<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 1996
REGISTRATION NOS.: 33-46049
811-6572
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
[X]
PRE-EFFECTIVE AMENDMENT NO.
[ ]
POST-EFFECTIVE AMENDMENT NO. 4
[X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
[X]
AMENDMENT NO. 5
[X]
------------------------
TCW/DW NORTH AMERICAN GOVERNMENT 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 effective date of the registration statement.
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
_____ immediately upon filing pursuant to paragraph (b)
X on 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 16, 1995.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
===============================================================================
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A
PART A
ITEM CAPTION PROSPECTUS
- -------------- -----------------------------------------------------
<S> <C>
1. .... Cover Page
2. .... Summary of Fund Expenses; Prospectus Summary
3. .... Financial Highlights; Performance Information
4. .... Investment Objective and Policies; Risk
Considerations; The Fund and its Management; Cover
Page; Investment Restrictions; Prospectus Summary
5. .... The Fund and Its Management; Back Cover;
Investment Objective and Policies
6. .... Dividends, Distributions and Taxes; Additional
Information
7. .... Purchase of Fund Shares; Shareholder Services;
Repurchases and Redemptions
8. .... Repurchases and Redemptions; Shareholder Services
9. .... Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B
ITEM STATEMENT OF ADDITIONAL INFORMATION
- -------------- ------------------------------------------------------
<C> <S>
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; Custodian and Transfer
Agent;
Independent Accountants
17. .... Portfolio Transactions and Brokerage
18. .... Description of Shares
19. .... Repurchases and Redemptions; 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
TCW/DW North American Government Income Trust (the "Fund")
is an open-end, non-diversified management investment
company whose investment objective is to earn a high level of
current income while maintaining relatively low
volatility of principal. The Fund seeks to achieve
its investment objective by investing primarily in
investment grade fixed-income securities issued or
guaranteed by the U.S., Canadian or Mexican
governments, or their subdivisions, or agencies or
instrumentalities of any of the foregoing. Shares of the
Fund are not issued, insured or guaranteed, as to value or
yield, by the U.S. or any other government.
Shares of the Fund are sold and redeemed at net
asset value. The Fund pays a distribution fee of up
to 0.75% of its average daily net assets in
accordance with a Plan of Distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940.
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 below. The Statement
of Additional Information is incorporated herein
by reference.
TCW/DW NORTH AMERICAN
GOVERNMENT INCOME TRUST
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
TABLE OF CONTENTS
Prospectus Summary/ 2
Summary of Fund Expenses/ 4
Financial Highlights/ 5
The Fund and its Management/ 5
Investment Objective and Policies/ 6
Risk Considerations/ 12
Investment Restrictions/ 20
Purchase of Fund Shares/ 20
Shareholder Services/ 22
Repurchases and Redemptions/ 24
Dividends, Distributions and Taxes/ 26
Performance Information/ 27
Additional Information/ 27
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Dean Witter Distributors Inc.
Distributor
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
--------------- ---------------------------------------------------------------------------
THE The Fund is organized as a Massachusetts business trust, and is an
FUND open-end, non-diversified management investment company investing primarily
in investment grade fixed-income securities issued or guaranteed by the
U.S., Canadian or Mexican governments or their subdivisions, or the
agencies or instrumentalities of any of the foregoing.
- --------------- ---------------------------------------------------------------------------
SHARES OFFERED Shares of beneficial interest with $0.01 par value (see page 27).
- --------------- ---------------------------------------------------------------------------
OFFERING The price of the shares offered by this Prospectus is determined once daily
PRICE as of 4:00 p.m., New York time, on each day that the New York Stock
Exchange is open, and is equal to the net asset value per share (see page
21).
- --------------- ---------------------------------------------------------------------------
MINIMUM The minimum initial investment is $1,000 ($100 if the account is opened
PURCHASE through EasyInvestSM); minimum subsequent investment is $100 (see page 20).
- --------------- ---------------------------------------------------------------------------
INVESTMENT The investment objective of the Fund is to earn a high level of current
OBJECTIVE income while maintaining relatively low volatility of principal.
