospectus (as then amended or supplemented)
and will not furnish to any person any information relating to the Shares,
which is inconsistent in any respect with the information contained in the
Prospectus (as then amended or supplemented) or cause any advertisement to be
published by radio or television or in any newspaper or posted in any public
place or use any sales promotional material without our consent and the
consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund
and personal services to Fund shareholders by paying you a sales charge
and/or other commission (which may be in the form of a gross sales credit
and/or an annual residual commission) and/or a service fee, under the terms
as are set forth in the Fund's Prospectus.
5. If any Shares sold to your customers under the terms of this
Agreement are repurchased by us for the account of the Fund or are tendered
for redemption within seven business days after the date of the confirmation
of the original purchase by you, it is agreed that you shall forfeit your
right to, and refund to us, any commission received by you with respect to
such Shares.
6. No person is authorized to make any representations concerning the
Shares or the Fund except those contained in the current Prospectus and in
such printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus. In selling Shares, you shall rely solely on
the representations contained in the Prospectus and supplemental information
mentioned above. Any printed information which we furnish you other than the
Prospectus and the Fund's periodic reports and proxy solicitation material
are our sole responsibility and not the responsibility of the Fund, and you
agree that the Fund shall have no liability or responsibility to you in
these respects unless expressly assumed in connection therewith.
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<PAGE>
7. You agree to deliver to each of the purchasers making purchases a
copy of the then current Prospectus at or prior to the time of offering or
sale, and you agree thereafter to deliver to such purchasers copies of the
annual and interim reports and proxy solicitation materials of the Fund. You
further agree to endeavor to obtain proxies from such purchasers. Additional
copies of the Prospectus, annual or interim reports and proxy solicitation
materials of the Fund will be supplied to you in reasonable quantities upon
request.
8. You are hereby authorized (i) to place orders directly with the Fund
or its agent for shares of the Fund to be sold by us subject to the
applicable terms and conditions governing the placement of orders for the
purchase of Fund shares, as set forth in the Distribution Agreement, and (ii)
to tender shares directly to the Fund or its agent for redemption subject to
the applicable terms and conditions set forth in the Distribution Agreement.
9. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Shares entirely. Each party hereto has the
right to cancel this agreement upon notice to the other party.
10. I. You shall indemnify and hold harmless the Distributor, from and
against any claims, damages and liabilities which arise as a result of action
taken pursuant to instructions from you, or on your behalf to: a)(i) place
orders for Shares of the Fund with the Fund's transfer agent or direct the
transfer agent to receive instructions for the order of Shares, and (ii)
accept monies or direct that the transfer agent accept monies as payment for
the order of such Shares, all as contemplated by and in accordance with
Section 3 of the Distribution Agreement; b)(i) place orders for the
redemption of Shares of the Fund with the Fund's transfer agent or direct the
transfer agent to receive instruction for the redemption of Shares and (ii)
to pay redemption proceeds or to direct that the transfer agent pay
redemption proceeds in connection with orders for the redemption of Shares,
all as contemplated by and in accordance with Section 4 of the Distribution
Agreement; provided, however, that in no case, (i) is this indemnity in favor
of the Distributor and any such controlling persons to be deemed to protect
the distributor or any such controlling persons thereof against any liability
to which the Distributor or any such controlling persons would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement or the Distribution Agreement; or
(ii) are you to be liable under the indemnity agreement contained in this
paragraph with respect to any claim made against the Distributor or any such
controlling persons, unless the Distributor or any such controlling persons,
as the case may be, shall have notified you in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Distributor or such
controlling persons (or after the Distributor or such controlling persons
shall have received notice of such service on any designated agent), but
failure to notify you of any such claim shall not relieve you from any
liability which you may have to the person against whom such action is
brought otherwise than on account of the indemnity agreement contained in
this paragraph. You will be entitled to participate at your own expense in
the defense, or, if you so elect, to assume the defense, of any suit brought
to enforce any such liability, but if you elect to assume the defense, such
defense shall be conducted by counsel chosen by you and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event you elect to assume the defense of any such suit and
retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case you do not elect to assume
the defense of any such suit, you will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. You shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or directors in connection with
the issuance or sale of the Shares.
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<PAGE>
II. If the indemnification provided for in this Section 10 is
unavailable or insufficient to hold harmless the Distributor, as provided
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then you shall contribute to
the amount paid or payable by the Distributor as a result of such losses,
claims, damages, laibilities or expenses (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative benefits received
by you on the one hand and the Distributor on the other from the offering of
the Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then you shall contribute to
such amount paid or payable by such indemnified party in such proportion as
is appropriate to reflect not only such relative benefits but also your
relative fault on the one hand and the relative fault of the Distributor on
the other, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. You and the
Distributor agree that it would not be just and equitable if contribution
were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to
above. The amount paid or payable by the Distributor as a result of the
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) referred to above shall be deemed to include any legal or other
expenses reasonably incurred by the Distributor in connection with
investigating or defending any such claim. Notwithstanding the provisions of
this subsection (II), you shall not be required to contribute any amount in
excess of the amount by which the total price at which the Shares distributed
by it to the public were offered to the public exceeds the amount of any
damages which it has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged ommission. No person
guilty to fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act of 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Fund shares. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us herein.
Nothing contained in this paragraph is intended to operate as, and the
provisions of this paragraph shall not in any way whatsoever constitute, a
waiver by you of compliance with any provision of the Securities Act of 1933,
as amended, or of the rules and regulations of the Securities and Exchange
Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States,
we both hereby agree to abide by the Rules of Fair Practice of such
Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Shares have been qualified for sale under, or are exempt from
the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Shares in any
jurisdiction.
14. All communications to us should be sent to the address shown below.
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
15. This Agreement shall become effective as of the date of your
acceptance hereof, provided that you return to us promptly a signed and dated
copy.
DEAN WITTER DISTRIBUTORS INC.
By________________________________
(Authorized Signature)
Please return one signed copy
of this agreement to:
Dean Witter Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: Nations Securities
--------------------------
By:
---------------------------------
Address: 4201 Congress St. Suite 245
----------------------------
Charlotte NC 28209
- -------------------------------------
Date: 6/7/93
--------------------------------
3
<PAGE>
CUSTODY AGREEMENT
Agreement made as of this 20th day of September, 1991, between DEAN
WITTER PREMIER INCOME TRUST, a Massachusetts business trust organized and
existing under the laws of the Commonwealth of Massachusetts, having its
principal office and place of business at 2 World Trade Center, New York,
New York 10048 (hereinafter called the "Fund"), and THE BANK OF NEW YORK,
a New York corporation authorized to do a banking business, having its
principal office and place of business at 48 Wall Street, New York,
New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, shall
have the following meanings:
1. "Agreement" shall mean this Custody Agreement and all Appendices and
Certifications described in the Exhibits delivered in connection herewith.
2. "Authorized Person" shall mean any person, whether or not such person
is an Officer or employee of the Fund, duly authorized by the Board of Trustees
of the Fund to give Oral Instructions and Written Instructions on behalf of the
Fund and listed in the Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to time, provided that
each person who is designated in any such Certificate as an "Officer of DWTC"
shall be an Authorized Person only for purposes of Articles XII and XIII hereof.
3. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
<PAGE>
4. "Call Option" shall mean an exchange traded option with respect to
Securities other than Index, Futures Contracts, and Futures Contract Options
entitling the holder, upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities.
5. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received (irrespective of constructive receipt) by
the Custodian and signed on behalf of the Fund by any two Officers. The term
Certificate shall also include instructions by the Fund to the Custodian
communicated by a Terminal Link.
6. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
7. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
instruments, currency, or Securities (excluding Futures Contracts) which are
owned by the writer thereof.
9. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
10. "Financial Futures Contract" shall mean the firm commitment to buy or
sell financial instruments on a U.S. commodities exchange or board of trade at a
specified future time at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures Contract and/or
Index Futures Contracts.
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<PAGE>
12. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
13. "Investment Company Act of 1940" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
14. "Index Futures Contract" shall mean a bilateral agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value of a particular
index at the close of the last business day of the contract and the price at
which the futures contract is originally struck.
15. "Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or a Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's effecting an
appropriate entry in its books and records.
17. "Money Market Security" shall mean all instruments and obligations
commonly known as a money market instruments, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale, including, without limitation, certain Reverse Repurchase
Agreements, debt obligations issued or guaranteed as to interest and/or
principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to Securities and bank time deposits.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the
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<PAGE>
Securities Exchange Act of 1934, its successor or successors, and its nominee or
nominees.
19. "Officers" shall mean the President, any Vice President, the
Secretary, the Clerk, the Treasurer, the Controller, any Assistant Secretary,
any Assistant Clerk, any Assistant Treasurer, and any other person or persons,
whether or not any such other person is an officer or employee of the Fund, but
in each case only if duly authorized by the Board of Trustees of the Fund to
execute any Certificate, instruction, notice or other instrument on behalf of
the Fund and listed in the Certificate annexed hereto as Appendix B or such
other Certificate as may be received by the Custodian from time to time;
provided that each person who is designated in any such Certificate as holding
the position of "Officer of DWTC" shall be an Officer only for purposes of
Articles XII and XIII hereof.
20. "Option" shall mean a Call Option, Covered Call Option, Index Option
and/or a Put Option.
21. "Oral Instructions" shall mean verbal instructions actually received
(irrespective of constructive receipt) by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an Authorized
Person.
22. "Put Option" shall mean an exchange traded option with respect to
instruments, currency, or Securities other than Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying instruments, currency, or
Securities, to sell such instruments, currency, or Securities to the writer
thereof for the exercise price.
23. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
24. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Index Options, Index Futures
Contracts, Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, over the
counter options on Securities, common stocks and other securities having
characteristics similar to common stocks, preferred stocks, debt obligations
issued by state or municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds, industrial bonds
and industrial development bonds), bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe
- 4 -
<PAGE>
for the same, or evidencing or representing any other rights or interest
therein, or rights to any property or assets.
25. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
26. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund, except that if the Fund does not have more than one portfolio, "Series"
shall mean the Fund or be ignored where a requirement would be imposed on the
Fund or the Custodian which is unnecessary if there is only one portfolio.
27. "Shares" shall mean the shares of beneficial interest of the Fund and
its Series.
28. "Terminal Link" shall mean an electronic data transmission link
between the Fund and the Custodian requiring in connection with each use of the
Terminal Link the use of an authorization code provided by the Custodian and at
least two access codes established by the Fund, provided, that the Fund shall
have delivered to the Custodian a Certificate substantially in the form of
Appendix C.
29. "Transfer Agent" shall mean Dean Witter Trust Company, a New Jersey
limited purpose trust company, its successors and assigns.
30. "Transfer Agent Account" shall mean any account in the name of the
Transfer Agent maintained with The Bank of New York pursuant to a Cash
Management and Related Services Agreement between The Bank of New York and the
Transfer Agent.
31. "Written Instructions" shall mean written communications actually
received (irrespective of constructive receipt) by the Custodian from an
Authorized Person or from a person reasonably believed by the Custodian to be an
Authorized Person by telex or any other such system whereby the receiver of such
communications is able to verify by codes or otherwise with a reasonable degree
of certainty the identity of the sender of such communication.
- 5 -
<PAGE>
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated, and the Custodian shall not
be responsible for any Securities or money not so delivered. The Custodian shall
physically segregate, keep and maintain the Securities of the Series separate
and apart from each other Series and from other assets held by the Custodian.
Except as otherwise expressly provided in this Agreement, the Custodian will not
be responsible for any Securities and moneys not actually received by it, unless
the Custodian has been negligent or has engaged in willful misconduct with
respect thereto. The Custodian will be entitled to reverse any credits of money
made on the Fund's behalf where such credits have been previously made and
moneys are not finally collected, unless the Custodian has been negligent or has
engaged in willful misconduct with respect thereto. The Fund shall deliver to
the Custodian a certified resolution of the Board of Trustees of the Fund,
substantially in the form of Exhibit A hereto, approving, authorizing and
instructing the Custodian on a continuous and on-going basis to deposit in the
Book-Entry System all Securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated and to utilize the
Book-Entry System to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities and deliveries and
returns of Securities collateral. Prior to a deposit of Securities specifically
allocated to a Series in any Depository, the Fund shall deliver to the Custodian
a certified resolution of the Board of Trustees of the Fund, substantially in
the form of Exhibit B hereto, approving,
- 6 -
<PAGE>
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate to deposit in such Depository
all Securities specifically allocated to such Series eligible for deposit
therein, and to utilize such Depository to the extent possible with respect to
such Securities in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities collateral.
Securities and moneys deposited in either the Book-Entry System or a Depository
will be represented in accounts which include only assets held by the Custodian
for customers, including, but not limited to, accounts in which the Custodian
acts in a fiduciary or representative capacity and will be specifically
allocated on the Custodian's books to the separate account for the applicable
Series. Prior to the Custodian's accepting, utilizing and acting with respect to
Clearing Member confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have received a
certified resolution of the Fund's Board of Trustees, substantially in the form
of Exhibit C hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by a
Certificate, to accept, utilize and act in accordance with such confirmations as
provided in this Agreement with respect to such Series. All securities are to be
held or disposed of by the Custodian for, and subject at all times to the
instructions of, the Fund pursuant to the terms of this Agreement. The Custodian
shall have no power or authority to assign, hypothecate, pledge or otherwise
dispose of any Securities except as provided by the terms of this Agreement, and
shall have the sole power to release and deliver Securities held pursuant to
this Agreement.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Such moneys will be held in such manner and account as the Fund and the
Custodian shall agree upon in writing from time to time. Money credited to a
separate account for a Series shall be subject only to drafts, orders, or
charges of the Custodian pursuant to this Agreement and shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Resolutions of the Fund's Board of Trustees certified
by an Officer and by the Secretary or Assistant Secretary of the Fund setting
forth the name and address of the person to whom the payment is to be made, the
Series account from which payment is to be made, the purpose for which payment
is to be made, and declaring such purpose to be a proper corporate purpose;
provided, however, that amounts
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<PAGE>
representing dividends or distributions with respect to Shares shall be paid
only to the Transfer Agent Account;
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series and authorized by this
Agreement; or
(d) Pursuant to Certificates to pay interest, taxes, management fees
or operating expenses (including, without limitation thereto, Board of Trustees'
fees and expenses, and fees for legal accounting and auditing services), which
Certificates set forth the name and address of the person to whom payment is to
be made, state the purpose of such payment and designate the Series for whose
account the payment is to be made.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series but held in a Depository, the Custodian shall upon such
transfer also by book-entry or otherwise identify such Securities as belonging
to such Series in a fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the books of
the Book-Entry System or the Depository. At least monthly and from time to time,
the Custodian shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held under this Agreement for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or a
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or a
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in a Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
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<PAGE>
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or a Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Promptly collect all income and dividends due or payable;
(b) Promptly give notice to the Fund and promptly present for payment
and collect the amount of money or other consideration payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix D annexed hereto, which may be amended at
any time by the Custodian without the prior consent of the Fund, provided the
Custodian gives prior notice of such amendment to the Fund;
(c) Promptly present for payment and collect for the Fund's account
the amount payable upon all Securities which mature;
(d) Promptly surrender Securities in temporary form in exchange for
definitive Securities;
(e) Promptly execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of a Series, all
rights and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder; and
(g) Promptly deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered holder (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
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<PAGE>
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Promptly execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held hereunder for
the Series specified in such Certificate may be exercised;
(b) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
right, warrant or conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) Promptly deliver any Securities held hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series in exchange
therefor such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery or such Securities as
may be issued upon such delivery; and
(d) Promptly present for payment and collect the amount payable upon
Securities which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940 in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates in connection with any such purchase, sale, writing, settlement or
closing out upon its receipt from a broker, dealer, or futures commission
merchant of a statement or confirmation reasonably believed by the Custodian to
be in the form customarily used by brokers, dealers, or future
- 10 -
<PAGE>
commission merchants with respect to such Futures Contracts, Options, or Futures
Contract Options, as the case may be, confirming that such Security is held by
such broker, dealer or futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstanding the foregoing,
payments to or deliveries from the Margin Account and payments with respect to
Securities to which a Margin Account relates, shall be made in accordance with
the terms and conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall, notwithstanding
any provision in this Agreement to the contrary, make payment for any Futures
Contract, Option, or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the provisions of this
Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each execution of a purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, or a Futures Contract
Option, the Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a Certificate, and
(ii) with respect to each purchase of Money Market Securities, a Certificate,
Oral Instructions or Written Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of such Securities purchased by or for
the Fund, pay to the broker specified in
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<PAGE>
the Certificate out of the moneys held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate, Oral Instructions or Written
Instructions.
2. Promptly after each execution of a sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures Contract Option, or
any Reverse Repurchase Agreement, the Fund shall deliver such to the Custodian
(i) with respect to each sale of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each sale of Money Market
Securities, a Certificate, Oral Instructions or Written Instructions, specifying
with respect to each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale and settlement; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. On the settlement date, the Custodian shall
deliver the Securities specifically allocated to such Series to the broker in
accordance with generally accepted street practices and as specified in the
Certificate upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions.
ARTICLE V
OPTIONS
1. Promptly after each execution of a purchase of any Option by the Fund
other than a closing purchase transaction the Fund shall deliver to the
Custodian a Certificate specifying with respect to each Option purchased: (a)
the Series to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the instrument, currency, or Security underlying such
Option and the number of Options, or the name of the in the case of an Index
Option, the index to which such Option relates and the number of Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund in connection
with such purchase; and (h) the name of the Clearing Member through whom such
Option was purchased. The Custodian shall pay, upon receipt of a Clearing
Member's statement confirming the purchase of such Option held by such Clearing
Member for the account of the Custodian (or any duly appointed and registered
nominee of the
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<PAGE>
Custodian) as custodian for the Fund, out of moneys held for the account of the
Series to which such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Certificate.