- --------------- ---------------------------------------------------------------------------
MANAGER Dean Witter Services Company Inc. (the "Manager"), a wholly-owned
subsidiary of Dean Witter InterCapital Inc. ("InterCapital"), is the Fund's
manager. The Manager also serves as Manager to eleven other investment
companies which are advised by TCW Funds Management, Inc. (the "TCW/DW
Funds"). The Manager and InterCapital serve in various investment
management, advisory, management and administrative capacities to a total
of ninety-four investment companies and other portfolios with assets of
approximately $79.5 billion at December 31, 1995.
- --------------- ---------------------------------------------------------------------------
ADVISER TCW Funds Management, Inc. (the "Adviser") is the Fund's investment
adviser. In addition to the Fund, the Adviser serves as investment adviser
to eleven other TCW/DW Funds. As of September 30, 1995, the Adviser and its
affiliates had approximately $52 billion under management or committed to
management in various fiduciary or advisory capacities, primarily from
institutional investors.
- --------------- ---------------------------------------------------------------------------
MANAGEMENT AND The Manager receives a monthly fee at the annual rate of 0.39% of daily net
ADVISORY assets. The Adviser receives a monthly fee at an annual rate of 0.26% of
FEES daily net assets, scaled down on assets over $3 billion (see page 6).
- --------------- ---------------------------------------------------------------------------
DIVIDENDS AND Dividends are declared and paid monthly. Capital gains distributions, if
CAPITAL GAINS any, are paid at least once a year or are retained for reinvestment by the
DISTRIBUTIONS Fund. Dividends and any capital gains distributions are automatically
invested in additional shares at net asset value unless the shareholder
elects to receive cash (see page 26).
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<C> <S>
DISTRIBUTOR AND The Fund is authorized to reimburse Dean Witter Distributors Inc., the Fund's Distributor, for specific
PLAN OF expenses incurred in promoting the distribution of the Fund's shares, including personal services to
DISTRIBUTION shareholders and maintenance of shareholder accounts, in accordance with 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 an annual rate of 0.75% of average daily net assets of the Fund (see page 21).
- ------------------ ------------------------------------------------------------------------------------------------------
REDEMPTION Shares are redeemable by the shareholder at net asset value. An account may be involuntarily redeemed if
the total value of the account is less than $100 or, if the account was opened through EasyInvestSM, if
after twelve months the shareholder has invested less than $1,000 in the account (see page 24).
- ------------------ ------------------------------------------------------------------------------------------------------
SPECIAL The net asset value of the Fund's shares will fluctuate with changes in the market value of its portfolio
RISK securities. A decline in prevailing interest rates will generally increase the value of fixed-income
CONSIDERATIONS 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. The Fund may invest in mortgage-backed
securities issued in the United States and Canada; these 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. Certain derivative mortgage-backed securities
in which the Fund invests are extremely sensitive to changes in interest rates and in prepayment rates on the
underlying mortgage assets, and as a result may be highly volatile (see page 13). The Canadian mortgage-backed
securities market is of recent origin and is less well developed and less liquid than the U.S. market. The Fund
may invest a significant portion of its assets in securities issued and guaranteed by the governments of Canada
and Mexico. It should be recognized that the Canadian and Mexican debt securities in which the Fund will
invest pose different and greater risks than those customarily associated with U.S. debt securities,
including (i) the risks associated with international investments generally, such as fluctuations in foreign
currency exchange rates, (ii) the risks of investing in Canada and Mexico, which have smaller, less liquid debt
markets, such as limited liquidity, price volatility, custodial and settlement issues, and (iii) specific risks
associated with the Mexican economy, including high levels of inflation, large amounts of debt and political
and social uncertainties (see page 14). The Fund is a non-diversified investment company and, as such, is not
subject to the diversification requirements of the Investment Company Act of 1940. As a result, a relatively
high percentage of the Fund's assets may be invested in a limited number of issuers. However, the Fund intends
to continue to qualify as a regulated investment company under the federal income tax laws and, as such,
is subject to the diversification requirements of the Internal Revenue Code (see page 15). In addition,
the Fund may utilize certain investment techniques, including forward foreign currency exchange contracts,
options and futures, and the speculative technique known as leverage through the use of reverse repurchase
agreements and dollar rolls, which entail additional risks (see pages 12-19).