2. Promptly after the execution of a sale of any Option purchased by the
Fund, other than a closing sale transaction, pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with respect to
each such sale: (a) the Series to which such Option was specifically allocated;
(b) the type of Option (put or call); (c) the instrument, currency, or Security
underlying such Option and the number of Options, or the name of the issuer and
the title and number of shares subject to such Option or, in the case of a Index
Option, the index to which such Option relates and the number of Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of settlement; (g)
the total amount payable to the Fund upon such sale; and (h) the name of the
Clearing Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which previously supplied
the confirmation described in preceding paragraph 1 of this Article with respect
to such Option against payment to the Custodian of the total amount payable to
the Fund, provided that the same conforms to the total amount payable as set
forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise
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and settlement; (e) the exercise price per share; (f) the total amount to be
paid to the Fund upon such exercise; and (g) the name of the Clearing Member
through whom such Put Option was exercised. The Custodian shall, upon receipt of
the amount payable upon the exercise of the Put Option, deliver or direct a
Depository to deliver the Securities specifically allocated to such Series,
provided the same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Index Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Index Option: (a) the
Series to which such Index Option was specifically allocated; (b) the type of
Index Option (put or call); (c) the number of Options being exercised; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the total amount to be received by the Fund in connection with such
exercise; and (h) the Clearing Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct a
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with a Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
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Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct a Depository to deliver, the underlying Securities as specified in the
Certificate against payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate, against delivery of such
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Securities, and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes an Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) whether such
Index Option is a put or a call; (c) the number of options written; (d) the
index to which such Option relates; (e) the expiration date; (f) the exercise
price; (g) the Clearing Member through whom such Option was written; (h) the
premium to be received by the Fund; (i) the amount of cash and/or the amount and
kind of Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and (k) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The Custodian shall, upon
receipt of the premium specified in the Certificate, make the deposits, if any,
into the Senior Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian has specifically agreed to
issue, which are in accordance with the customs prevailing among Clearing
Members in Index Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever an Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Index
Option: (a) the Series for which such Index Option was written; (b) such
information as may be necessary to identify the Index Option being exercised;
(c) the Clearing Member through whom such Index Option is being exercised; (d)
the total amount payable upon such exercise, and whether such amount is to be
paid by or to the Fund; (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Margin Account; and (f) the amount
of cash and/or amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
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12. Promptly after the execution of a purchase or sale by the Fund of any
Option identical to a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a "Closing Purchase
Transaction" or a "Closing Sale Transaction", the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction or a
Closing Sale Transaction; (b) the Series for which the Option was written; (c)
the instrument, currency, or Security subject to the Option, or, in the case of
an Index Option, the index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by or the
amount to be paid to the Fund; (f) the expiration date; (g) the type of Option
(put or call); (h) the date of such purchase or sale; (i) the name of the
Clearing Member to whom the premium is to be paid or from whom the amount is to
be received; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account, a specified
Margin Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium or receipt of the amount, as the case may be,
specified in the Certificate and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with respect to the
Option being liquidated through the Closing Purchase Transaction or the Closing
Sale Transaction, the Custodian shall remove, or direct a Depository to remove,
the previously imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
14. Securities acquired by the Fund through the exercise of an Option
described in this Article shall be subject to Article IV hereof.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract,
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(or with respect to any number of identical Futures Contract(s)): (a) the Series
for which the Futures Contract is being entered; (b) the category of Futures
Contract (the name of the underlying index or financial instrument); (c) the
number of identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the Futures Contract(s)
was (were) entered into and the maturity date; (f) whether the Fund is buying
(going long) or selling (going short) such Futures Contract(s); (g) the amount
of cash and/or the amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract was entered into;
and (i) the amount of fee or commission, if any, to be paid and the name of the
broker, dealer, or futures commission merchant to whom such amount is to be
paid. The Custodian shall make the deposits, if any, to the Margin Account in
accordance with the terms and conditions of the Margin Account Agreement. The
Custodian shall make payment out of the moneys specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the amount of cash and/or
the amount and kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian prior to the delivery or
settlement date a Certificate specifying: (a) the Futures Contract and the
Series to which the same relates; (b) with respect to an Index Futures Contract,
the total cash settlement amount to be paid or received, and with respect to a
Financial Futures Contract, the Securities and/or amount of cash to be delivered
or received; (c) the broker, dealer, or futures commission merchant to or from
whom payment or delivery is to be made or received; and (d) the amount of cash
and/or Securities to be withdrawn from the Senior Security Account for such
Series. The Custodian shall make the payment or delivery specified in the
Certificate, and delete such Futures Contract from the
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statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the execution of a purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the Series to which
such Option is specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the Futures
Contract Option purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or futures commission
merchant through whom such option was purchased; and (i) the name of the broker,
or futures commission merchant, to whom payment is to be made. The Custodian
shall pay out of the moneys specifically allocated to such Series the total
amount to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
2. Promptly after the execution of a sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such sale: (a)
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Future Contract Option (put or call); (c) the type of Futures Contract
and such other
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information as may be necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the date of sale; (e) the sale price; (f) the date
of settlement; (g) the total amount payable to the Fund upon such sale; and (h)
the name of the broker of futures commission merchant through whom the sale was
made. The Custodian shall consent to the cancellation of the Futures Contract
Option being closed against payment to the Custodian of the total amount payable
to the Fund, provided the same conforms to the total amount payable as set forth
in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments of money, if any,
and the deposits of Securities, if any, into the Senior Security Account as
specified in the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
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5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Promptly after the execution by the Fund of a purchase of any Futures
Contract Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall deliver to the Custodian a Certificate
specifying with respect to the Futures Contract Option being purchased: (a) the
Series to which such Option is specifically allocated; (b) that the transaction
is a closing transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the
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Futures Contract underlying the Futures Option Contract; (d) the exercise price;
(e) the premium to be paid by the Fund; (f) the expiration date; (g) the name of
the broker or futures commission merchant to whom the premium is to be paid; and
(h) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account for such Series. The Custodian shall
effect the withdrawals from the Senior Security Account specified in the
Certificate. The withdrawals, if any, to be made from the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after the execution of any short sales of Securities by any
Series of the Fund, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series for which such short sale was made; (b) the name of
the issuer and the title of the Security; (c) the number of shares or principal
amount sold, and accrued interest or dividends, if any; (d) the dates of the
sale and settlement; (e) the sale price per unit; (f) the total amount credited
to the Fund upon such sale, if any, (g) the amount of cash and/or the amount and
kind of Securities, if any, which are to be deposited in a Margin Account and
the name in which such Margin Account has been or is to be established; (h) the
amount of cash and/or the amount and kind of Securities, if any, to be deposited
in a Senior Security Account, and (i) the name of the broker through whom such
short sale was made. The Custodian shall upon its receipt of a statement from
such broker confirming such sale and that the total amount credited to the Fund
upon such sale, if any, as specified in the Certificate is held by
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such broker for the account of the Custodian (or any nominee of the Custodian)
as custodian of the Fund, issue a receipt or make the deposits into the Margin
Account and the Senior Security Account specified in the Certificate.
2. Promptly after the execution of a purchase to close-out any short sale
of Securities, the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or the principal amount, and accrued interest
or dividends, if any, required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the purchase price per
unit; (f) the net total amount payable to the Fund upon such closing-out; (g)
the net total amount payable to the broker upon such closing-out; (h) the amount
of cash and the amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out. The Custodian
shall, upon receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/or cancellation of the receipts, if any, issued
by the Custodian with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net total amount
payable to the broker, and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral Instructions, or
Written Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker, dealer, or financial institution with whom the Reverse
Repurchase Agreement is entered; (d) the amount and kind of Securities to be
delivered by the Fund to such broker, dealer, or financial institution; (e) the
date of such Reverse Repurchase Agreement; and (f) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in a Senior Security Account for such Series in connection with
such Reverse Repurchase Agreement. The Custodian shall, upon receipt of
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the total amount payable to the Fund specified in the Certificate, Oral
Instructions, or Written Instructions make the delivery to the broker, dealer,
or financial institution and the deposits, if any, to the Senior Security
Account, specified in such Certificate, Oral Instructions, or Written
Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate, Oral Instructions, or Written Instructions to the
Custodian specifying: (a) the Reverse Repurchase Agreement being terminated and
the Series for which same was entered; (b) the total amount payable by the Fund
in connection with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in connection
with such termination; (d) the date of termination; (e) the name of the broker,
dealer, or financial institution with whom the Reverse Repurchase Agreement is
to be terminated; and (f) the amount of cash and/or the amount and kind of
Securities to be withdrawn from the Senior Securities Account for such Series.
The Custodian shall, upon receipt of the amount and kind of Securities to be
received by the Fund specified in the Certificate, Oral Instructions, or Written
Instructions, make the payment to the broker, dealer, or financial institution
and the withdrawals, if any, from the Senior Security Account, specified in such
Certificate, Oral Instructions, or Written Instructions.
3. The Certificates, Oral Instructions, or Written Instructions described
in paragraphs 1 and 2 of this Article may with respect to any particular Reverse
Repurchase Agreement be combined and delivered to the Custodian at the time of
entering into such Reverse Repurchase Agreement.
ARTICLE X
LOANS OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
institution
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to which the loan was made. The Custodian shall deliver the Securities thus
designated to the broker, dealer or financial institution to which the loan was
made upon receipt of the total amount designated in the Certificate as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book-Entry System or a
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds.
2. In connection with each termination of a loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall establish a Senior Security Account and from time
to time make such deposits thereto, or withdrawals therefrom, as specified in a
Certificate. Such Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be deposited in, or
withdrawn from, such Senior Security Account for such Series. In the event that
the Fund fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn from, a Senior
Securities Account, the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall promptly notify the Fund that no such deposit
has been made.