- ------------------ ------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------------------
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus
and in the Statement of Additional Information.
3
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth in the table are for
the fiscal year ended October 31, 1995.
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases ...............None
Maximum Sales Charge Imposed on Reinvested Dividends ... None
Deferred Sales Charge ................................... None
Redemption Fees ......................................... None
Exchange Fee ............................................ None
</TABLE>
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
<TABLE>
<CAPTION>
<S> <C>
Management and Advisory Fees 0.65%
12b-1 Fees* .................. 0.71%
Other Expenses ............... 0.23%
Total Fund Operating Expenses 1.59%
<FN>
- ------------
* A portion of the 12b-1 fee equal to 0.25% of the Fund's average daily
net assets is characterized as a service fee within the meaning of National
Association of Securities Dealers ("NASD") guidelines (see "Purchase of Fund
Shares").
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example 1 year 3 years 5 years 10 years
- --------------------------------------------------- ---------- ----------- ----------- ------------
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: $16 $50 $87 $189
</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--Plan of
Distribution" in this Prospectus.
Long-term shareholders of the Fund may pay more in distribution fees than
the economic equivalent of the maximum front-end sales charges permitted by
the NASD.
4
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The ratios and per share 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
FOR THE YEAR ENDED OCTOBER JULY 31, 1992*
31, THROUGH
----------------------------- OCTOBER 31, 1992
1995 1994 1993 -----------------
-------- --------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period . $ 8.89 $10.11 $ 9.96 $10.00
-------- --------- -------- ----------------
Net investment income ................. 0.69 0.68 0.77 0.18
Net realized and unrealized gain
(loss) ............................... (0.59) (1.18) 0.14 (0.05)
-------- --------- -------- ----------------
Total from investment operations ..... 0.10 (0.50) 0.91 0.13
-------- --------- -------- ----------------
Less dividends and distributions from:
Net investment income ................ -- (0.47) (0.76) (0.17)
Net capital gain ..................... -- (0.02) -- --
Paid-in-capital ...................... (0.66) (0.23) -- --
-------- --------- -------- ----------------
Total dividends and distributions .... (0.66) (0.72) (0.76) (0.17)
-------- --------- -------- ----------------
Net asset value, end of period ....... $ 8.33 $ 8.89 $10.11 $ 9.96
======== ========= ======== ================
TOTAL INVESTMENT RETURN + ............. 1.61% (5.06)% 9.35% 1.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .............................. 1.59% 1.52% 1.54% 1.80%(2)
Net investment income ................. 8.28% 6.85% 7.78% 8.36%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions $658 $1,360 $2,986 $762
Portfolio turnover rate ............... 44% 27% 77% 2%(1)
<FN>
- ------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
TCW/DW North American Government Income Trust (the "Fund") is an open-end,
non-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 February 19, 1992.
Dean Witter Services Company Inc. (the "Manager"), whose address is Two
World Trade Center, New York, New York 10048, is the Fund's Manager. The
Manager is a wholly-owned subsidiary of Dean Witter InterCapital Inc.
("InterCapital"). InterCapital 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.
The Manager acts as manager to eleven other TCW/DW Funds. The Manager and
InterCapital act in various investment management, advisory, management and
administrative capacities to a total of ninety-four investment companies,
thirty of which are listed on the New York Stock Exchange, with combined
5
<PAGE>
assets of approximately $76.9 billion as of December 31, 1995. InterCapital
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 Manager to manage its business affairs,
supervise its overall day-to-day operations (other than providing investment
advice) and provide all administrative services.
TCW Funds Management, Inc. (the "Adviser"), whose address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017, is the Fund's
investment adviser. The Adviser was organized in 1987 as a wholly-owned
subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries, including
Trust Company of the West and TCW Asset Management Company, provide a variety
of trust, investment management and investment advisory services. Robert A.
Day, who is Chairman of the Board of Directors of TCW, may be deemed to be a
control person of the Adviser by virtue of the aggregate ownership of Mr. Day
and his family of more than 25% of the outstanding voting stock of TCW. The
Adviser serves as investment adviser to eleven other TCW/DW Funds in addition
to the Fund. As of September 30, 1995, the Adviser and its affiliated
companies had approximately $52 billion under management or committed to
management, primarily from institutional investors.
The Fund has retained the Adviser to invest the Fund's assets.
The Fund's Trustees review the various services provided by the Manager
and the Adviser to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Manager, the Fund pays the
Manager monthly compensation calculated daily by applying the annual rate of
0.39% to the Fund's net assets up to $3 billion, scaled down to 0.36% on
assets over $3 billion. As compensation for its investment advisory services,
the Fund pays the Adviser monthly compensation calculated daily by applying
an annual rate of 0.26% to the Fund's net assets up to $3 billion, scaled
down to 0.24% on assets over $3 billion. For the fiscal year ended October
31, 1995, the Fund accrued total compensation to the Manager and the Adviser
amounting to 0.39% and 0.26%, respectively, of the Fund's average daily net
assets. During that period, the Fund's total expenses amounted to 1.59% 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 while maintaining relatively low volatility of principal. This
objective is fundamental and may not be changed without shareholder approval.
There is no assurance that the objective will be achieved.
The Fund seeks to achieve its investment objective by investing under
normal circumstances at least 65% of its total assets in investment grade
fixed-income securities issued or guaranteed by the U.S., Canadian or
Mexican governments or their subdivisions, or the agencies or
instrumentalities of any of the foregoing ("Government Securities"). In the
case of the United States and Canada, a substantial portion of such
investments will be fixed rate and adjustable rate mortgage-backed
securities, including collateralized mortgage obligations ("Mortgage-Backed
Securities"). The term investment grade consists of fixed-income securities
rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB or
higher by Standard & Poor's Corporation ("S&P") or, if not rated, determined
to be of comparable quality by the Adviser. Investments in securities rated
either Baa by Moody's or BBB by S&P may have speculative characteristics and,
therefore, changes in economic conditions or other circumstances are more
likely to weaken their capacity to make principal and interest payments than
would be the case with investments in securities with higher credit ratings.
If a fixed-income security held by the Fund is rated BBB or Baa and is
subsequently downgraded by a rating agency, the Fund will
6
<PAGE>
retain such security in its portfolio until the Adviser determines that it is
practicable to sell the security without undue market or tax consequences to
the Fund. In the event that such downgraded securities constitute 5% or more
of the Fund's total assets, the Adviser will seek to sell immediately
sufficient securities to reduce the total to below 5%. A description of
fixed-income security ratings is contained in the Appendix to the Statement
of Additional Information.
The Fund may invest up to 35% of its total assets in securities which are
not Government Securities, including corporate debt securities and securities
backed by other assets, such as automobile or credit card receivables and
home equity loans ("Asset- Backed Securities"), and money market instruments,
which are short-term (maturities of up to thirteen months) fixed-income
securities, issued by private institutions. Such securities (except for
Eurodollar certificates of deposit) must be issued by U.S., Canadian or
Mexican issuers and (except for money market instruments) must be rated at
least Aa by Moody's or AA by S&P or, if not rated, determined to be of
comparable quality by the Adviser.
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 three years. In addition, the
Fund will purchase only Mexican Government Securities with remaining
maturities of one year or less. The Fund seeks to achieve relatively low
volatility by investing in a portfolio of securities which the Adviser
believes will, in the aggregate, be resistant to significant fluctuations in
market value. 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 shorter
term securities has also historically been lower on average than those
available from longer term securities.