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2. The Custodian shall make deliveries or payments from a Margin Account
to the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. The Custodian shall establish a Collateral Account and from time to
time shall make such deposits thereto as may be specified in a Certificate.
Promptly after the close of business on each business day in which cash and/or
Securities are maintained in a Collateral Account for any Series, the Custodian
shall furnish the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the delivery to the
Fund of such statement, the Fund shall furnish to the Custodian a Certificate or
Written Instructions specifying the then market value of the Securities
described in such statement. In the event such then market value is indicated to
be less than the Custodian's obligation with respect to any outstanding Put
Option guarantee letter or similar document,
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the Fund shall promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to eliminate such
deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein and the declaration of dividends and
distributions thereon the Custodian to rely on Oral Instructions, Written
Instructions, or a Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions,
Written Instructions, or Certificate, as the case may be, the Custodian shall
pay to the Transfer Agent Account out of the moneys held for the account of the
Series specified therein the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver or cause to
be delivered, to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
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(b) The amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series the Custodian shall pay, out
of the money held for the account of such Series, all original issue or other
taxes required to be paid by the Fund in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish, or cause to be
furnished, to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt of an advice from an Authorized Person setting forth
the Series and number of Shares received by the Transfer Agent for redemption
and that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent Account out of the moneys held in the separate
account in the name of the Series the total amount specified in the Certificate
issued pursuant to the foregoing paragraph 4 of this Article.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient to
pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate, Oral Instructions, or
Written Instructions or which results in an overdraft in the separate account of
such Series for some other reason, or if the Fund is for any other reason
indebted to the Custodian with respect to a Series, (except a borrowing for
investment or for temporary or emergency purposes using Securities as collateral
pursuant to a separate agreement and subject to the provisions of paragraph 2 of
this Article), such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Fund
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for such Series payable on demand and shall bear interest from the date incurred
at a rate per annum (based on a 360-day year for the actual number of days
involved) equal to the Federal Funds Rate plus 1/2%, such rate to be adjusted on
the effective date of any change in such Federal Funds Rate but in no event to
be less than 6% per annum. In addition, the Fund hereby agrees that the
Custodian shall have a continuing lien and security interest in the aggregate
amount of such overdrafts and indebtedness as may from time to time exist in and
to any property specifically allocated to such Series at any time held by it for
the benefit of such Series or in which the Fund may have an interest which is
then in the Custodian's possession or control or in possession or control of any
third party acting in the Custodian's behalf. The Fund authorizes the Custodian,
in its sole discretion, at any time to charge any such overdraft or indebtedness
together with interest due thereon against any money balance of account standing
to such Series' credit on the Custodian's books. In addition, the Fund hereby
covenants that on each Business Day on which either it intends to enter a
Reverse Repurchase Agreement and/or otherwise borrow from a third party, or
which next succeeds a Business Day on which at the close of business the Fund
had outstanding a Reverse Repurchase Agreement or such a borrowing, it shall
prior to 9 a.m., New York City time, advise the Custodian, in writing, of each
such borrowing, shall specify the Series to which the same relates, and shall
not incur any indebtedness, including pursuant to any Reverse Repurchase
Agreement, not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the
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borrowing date specified in a Certificate the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Certificate. The Custodian may, at the option
of the lending bank, keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to collateralize
further any transaction described in this paragraph. The Fund shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund fails to specify
in a Certificate the Series, the name of the issuer, the title and number of
shares or the principal amount of any particular Securities to be delivered as
collateral by the Custodian, to any such bank, the Custodian shall not be under
any obligation to deliver any Securities.
ARTICLE XV
CONCERNING THE CUSTODIAN
1. The Custodian shall use reasonable care in the performance of its
duties hereunder, and, except as hereinafter provided, neither the Custodian nor
its nominee shall be liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or damage arising
out of its own negligence, bad faith, or willful misconduct or that of its
officers, employees, or agents. The Custodian may, with respect to questions of
law arising hereunder or under any Margin Account Agreement, apply for and
obtain the advice and opinion of counsel to the Fund, at the expense of the
Fund, or of its own counsel, at its own expense, and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity with
such advice or opinion. The Custodian shall be liable to the Fund for any loss
or damage resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the part of the
Custodian or any of its employees or agents.
2. Notwithstanding the foregoing, the Custodian shall be under no
obligation to inquire into, and shall not be liable for:
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(a) The validity (but not the authenticity) of the issue of any
Securities purchased, sold, or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount paid or
received therefor, as specified in a Certificate, Oral Instructions, or Written
Instructions;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor, as specified in a
Certificate;
(c) The legality of the declaration or payment of any dividend by the
Fund, as specified in a resolution, Certificate, Oral Instructions, or Written
Instructions;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that the cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan, except that this subparagraph shall not excuse any liability the
Custodian may have for failing to act in accordance with Article X hereof or any
Certificate, Oral Instructions, or Written Instructions given in accordance with
this Agreement. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund, except that this
sub-paragraph shall not excuse any liability the Custodian may have for failing
to establish, maintain, make deposits to or withdrawals from such accounts in
accordance with this Agreement. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer, futures commission merchant
or Clearing Member makes payment to the Fund of any variation margin payment or
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similar payment which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. With respect to Securities held in a Depository, except as otherwise
provided in paragraph 5(b) of Article III hereof, the Custodian shall have no
responsibility and shall not be liable for ascertaining or acting upon any
calls, conversions, exchange offers, tenders, interest rate changes or similar
matters relating to such Securities, unless the Custodian shall have actually
received timely notice from the Depository in which such Securities are held. In
no event shall the Custodian have any responsibility or liability for the
failure of a Depository to collect, or for the late collection or late crediting
by a Depository of any amount payable upon Securities deposited in a Depository
which may mature or be redeemed, retired, called or otherwise become payable.
However, upon receipt of a Certificate from the Fund of an overdue amount on
Securities held in a Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall not be under
any obligation to appear in, prosecute or defend any action suit or proceeding
in respect to any Securities held by a Depository which in its opinion may
involve it in expense or liability, unless indemnity satisfactory to it against
all expense and liability be furnished as often as may be required, or
alternatively, the Fund shall be subrogated to the rights of the Custodian with
respect to such claim against the Depository should it so request in a
Certificate. This paragraph shall not, however, excuse any failure by the
Custodian to act in accordance with a Certificate, Oral Instructions, or Written
Instructions given in accordance with this Agreement.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
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6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after the Custodian has timely
and properly, in accordance with this Agreement, made due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action, but the Custodian
shall have such a duty if the Securities were not in default on the payable date
and the Custodian failed to timely and properly make such demand for payment and
such failure is the reason for the non-receipt of payment.
7. The Custodian may appoint one or more banking institutions as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians including,
but not limited to, banking institutions located in foreign countries, of
Securities and moneys at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in an agreement
executed by the Custodian, the Fund and the appointed institution.
8. The Custodian agrees to indemnify the Fund against and save the Fund
harmless from all liability, claims, losses and demands whatsoever, including
attorney's fees, howsoever arising or incurred because of the negligence, bad
faith or willful misconduct of any Sub-Custodian of the Securities and moneys
owned by the Fund, provided such Sub-Custodian is a banking institution located
in a foreign country and appointed by the Custodian pursuant to paragraph 7 of
this Article.
9. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it, for
the account of the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the provisions of its then
current prospectus, or (b) to ascertain whether any transactions by the Fund,
whether or not involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
10. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all reasonable out-of-pocket expenses and such compensation as
may be agreed upon from time to time between the Custodian and the Fund. The
Custodian may charge such compensation, and any such expenses with respect to a
Series incurred by the Custodian in the performance of its duties under this
Agreement against any money specifically allocated to such Series. The Custodian
shall also be entitled to charge against any money held by it for the account of
a Series the amount of any loss, damage, liability or expense, including counsel
fees, for which it
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shall be entitled to reimbursement under the provisions of this Agreement
attributable to, or arising out of, its serving as Custodian for such Series.
The expenses for which the Custodian shall be entitled to reimbursement
hereunder shall include, but are not limited to, the expenses of sub-custodians
and foreign branches of the Custodian incurred in settling outside of New York
City transactions involving the purchase and sale of Securities of the Fund.
Notwithstanding the foregoing or anything else contained in this Agreement to
the contrary, the Custodian shall, prior to effecting any charge for
compensation, expenses, or any overdraft or indebtedness or interest thereon,
submit an invoice therefor to the Fund.
11. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing, Oral Instructions, or Written Instructions
received by the Custodian and reasonably believed by the Custodian to be
genuine. The Fund agrees to forward to the Custodian a Certificate or facsimile
thereof confirming Oral Instructions or Written Instructions in such manner so
that such Certificate or facsimile thereof is received by the Custodian, whether
by hand delivery, telecopier or other similar device, or otherwise, by the close
of business of the same day that such Oral Instructions or Written Instructions
are given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions thereby
authorized by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions or Written Instructions
given to the Custodian hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized Person.
12. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member. This paragraph shall not excuse any failure by the Custodian to
have acted in accordance with any Margin Agreement it has executed or any
Certificate, Oral Instructions, or Written Instructions given in accordance with
this Agreement.