Under normal circumstances the Fund will invest at least 50% of its total
assets in U.S. Government Securities. The Fund will invest no more than 25%
of its total assets in Canadian Government Securities and no more than 25% of
its total assets in Mexican Government Securities. Subject to the foregoing
guidelines, the Adviser will invest the Fund's assets, and allocate its
investments from time to time among U.S., Canadian and Mexican Government
Securities, based on its analysis of market conditions and changes in general
economic conditions in the United States, Canada and Mexico. In such
analysis, the Adviser will consider various factors, including its
expectations regarding interest rate changes and changes in currency exchange
rates among the U.S. dollar, the Canadian dollar and the Mexican peso, as
well as general market, economic and political factors, to attempt to take
advantage of favorable investment opportunities in each country.
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); obligations of banks subject to regulation
by the U.S. Government and having total assets of $1 billion or more;
Eurodollar certificates of deposit; obligations of savings banks and savings
and loan associations having total assets of $1 billion or more; 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 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 Adviser, 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.
money market instruments or cash.
7
<PAGE>
GOVERNMENT SECURITIES
The Fund will invest at least 65% of its total assets in Government
Securities. Government Securities are securities issued or guaranteed by the
governments of the United States, Canada or Mexico, their political
subdivisions and agencies and instrumentalities of any of the foregoing. Such
securities may include U.S. Treasury securities, U.S. Mortgage-Backed
Securities, the sovereign debt of Canada or any of its Provinces, Canadian
Mortgage-Backed Securities, and the sovereign debt of Mexico or any of its
government agencies.
A portion of the Government Securities purchased by the Fund may be zero
coupon securities. Such securities are purchased at a discount from their
face amount, giving the purchaser the right to receive their full value at
maturity. The interest earned on such securities is, implicitly,
automatically compounded and paid out at maturity. While such compounding at
a constant rate eliminates the risk of receiving lower yields upon
reinvestment of interest if prevailing interest rates decline, the owner of a
zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise. For this reason, zero coupon securities are subject to
substantially greater price fluctuations during periods of changing
prevailing interest rates than are comparable securities which pay interest
on a current basis.
The zero coupon securities in which the Fund may invest are primarily
Canadian Government Securities with remaining maturities of two years or less
issued by Canadian provinces. Such securities generally are currently readily
available only in the form of zero coupon securities.
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. However,
the Fund will invest in zero coupon securities only when the Adviser believes
that there will be cash in the Fund's portfolio representing return of
principal on portfolio securities of the Fund at least equal to the imputed
income on the zero coupon securities. The Adviser believes that a limited use
of zero coupon securities in the Fund's portfolio may enable the Fund to
increase the income available to shareholders (as a result of the yield
premium often obtainable on such securities) without significantly increasing
the volatility of the Fund's net asset value, although there is no assurance
this can be achieved. The Fund intends to limit its use of zero coupon
securities (other than Treasury bills with one year or less to maturity) to
10% of its total assets.
UNITED STATES GOVERNMENT SECURITIES
Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities include: (i) U.S. Treasury obligations, all of which are
backed by the full faith and credit of the United States and which differ
only in their interest rates, maturities and times of issuance: 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); and (ii) obligations issued or guaranteed by U.S. Government
agencies or instrumentalities, including government guaranteed
Mortgage-Backed Securities, some of which are backed by the full faith and
credit of the U.S. Treasury (e.g., Government National Mortgage Association
direct pass-through certificates), some of which are supported by the right
of the issuer to borrow from the U.S. Government (e.g., obligations of
Federal Home Loan Banks), and some of which are backed only by the credit of
the issuer itself (e.g., obligations of the Student Loan Marketing
Association). The U.S. Government may also guarantee other debt obligations
of special purpose borrowers.
CANADIAN GOVERNMENT SECURITIES
Canadian Government Securities include securities issued or guaranteed by
the Government of Canada, the Government of a Province of Canada or their
agencies and Crown corporations. These securities may be denominated or
payable in U.S. dollars or Canadian dollars.