13. The books and records pertaining to the Fund, as described in
Appendix E hereto, which are in the possession of the Custodian shall be the
property of the Fund. Such books
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and records shall be prepared and maintained by the Custodian as required by the
Investment Company Act of 1940, as amended, and other applicable securities laws
and rules and regulations. The Fund, or the Fund's authorized representatives,
shall have access to such books and records during the Custodian's normal
business hours. Upon the reasonable request of the Fund, copies of any such
books and records shall be provided by the Custodian to the Fund or the Fund's
authorized representative, and the Fund shall reimburse the Custodian its
expenses of providing such copies. Upon reasonable request of the Fund, the
Custodian shall provide in hard copy or on micro-film, whichever the Custodian
elects, any records included in any such delivery which are maintained by the
Custodian on a computer disc, or are similarly maintained, and the Fund shall
reimburse the Custodian for its expenses of providing such hard copy or
micro-film.
14. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
each Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
15. The Custodian shall furnish upon request annually to the Fund a letter
prepared by the Custodian's accountants with respect to the Custodian's internal
systems and controls in the form generally provided by the Custodian to other
investment companies for which the Custodian acts as custodian.
16. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising out of, or related to, the
Custodian's performance of its obligations under this Agreement, except for
any such liability, claim, loss and demand arising out of the Custodian's own
negligence, bad faith, or willful misconduct or that of its officers,
employees, or agents.
17. Subject to the foregoing provisions of this Agreement, the Custodian
shall deliver and receive Securities, and receipts with respect to such
Securities, and shall make and receive payments only in accordance with the
customs prevailing from time to time among brokers or dealers in such Securities
and, except as may otherwise be provided by this Agreement or as may be in
accordance with such customs, shall make payment for Securities only against
delivery thereof and deliveries of Securities only against payment therefor.
18. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
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ARTICLE XVI
TERMINATION
1. Except as provided in paragraph 3 of this Article, this Agreement
shall continue until terminated by either the Custodian giving to the Fund, or
the Fund giving to the Custodian, a notice in writing specifying the date of
such termination, which date shall be not less than 60 days after the date of
the giving of such notice. In the event such notice or a notice pursuant to
paragraph 3 of this Article is given by the Fund, it shall be accompanied by a
copy of a resolution of the Board of Trustees of the Fund, certified by an
Officer and the Secretary or an Assistant Secretary of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
each of which shall be eligible to serve as a custodian for the securities of a
management investment company under the Investment Company Act of 1940. In the
event such notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution of the Board
of Trustees of the Fund, certified by the Secretary, the Clerk, any Assistant
Secretary or any Assistant Clerk, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon
the date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and moneys then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
3. Notwithstanding the foregoing, the Fund may terminate this Agreement
upon the date specified in a written
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notice in the event of the "Bankruptcy" of The Bank of New York. As used in this
sub-paragraph, the term "Bankruptcy" shall mean The Bank of New York's making a
general assignment, arrangement or composition with or for the benefit of its
creditors, or instituting or having instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or the entry of a order for relief under
any applicable bankruptcy law or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights, or if a
petition is presented for the winding up or liquidation of the party or a
resolution is passed for its winding up or liquidation, or it seeks, or becomes
subject to, the appointment of an administrator, receiver, trustee, custodian or
other similar official for it or for all or substantially all of its assets or
its taking any action in furtherance or, or indicating its consent to approval
of, or acquiescence in, any of the foregoing.
ARTICLE XVII
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to
have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to and to receive notices
from the Custodian.
2. The parties hereto shall utilize the Terminal Link only for the
purpose of the Fund providing Certificates to the Custodian and the Custodian
providing notices to the Fund and only after the Fund and the Custodian shall
have established access codes and internal safekeeping procedures to safeguard
and protect the confidentiality and availability of such access codes. Each use
of the Terminal Link by the Fund shall constitute a representation and warranty
that at least two such access codes have been utilized and that such procedures
have been established.
3. Each party shall obtain and maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the other party shall not be
responsible for the reliability or availability of any such equipment or
services, except that the Custodian shall not pay any communications costs of
any line leased by the Fund, even if such line is also used by the Custodian.
4. The Fund acknowledges that any data bases made available as part of,
or through the Terminal and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
- 37 -
<PAGE>
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, each Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its control, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status of
any of the Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from time
to time without notice to the Fund, except that the Custodian shall give the
Fund notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees not to
modify or attempt to modify the Terminal Link without the Bank's prior written
consent. The Fund acknowledges that the Terminal Link is the property of the
Custodian and, accordingly, the Fund agrees that any modifications to the
Terminal Link, whether by the Fund or the Custodian and whether with or without
the Custodian's consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes
or the Fund utilizes in connection with the Terminal Link makes any warranties
or representations, express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a particular purpose.
8. Each party will, and will cause its officers and employees to, treat
the user and authorization codes, passwords and authentication keys applicable
to Terminal Link with extreme care. Each party hereby irrevocably authorizes the
other to act in accordance with and rely on Certificates and notices received by
it through the Terminal Link. Each party acknowledges that it is its
responsibility to assure that only its authorized persons use the Terminal Link
on its behalf, and that a party shall not be responsible nor liable for use of
the Terminal Link on its behalf of the other party by unauthorized persons
except that the other party shall be liable for such use thereof by unauthorized
persons who have obtained access thereto as a result of the bad faith or willful
misconduct of such party or any of its officers or employees.
- 38 -
<PAGE>
9. Notwithstanding anything else in this Agreement to the contrary,
neither party shall have any liability to the other for any losses, damages,
injuries, claims, costs or expenses arising as a result of a delay, omission or
error in the transmission of a Certificate or notice by use of the Terminal Link
except for money damages for those suffered as the result of the negligence, bad
faith or willfull misconduct of such party or its officers, employees or agents
in an amount not exceeding for any incident $100,000, provided, however, that a
party shall have no liability under this Section 9 if the other party fails to
comply with the provisions of Section 11.
10. Without limiting the generality of the foregoing, it is hereby agreed
that in no event shall either party or any manufacturer or supplier of its
computer equipment, software or services relating to the Terminal Link be
responsible for any special, indirect, incidental or consequential damages which
the other party may incur or experience by reason of its use of the Terminal
Link even if such party, manufacturer or supplier has been advised of the
possibility of such damages, nor with respect to the use of the Terminal Link
shall either party or any such manufacturer or supplier be liable for acts of
God, or with respect to the following to the extent beyond such person's
reasonable control: machine or computer breakdown or malfunction, interruption
or malfunction of communication facilities, labor difficulties or any other
similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the business day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the Custodian learns
of any errors, omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. Each party shall, as soon as practicable after its receipt of a
Certificate or of any notice transmitted by the Terminal Link, verify to the
other party by use of the Terminal Link its receipt of such Certificate or
notice, and in the absence of such verification a party to whom a Certificate or
notice is sent shall not be liable for any failure to act in accordance with
such Certificate or notice, and the sending party may not claim that such
Certificate or notice was received by the other.
- 39 -
<PAGE>
ARTICLE XVIII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the event that other
or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be entitled to rely and to
act upon Oral Instructions, Written Instructions, or signatures of the present
Authorized Persons as set forth in the last delivered Certificate to the extent
provided by this Agreement.
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its seal, setting forth the names and the
signatures of the present Officers of the Fund. The Fund agrees to furnish to
the Custodian a new Certificate in similar form in the event any such present
Officer ceases to be an Officer of the Fund, or in the event that other or
additional Officers are elected or appointed. Until such new Certificate shall
be received, the Custodian shall be entitled to rely and to act upon the
signatures of the Officers as set forth in the last delivered Certificate to the
extent provided by this Agreement.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, other than any Certificate or
Written Instructions, shall be sufficiently given if addressed to the Custodian
and mailed or delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from time to time
designate in writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
5. This Agreement may not be amended or modified in any manner except by
a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund,
except that Appendices A and B may be amended unilaterally by the Fund without
such an approving resolution.
- 40 -
<PAGE>
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian or The Bank of New York without the
written consent of the Fund, authorized or approved by a resolution of the
Fund's Board of Trustees. For purposes of this paragraph, no merger,
consolidation, or amalgamation of the Custodian, The Bank of New York, or the
Fund shall be deemed to constitute an assignment of this Agreement.
7. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
9. A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
- 41 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DEAN WITTER PREMIER INCOME TRUST
[SEAL] By:_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:_______________________
Attest:
_______________________
- 42 -
<PAGE>
APPENDIX A
I, , President and I, ,
of DEAN WITTER , a Massachusetts business trust (the
"Fund"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of Trust and
By-Laws to give Oral Instructions and Written Instructions on behalf of the
Fund, except that those persons designated as being an "Officer of DWTC" shall
be an Authorized Person only for purposes of Articles XII and XIII. The
signatures set forth opposite their respective names are their true and correct
signatures:
Name Position Signature
_________________ ________________ _________________
<PAGE>
APPENDIX B
I, , President and I, ,
of DEAN WITTER , a Massachusetts business trust (the
"Fund"), do hereby certify that:
The following individuals for whom a position other than "Officer of DWTC"
is specified serve in the following positions with the Fund and each has been
duly elected or appointed by the Board of Trustees of the Fund to each such
position and qualified therefor in conformity with the Fund's Declaration of
Trust and By-Laws. With respect to the following individuals for whom a position
of "Officer of DWTC" is specified, each such individual has been designated by a
resolution of the Board of Trustees of the Fund to be an Officer for purposes of
the Fund's Custody Agreement with The Bank of New York, but only for purposes of
Articles XII and XIII thereof and a certified copy of such resolution is
attached hereto. The signatures of each individual below set forth opposite
their respective names are their true and correct signatures:
Name Position Signature
____________________ ___________________ _________________
<PAGE>
APPENDIX C
The undersigned, hereby certifies that he or she is the
duly elected and acting of DEAN WITTER (the "Fund"),
further certifies that the following resolutions were adopted by the Board of
Trustees of the Fund at a meeting duly held on , 199 , at which a quorum
at all times present and that such resolutions have not been modified or
rescinded and are in full force an effect as of the date hereof.