The Bank of Canada, acting on behalf of the federal government, is
responsible for the distribution
8
<PAGE>
of Government of Canada Treasury bills and federal bond issues. The Bank of
Canada holds weekly auctions of Treasury bills (maturities of one year or
less) and offers new issues of federal bonds through investment dealers and
banks. An offering of Government of Canada bonds frequently consists of
several different issues with various maturity dates, representing different
segments of the yield curve and generally having maturities ranging from
three to 25 years. The Bank of Canada usually purchases a previously
announced amount of each offering of bonds. Mortgage-Backed Securities
issued pursuant to the program established under the National Housing Act of
Canada are also Canadian Government Securities because they benefit from a
guarantee by the Canada Mortgage and Housing Corporation, but are not
distributed by the Bank of Canada.
All Canadian Provinces have outstanding bond issues and several Provinces
also guarantee bond issues of Provincial authorities, agencies and provincial
Crown corporations. Spreads in the marketplace are determined by various
factors, including the relative supply and the rating assigned by the rating
agencies. Most Provinces also issue treasury bills.
Many municipalities and municipal financial authorities in Canada raise
funds through the bond market in order to finance capital expenditures.
Unlike U.S. municipal securities, which have special tax status, Canadian
municipal securities have the same tax status as other Canadian Government
Securities and trade similarly to such securities. The Canadian municipal
market may be less liquid than the Provincial bond market.
The Fund will only invest in Canadian Government Securities which are
rated at least A by Moody's or S&P, or, if not rated, are determined to be of
comparable quality by the Adviser.
MEXICAN GOVERNMENT SECURITIES
Mexican Government Securities include those securities which are issued or
guaranteed by the Mexican Treasury or by Mexican government agencies or
instrumentalities. These securities may be denominated and payable in Mexican
pesos or U.S. dollars.
The debt market in Mexico began to develop rapidly after the promulgation
of the Securities Market Law in 1975. Since 1975, the government has
authorized a range of Mexican government issued debt securities, all of which
are traded on the Mexican Stock Exchange: (i) Cetes -- peso-denominated
discount debt securities having maturities of two years or less sold through
auctions regulated by Banco de Mexico; (ii) Bondes -- peso-denominated
long-term development bonds sold through auctions regulated by Banco de
Mexico; (iii) Ajustabonos -- peso-denominated bonds with a fixed coupon rate
on a variable face amount which is adjusted in proportion to fluctuations in
the Mexican consumer price index; (iv) Tesobonos -- U.S. dollar-denominated
securities sold at auctions which are paid in pesos equal to the value of the
U.S. dollar calculated at the prevailing exchange rate and (v) Nafinsa
Pagares--peso denominated promissory notes, with maturities approximating
those of Cetes, issued by the Nacional Financiera (Nafinsa), an agency of the
Mexican government.
In addition, a variety of other special purpose bonds are issued by the
Mexican federal government or its agencies, such as development bonds, bank
indemnity bonds and urban renovation bonds, as well as bank development bonds
and industrial development bonds.
The Fund will only invest in Mexican Government Securities which are rated
at least Baa by Moody's or BBB by S&P or, if not rated, are determined to be
of comparable quality by the Adviser.
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.
U.S. MORTGAGE-BACKED SECURITIES
There are currently three basic types of U.S. Mortgage-Backed Securities:
(i) those issued or guar-
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anteed 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 latter category of Mortgage-
Backed Securities are not considered Government Securities for purposes of
this Prospectus.
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.
The Fund may also invest in adjustable rate mortgage securities, which are
pass-through mortgage securities collateralized by mortgages with adjustable
rather than fixed rates.
Collateralized Mortgage Obligations and Multiclass Pass-Through
Securities. The Fund may invest in collateralized mortgage obligations or
"CMOs". 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 is 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. The Fund may invest without limitation in CMOs.
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
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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 inverse floaters and 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 generally are more volatile.
The Fund may invest up to 10% of its total assets in inverse floaters.