RESOLVED, that The Bank New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of , 199
(the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to rely on instructions by the Fund
to the Custodian communicated by a Terminal Link as defined in the Custody
Agreement.
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to officers of the Fund as defined in the Custody Agreement,
and shall establish internal safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes.
RESOLVED, that Officers of the Fund as defined in the Custody Agreement
shall, following the establishment of such access codes and such internal
safekeeping procedures, advise the Custodian that the same have been established
by delivering a Certificate, as defined in the Custody Agreement, and the
Custodian shall be entitled to rely upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand in the seal of DEAN WITTER
, as of the day of , 199 .
<PAGE>
APPENDIX D
I, , an Assistant Vice President with THE
BANK OF NEW YORK do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
APPENDIX E
The following books and records pertaining to Fund shall be prepared and
maintained by the Custodian and shall be the property of the Fund:
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of , a Massachusetts
business trust (the "Fund"), and further certifies that the following resolution
was adopted by the Board of Trustees of the Fund at a meeting duly held on
, 199 , at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect as
of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 199 .
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of , a
Massachusetts business Trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 199 , at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary to
deposit in The Depository Trust Company ("DTC"), as a "Depository" as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize DTC to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 199 .
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of , a
Massachusetts business Trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 199 , at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Participants Trust Company as a Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 199 .
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he
or she is the duly elected and acting of , a
Massachusetts business trust (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Trustees of the Fund at a
meeting duly held on , 199 , at which a quorum was at all times present
and that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary, to
accept, utilize and act with respect to Clearing Member confirmations for
Options and transaction in Options, regardless of the Series to which the
same are specifically allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of ,
as of the day of , 199 .
[SEAL]
<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 17th day of April, 1995 by and between Dean Witter
InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a Delaware corporation
(herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement") with
certain investment companies as set forth on Schedule A (each such investment
company being herein referred to as a "Fund" and, collectively, as the "Funds")
pursuant to which InterCapital is to perform, or supervise the performance of,
among other services, administrative services for the Funds (and, in the case of
Funds with multiple portfolios, the Series or Portfolios of the Funds (such
Series and Portfolio being herein individually referred to as "a Series" and,
collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice); (ii)
provide the Fund with full administrative services, including the maintenance of
certain books and records, such as journals, ledger accounts and other records
required under the Investment Company Act of 1940, as amended (the "Act"), the
notification to the Fund and InterCapital of available funds for investment, the
reconciliation of account information and balances among the Fund's custodian,
transfer agent and dividend disbursing agent and InterCapital, and the
calculation of the net asset value of the Fund's shares; (iii) provide the Fund
with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary to provide effective
operation of the Fund; (iv) oversee the performance of administrative and
professional services rendered to the Fund by others, including its custodian,
transfer agent and dividend disbursing agent, as well as accounting, auditing
and other services; (v) provide the Fund with adequate general office space and
facilities; (vi) assist in the preparation and the printing of the periodic
updating of the Fund's registration statement and prospectus (and, in the case
of an open-end Fund, the statement of additional information), tax returns,
proxy statements, and reports to its shareholders and the Securities and
Exchange Commission; and (vii) monitor the compliance of the Fund's investment
policies and restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to perform
administrative services hereunder, it shall notify DWS in writing. If DWS is
willing to render such services, it shall notify InterCapital in writing,
whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to time
determine to be necessary or useful to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, the staff and
personnel of DWS shall be deemed to include officers of DWS and persons employed
or otherwise retained by DWS (including officers and employees of InterCapital,
with the consent of InterCapital) to furnish services, statistical and other
factual data, information with respect to technical and scientific developments,
and such other information, advice and assistance as DWS may desire. DWS shall
maintain each Fund's records and books of account (other than those maintained
by the Fund's transfer agent, registrar, custodian and other agencies). All such
books and records so maintained shall be the property of the Fund and, upon
request therefor, DWS shall surrender to InterCapital or to the Fund such of the
books and records so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other information
relating to the business and affairs of the Fund as DWS may reasonably require
in order to discharge its duties and obligations to the Fund under this
Agreement or to comply with any applicable law and regulation or request of the
Board of Directors/Trustees of the Fund.
1
<PAGE>
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of a
closed-end Fund) by applying the annual rate or rates set forth on Schedule B to
the net assets of each Fund. Except as hereinafter set forth, (i) in the case of
an open-end Fund, compensation under this Agreement shall be calculated by
applying 1/365th of the annual rate or rates to the Fund's or the Series' daily
net assets determined as of the close of business on that day or the last
previous business day and (ii) in the case of a closed-end Fund, compensation
under this Agreement shall be calculated by applying the annual rate or rates to
the Fund's average weekly net assets determined as of the close of the last
business day of each week. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth on
Schedule B. Subject to the provisions of paragraph 5 hereof, payment of DWS'
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund and/or any Series thereof imposed by
state securities laws or regulations thereunder, as such limitations may be
raised or lowered from time to time, or, in the case of InterCapital Income
Securities Inc. or Dean Witter Variable Investment Series or any Series thereof,
the expense limitation specified in the Fund's Investment Management Agreement,
the fee payable hereunder shall be reduced on a pro rata basis in the same
proportion as the fee payable by the Fund under the Investment Management
Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by DWS,
and such clerical help and bookkeeping services as DWS shall reasonably require
in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations hereunder,
DWS shall not be liable to the Fund or any of its investors for any error of
judgment or mistake of law or for any act or omission by DWS or for any losses
sustained by the Fund or its investors. It is understood that, subject to the
terms and conditions of the Investment Management Agreement between each Fund
and InterCapital, InterCapital shall retain ultimate responsibility for all
services to be performed hereunder by DWS. DWS shall indemnify InterCapital and
hold it harmless from any liability that InterCapital may incur arising out of
any act or failure to act by DWS in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person controlling,
controlled by or under common control with DWS, and that DWS and any person
controlling, controlled by or under common control with DWS may have an interest
in the Fund. It is also understood that DWS and any affiliated persons thereof
or any persons controlling, controlled by or under common control with DWS have
and may have advisory, management, administration service or other contracts
with other organizations and persons, and may have other interests and
businesses, and further may purchase, sell or trade any securities or
commodities for their own accounts or for the account of others for whom they
may be acting.
9. This Agreement shall continue until April 30, 1995, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the event that the Investment Management
Agreement between any Fund and InterCapital is terminated, this Agreement will
automatically terminate with respect to such Fund.
10. This Agreement may be amended or modified by the parties in any manner
by written agreement executed by each of the parties hereto.
2
<PAGE>
11. This Agreement may be assigned by either party with the written consent
of the other party.
12. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By:
. . . . . . . . . . . . . .
Attest:
. . . . . . . . . . . . . . . . . . . . .
DEAN WITTER SERVICES COMPANY INC.
By:
. . . . . . . . . . . . . .
Attest:
. . . . . . . . . . . . . . . . . . . . .
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
at April 17, 1995
Open-End Funds
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter Balanced Growth Fund
7. Dean Witter Balanced Income Fund
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter California Tax-Free Income Fund
10. Dean Witter Capital Growth Securities
11. Dean Witter Convertible Securities Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter Diversified Income Trust
14. Dean Witter Dividend Growth Securities Inc.
15. Dean Witter European Growth Fund Inc.
16. Dean Witter Federal Securities Trust
17. Dean Witter Global Asset Allocation Fund
18. Dean Witter Global Dividend Growth Securities
19. Dean Witter Global Short-Term Income Fund Inc.
20. Dean Witter Global Utilities Fund
21. Dean Witter Health Sciences Trust
22. Dean Witter High Income Securities
23. Dean Witter High Yield Securities Inc.
24. Dean Witter Intermediate Income Securities
25. Dean Witter International Small Cap Fund
26. Dean Witter Limited Term Municipal Trust
27. Dean Witter Liquid Asset Fund Inc.
28. Dean Witter Managed Assets Trust
29. Dean Witter Mid-Cap Growth Fund
30. Dean Witter Multi-State Municipal Series Trust
31. Dean Witter National Municipal Trust
32. Dean Witter Natural Resource Development Securities Inc.
33. Dean Witter New York Municipal Money Market Trust
34. Dean Witter New York Tax-Free Income Fund
35. Dean Witter Pacific Growth Fund Inc.
36. Dean Witter Precious Metals and Minerals Trust
37. Dean Witter Premier Income Trust
38. Dean Witter Retirement Series
39. Dean Witter Select Dimensions Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Short-Term Bond Fund
42. Dean Witter Short-Term U.S. Treasury Trust
43. Dean Witter Strategist Fund
44. Dean Witter Tax-Exempt Securities Trust
45. Dean Witter Tax-Free Daily Income Trust
46. Dean Witter U.S. Government Money Market Trust
47. Dean Witter U.S. Government Securities Trust
48. Dean Witter Utilities Fund
49. Dean Witter Value-Added Market Series
50. Dean Witter Variable Investment Series
51. Dean Witter World Wide Income Trust
52. Dean Witter World Wide Investment Trust
Closed-End Funds
53. High Income Advantage Trust
54. High Income Advantage Trust II
55. High Income Advantage Trust III
56. InterCapital Income Securities Inc.
57. Dean Witter Government Income Trust
58. InterCapital Insured Municipal Bond Trust
59. InterCapital Insured Municipal Trust
60. InterCapital Insured Municipal Income Trust
61. InterCapital California Insured Municipal Income Trust
62. InterCapital Insured Municipal Securities
63. InterCapital Insured California Municipal Securities
64. InterCapital Quality Municipal Investment Trust
65. InterCapital Quality Municipal Income Trust
66. InterCapital Quality Municipal Securities
67. InterCapital California Quality Municipal Securities
68. InterCapital New York Quality Municipal Securities
4
<PAGE>
SCHEDULE B
DEAN WITTER SERVICES COMPANY INC.
Schedule of Administrative Fees--April 17, 1995
Monthly compensation calculated daily by applying the following annual
rates to a fund's net assets:
FIXED INCOME FUNDS
Dean Witter Balanced Income Fund 0.60% to the net assets.
Dean Witter California Tax-Free 0.055% of the portion of daily net assets not
Income Fund exceeding $500 million; 0.0525% of the
portion exceeding $500 million but not
exceeding $750 million; 0.050% of the portion
exceeding $750 million but not exceeding $1
billion; and 0.0475% of the portion of the
daily net assets exceeding $1 billion.
Dean Witter Convertible 0.060% of the portion of the daily net
Securities Securities Trust assets not exceeding $750 million; .055% of
the portion of the daily net assets exceeding
$750 million but not exceeding $1 billion;
0.050% of the portion of the daily net assets
of the exceeding $1 billion but not exceeding
$1.5 billion; 0.0475% of the portion of the
daily net assets exceeding $1.5 billion but
not exceeding $2 billion; 0.045% of the
portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and
0.0425% of the portion of the daily net
assets exceeding $3 billion.
Dean Witter Diversified 0.040% of the net assets.
Income Trust
Dean Witter Federal Securities 0.055% of the portion of the daily net assets
Trust not exceeding $1 billion; 0.0525% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.5 billion;
0.050% of the portion of the daily net assets
exceeding $1.5 billion but not exceeding $2
billion; 0.0475% of the portion of the daily
net assets exceeding $2 billion but not
exceeding $2.5 billion; 0.045% of the portion
of daily net assets exceeding $2.5 billion
but not exceeding $5 billion; 0.0425% of the
portion of the daily net assets exceeding $5
billion but not exceeding $7.5 billion;
0.040% of the portion of the daily net assets
exceeding $7.5 billion but not exceeding $10
billion; 0.0375% of the portion of the daily
net assets exceeding $10 billion but not
exceeding $12.5 billion; and 0.035% of the
portion of the daily net assets exceeding
$12.5 billion.
Dean Witter Global Short-Term 0.055% of the portion of the daily net
Income Fund assets not exceeding $500 million; and 0.050%
of the portion of the daily net assets
exceeding $500 million.
Dean Witter High Income 0.050% to the net assets.
Securities
Dean Witter High Yield 0.050% of the portion of the daily net
Securities Inc. assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of
B-1
<PAGE>
the daily net assets exceeding $1 billion but
not exceeding $2 billion; 0.0325% of the
portion of the daily net assets exceeding $2
billion but not exceeding $3 billion; and
0.030% of the portion of daily net assets
exceeding $3 billion.
Dean Witter Intermediate 0.060% of the portion of the daily net
Income Securities assets not exceeding $500 million; 0.050% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.040% of the portion of the daily net assets
exceeding $750 million but not exceeding $1
billion; and 0.030% of the portion of the
daily net assets exceeding $1 billion.
Dean Witter Limited Term 0.050% to the net assets.
Municipal Trust
Dean Witter Multi-State 0.035% to the net assets.
Municipal Series Trust (10)
Dean Witter National 0.035% to the net assets.
Municipal Trust
Dean Witter New York Tax-Free 0.055% to the net assets not exceeding
Income Fund $500 million and 0.0525% of the net assets
exceeding $500 million.
Dean Witter Premier 0.050% to the net assets.
Income Trust
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities
Trust
Dean Witter Select Dimensions 0.65% to the net assets.
Series-North American
Government Securities
Portfolio
Dean Witter Short-Term 0.070% to the net assets.
Bond Fund
Dean Witter Short-Term U.S. 0.035% to the net assets.
Treasury Trust
Dean Witter Tax-Exempt 0.050% of the portion of the daily net assets
Securities Trust not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; and 0.035% of the
portion of the daily net assets exceeding $1
billion but not exceeding $1.25 billion;
.0325% of the portion of the daily net assets
exceeding $1.25 billion.
Dean Witter U.S. Government 0.050% of the portion of such daily net
Securities Trust assets not exceeding $1 billion; 0.0475% of
the portion of such daily net assets
exceeding $1 billion but not exceeding $1.5
billion; 0.045% of the portion of such daily
net assets exceeding $1.5 billion but not
exceeding $2 billion; 0.0425% of the portion
of such daily net assets exceeding $2 billion
but not exceeding $2.5 billion; 0.040% of
that portion of such daily net assets
exceeding $2.5 billion but not exceeding $5
billion; 0.0375% of that portion
B-2
<PAGE>
of such daily net assets exceeding $5 billion
but not exceeding $7.5 billion; 0.035% of
that portion of such daily net assets
exceeding $7.5 billion but not exceeding $10
billion; 0.0325% of that portion of such
daily net assets exceeding $10 billion but
not exceeding $12.5 billion; and 0.030% of
that portion of such daily net assets
exceeding $12.5 billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-High Yield
Dean Witter Variable Investment 0.050% to the net assets.
Series-Quality Income
Dean Witter World Wide Income 0.075% of the daily net assets up to
Trust $250 million; 0.060% of the portion of the
daily net assets exceeding $250 million but
not exceeding $500 million; 0.050% of the
portion of the daily net assets of the
exceeding $500 million but not exceeding $750
milliion; 0.040% of the portion of the daily
net assets exceeding $750 million but not
exceeding $1 billion; and 0.030% of the daily
net assets exceeding $1 billion.
Dean Witter Select Municipal 0.050% to the net assets.
Reinvestment Fund
EQUITY FUNDS
Dean Witter American Value 0.0625% of the portion of the daily net
Fund assets not exceeding $250 million and 0.050%
of the portion of the daily net assets
exceeding $250 million.
Dean Witter Balanced Growth 0.60% to the net assets.
Fund
Dean Witter Capital Growth 0.065% to the portion of daily net assets
Securities not exceeding $500 million; 0.055% of the
portion exceeding $500 million but not
exceeding $1 billion; 0.050% of the portion
exceeding $1 billion but not exceeding $1.5
billion; and 0.0475% of the net assets
exceeding $1.5 billion.
Dean Witter Developing Growth 0.050 of the portion of daily net
Securities Trust assets not exceeding $500 million; and
0.0475% of the portion of daily net assets
exceeding $500 million.
Dean Witter Dividend Growth 0.0625% of the portion of the daily net
Securities Inc. assets not exceeding $250 million; 0.050% of
the portion exceeding $250 million but not
exceeding $1 billion; 0.0475% of the portion
of daily net assets exceeding $1 billion but
not exceeding $2 billion; 0.045% of the
portion of daily net assets exceeding $2
billion but not exceeding $3 billion; 0.0425%
of the portion of daily net assets exceeding
$3 billion but not exceeding $4 billion;
0.040% of the portion of daily net assets
exceeding $4 billion but not exceeding $5
billion; 0.0375% of the portion of the daily
net assets exceeding $5 billion but not
exceeding $6 billion; 0.035% of the portion
of the daily net assets exceeding $6 billion
but not exceeding $8 billion; and 0.0325% of
the portion of the daily net assets exceeding
$8 billion.
B-3
<PAGE>
Dean Witter European Growth 0.060% of the portion of daily net
Fund Inc. assets not exceeding $500 million; and 0.057%
of the portion of daily net assets exceeding
$500 million.
Dean Witter Global Asset 1.0% to the net assets.
Allocation Fund
Dean Witter Global Dividend 0.075% to the net assets.
Growth Securities
Dean Witter Global Utilities 0.065% to the net assets.
Fund
Dean Witter Health Sciences Trust 0.10% to the net assets.
Dean Witter International 0.075% to the net assets.
Small Cap Fund
Dean Witter Managed Assets Trust 0.060% to the daily net assets not exceeding
$500 million and 0.055% to the daily net
assets exceeding $500 million.
Dean Witter Mid-Cap Growth Fund 0.75% to the net assets.
Dean Witter Natural Resource 0.0625% of the portion of the daily net
Development Securities Inc. assets not exceeding $250 million and 0.050%
of the portion of the daily net assets
exceeding $250 million.
Dean Witter Pacific Growth 0.060% of the portion of daily net assets
Fund Inc. not exceeding $1 billion; and 0.057% of the
portion of daily net assets exceeding $1
billion.
Dean Witter Precious Metals 0.080% to the net assets.
and Minerals Trust
Dean Witter Retirement Series 0.085% to the net assets.
American Value
Dean Witter Retirement Series 0.085% to the net assets.
Capital Growth
Dean Witter Retirement Series 0.075% to the net assets.
Dividend Growth
Dean Witter Retirement Series 0.10% to the net assets.
Global Equity
Dean Witter Retirement Series 0.065% to the net assets.
Intermediate Income Securities
Dean Witter Retirement Series 0.050% to the net assets.
Liquid Asset
Dean Witter Retirement Series 0.085% to the net assets.
Strategist
Dean Witter Retirement Series 0.050% to the net assets.
U.S. Government Money Market
Dean Witter Retirement Series 0.065% to the net assets.
U.S. Government Securities
Dean Witter Retirement Series 0.075% to the net assets.
Utilities
B-4
<PAGE>
Dean Witter Retirement Series 0.050% to the net assets.
Value Added
Dean Witter Select Dimensions
Series-
American Value 0.625% to the net assets.
Portfolio Balanced Portfolio 0.75% to the net assets.
Core Equity Portfolio 0.85% to the net assets.
Developing Growth Portfolio 0.50% to the net assets.
Diversified Income Portfolio 0.40% to the net assets.
Dividend Growth Portfolio 0.625% to the net assets.
Emerging Markets Portfolio 1.25% to the net assets.
Global Equity Portfolio 1.0% to the net assets.
Utilities Portfolio 0.65% to the net assets.
Value-Added Market Portfolio 0.50% to the net assets.
Dean Witter Strategist Fund 0.060% of the portion of daily net assets not
exceeding $500 million; 0.055% of the portion
of the daily net assets exceeding $500
million but not exceeding $1 billion; and
0.050% of the portion of the daily net assets
exceeding $1 billion.
Dean Witter Utilities Fund 0.065% of the portion of daily net assets not
exceeding $500 million; 0.055% of the portion
exceeding $500 million but not exceeding $1
billion; 0.0525% of the portion exceeding $1
billion but not exceeding $1.5 billion;
0.050% of the portion exceeding $1.5 billion
but not exceeding $2.5 billion; 0.0475% of
the portion exceeding $2.5 billion but not
exceeding $3.5 billion; 0.045% of the portion
of the daily net assets exceeding $3.5 but
not exceeding $5 billion; and 0.0425% of the
portion of daily net assets exceeding $5
billion.
Dean Witter Value-Added Market 0.050% of the portion of daily net assets
Series not exceeding $500 million; and 0.45% of the
portion of daily net assets exceeding $500
million.
Dean Witter Variable Investment 0.065% to the net assets.
Series-Capital Growth
Dean Witter Variable Investment 0.0625% of the portion of daily net
Series-Dividend Growth assets not exceeding $500 million; and 0.050%
of the portion of daily net assets exceeding
$500 million.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Equity
Dean Witter Variable Investment 0.060% to the net assets.
Series-European Growth
Dean Witter Variable Investment 0.050% to the net assets.
Series-Managed
Dean Witter Variable Investment 0.065% of the portion of daily net assets
Series-Utilities exceeding $500 million and 0.055% of the
portion of daily net assets exceeding $500
million.
Dean Witter World Wide 0.055% of the portion of daily net assets
Investment Trust not exceeding $500 million; and 0.05225% of
the portion of daily net assets exceeding
$500 million.
B-5
<PAGE>
MONEY MARKET FUNDS
Active Assets Account (4) 0.050% of the portion of the daily net assets
not exceeding $500 million; 0.0425% of the
portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter California Tax-Free 0.050% of the portion of the daily net
Daily Income Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter Liquid Asset 0.050% of the portion of the daily net
Fund Inc. assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.35 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.35 billion but not exceeding $1.75
billion; 0.030% of the portion of the daily
net assets exceeding $1.75 billion but not
exceeding $2.15 billion; 0.0275% of the
portion of the daily net assets exceeding
$2.15 billion but not exceeding $2.5 billion;
0.025% of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $15
billion; 0.0249% of the portion of the daily
net assets exceeding $15 billion but not
exceeding $17.5 billion; and 0.0248% of the
portion of the daily net assets exceeding
$17.5 billion.
Dean Witter New York Municipal 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 bil-
B-6
<PAGE>
lion but not exceeding $2.5 billion; 0.0275%
of the portion of the daily net assets
exceeding $2.5 billion but not exceeding $3
billion; and 0.025% of the portion of the
daily net assets exceeding $3 billion.
Dean Witter Retirement Series 0.050% of the net assets.
Liquid Assets
Dean Witter Retirement Series 0.050% of the net assets.
U.S. Government Money Market
Dean Witter Select Dimensions 0.50% to the net assets.
Series-
Money Market Portfolio
Dean Witter Tax-Free Daily 0.050% of the portion of the daily net
Income Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter U.S. Government 0.050% of the portion of the daily net
Money Market Trust assets not exceeding $500 million; 0.0425% of
the portion of the daily net assets exceeding
$500 million but not exceeding $750 million;
0.0375% of the portion of the daily net
assets exceeding $750 million but not
exceeding $1 billion; 0.035% of the portion
of the daily net assets exceeding $1 billion
but not exceeding $1.5 billion; 0.0325% of
the portion of the daily net assets exceeding
$1.5 billion but not exceeding $2 billion;
0.030% of the portion of the daily net assets
exceeding $2 billion but not exceeding $2.5
billion; 0.0275% of the portion of the daily
net assets exceeding $2.5 billion but not
exceeding $3 billion; and 0.025% of the
portion of the daily net assets exceeding $3
billion.
Dean Witter Variable Investment 0.050% to the net assets.
Series-Money Market
Monthly compensation calculated weekly by applying the following annual
rates to the weekly net assets.
CLOSED-END FUNDS
Dean Witter Government Income 0.060% to the average weekly net assets.
Trust
High Income Advantage Trust 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of average weekly net assets
exceeding
B-7
<PAGE>
$750 million and not exceeding $1 billion;
and 0.030% of the portion of average weekly
net assets exceeding $1 billion.
High Income Advantage Trust II 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of average weekly net assets
exceeding $750 million and not exceeding $1
billion; and 0.030% of the portion of average
weekly net assets exceeding $1 billion.
High Income Advantage Trust III 0.075% of the portion of the average weekly
net assets not exceeding $250 million; 0.060%
of the portion of average weekly net assets
exceeding $250 million and not exceeding $500
million; 0.050% of the portion of average
weekly net assets exceeding $500 million and
not exceeding $750 million; 0.040% of the
portion of the average weekly net assets
exceeding $750 million and not exceeding $1
billion; and 0.030% of the portion of average
weekly net assets exceeding $1 billion.
InterCapital Income Securities 0.050% to the average weekly net assets.
Inc.
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Bond Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Trust
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital California Insured 0.035% to the average weekly net assets.
Municipal Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Investment Trust
InterCapital New York Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Income Trust
InterCapital Quality Municipal 0.035% to the average weekly net assets.
Securities
InterCapital California Quality 0.035% to the average weekly net assets.
Municipal Securities
InterCapital Insured Municipal 0.035% to the average weekly net assets.
Securities
InterCapital Insured California 0.035% to the average weekly net assets.
Municipal Securities
B-8
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 5 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
December 14, 1995, relating to the financial statements and financial
highlights of Dean Witter Premier Income Trust, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings
"Experts" and "Independent Accountants" in such Statement of Additional
Information and to the reference to us under the heading "Financial
Highlights" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
January 22, 1996
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
10/31/95
6
YIELD = 2 { [ ((a-b) /cd) +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 { [ ((210,617.84-68,013.52) /3,581,176.408 X 9.06) +1] -1}
= 5.332536%
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER PREMIER INCOME TRUST
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-95 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------- ----------- -------------- ----------- -------------------
<S> <C> <C> <C> <C>
31-Oct-94 $1,047.30 4.73% 1.00 4.73%
01-Jul-91 $1,223.30 22.33% 4.33 4.76%
</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 COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-95 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ----------- ----------- ----------------- ------ ------------------------
<S> <C> <C> <C> <C>
31-Oct-94 $1,079.70 7.97% 1.00 7.97%
01-Jul-91 $1,261.20 26.12% 4.33 5.50%
</TABLE>
(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
*ORIGINAL VALUE $9,700,$48,500 & $97,500 RESPECTIVELY ADJUSTED FOR 3.0 %,3.0% &
2.5% SALES CHARGES
<TABLE>
<CAPTION>
(D) (E) (F)
$10,000* TOTAL GROWTH OF GROWTH OF GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ----------- ----------- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
01-Jul-91 26.12 $12,234 $61,168 $122,967
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
Premier Income Trust
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 43,574,748
<INVESTMENTS-AT-VALUE> 40,518,115
<RECEIVABLES> 1,363,230
<ASSETS-OTHER> 37,574
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41,918,919
<PAYABLE-FOR-SECURITIES> 2,618,826
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,041,203
<TOTAL-LIABILITIES> 10,660,029
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,453,131
<SHARES-COMMON-STOCK> 3,556,853
<SHARES-COMMON-PRIOR> 5,001,159
<ACCUMULATED-NII-CURRENT> 41,898
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,179,506)
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</TABLE>