Inverse floaters constitute a class of CMOs with a coupon rate that moves
inversely to a designated index, such as the LIBOR (London Inter-Bank
Offered Rate) Index. Inverse floaters have coupon rates that typically change
at a multiple of the changes of the relevant index rate. Any rise in the
index rate (as a consequence of an increase in interest rates) causes a drop
in the coupon rate of an inverse floater while any drop in the index rate
causes an increase in the coupon of an inverse floater. In addition, like
most other fixed-income securities, the value of inverse floaters will
decrease as interest rates increase. Inverse floaters exhibit greater price
volatility than the majority of mortgage pass-through securities or CMOs. In
addition, some inverse floaters exhibit extreme sensitivity to changes in
prepayments. As a result, the yield to maturity of an inverse floater is
sensitive not only to changes in interest rates but also to changes in
prepayment rates on the related underlying Mortgage Assets. The Adviser
believes that, notwithstanding the fact that inverse floaters exhibit price
volatility, the use of inverse floaters as a component of the Fund's overall
portfolio, in light of the Fund's anticipated portfolio composition in the
aggregate, is compatible with the Fund's objective to earn a high level of
current income while maintaining relatively low volatility of principal.
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 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
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<PAGE>
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 15% of
its net assets in illiquid securities.
CANADIAN MORTGAGE-BACKED SECURITIES
Canadian Mortgage-Backed Securities may be issued in several ways, the
most common of which is a modified pass-through vehicle issued pursuant to
the program established under the National Housing Act of Canada.
Certificates issued pursuant to this program have some structural
similarities to GNMA securities and benefit from the guarantee of the Canada
Mortgage and Housing Corporation, a federal Crown corporation that is (except
for certain limited purposes) an agent of the Government of Canada.
Canadian private issuers such as banks and trust companies also issue
Mortgage-Backed Securities backed by private insurance or other forms of
credit support. Such Mortgage-Backed Securities are not considered Government
Securities for purposes of this Prospectus.
While most Canadian Mortgage-Backed Securities are subject to voluntary
prepayments, some pools are not subject to such prepayments and thus have
yield characteristics similar to bonds.
As the Canadian Mortgage-Backed Securities market was only recently
established, it is less well developed and less liquid than its U.S.
counterpart.
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 Securities. Mortgage-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
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<PAGE>
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 Adviser seeks to manage these risks (and
potential benefits) by investing in a variety of such securities.
Mortgage-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.
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.
Mortgage- 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 certain market conditions, such as those that
developed in 1994, 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 in CMOs issued by private entities only if the CMOs are rated at
least AA by S&P or Aa 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. In
addition, as stated above, inverse floaters, a class of CMOs in which the
Fund may invest up to 10% of its net assets, exhibit greater price volatility
than the majority of CMOs.
CURRENCY RISKS
Investors should carefully consider the risks of investing in securities
of foreign issuers and securities denominated in non-U.S. currencies.
Fluctuations in the relative rates of exchange among the currencies of
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the United States, Canada and Mexico will affect the value of the Fund's
investments. Changes in foreign currency exchange rates relative to the U.S.
dollar will affect the U.S. dollar value of the Fund's assets denominated in
that currency and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade.
RISKS OF INTERNATIONAL INVESTING
Investments in foreign securities will occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. Foreign securities are not subject to the regulatory
requirements of U.S. securities and, as such, there may be less publicly
available information about such securities. Moreover, issuers of foreign
securities are not subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to issuers of U.S.
securities.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be more
volatile. Furthermore, foreign exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign
markets may occasion delays in settlements of Fund trades effected in such
markets. Inability to dispose of portfolio securities due to settlement
delays could result in losses to the Fund due to subsequent declines in value
of such securities and the inability of the Fund to make intended security
purchases due to settlement problems could result in a failure of the Fund to
make potentially advantageous investments.
Canada. The Canadian debt securities market is significantly smaller than
the U.S. debt securities market. In particular, the Canadian Mortgage-Backed
Securities market is of recent origin, and, although continued growth is
anticipated, is less well developed and less liquid than its U.S.
counterpart.
Mexico. Because the Fund intends to invest in Mexican debt instruments,
investors in the Fund should be aware of certain special considerations
associated with investing in debt obligations of the Mexican government.
The Mexican government has exercised and continues to exercise a
significant influence over many aspects of the private sector in Mexico.
Mexican government actions concerning the economy could have a significant
effect on market conditions and prices and yields of Mexican debt
obligations, including those in which the Fund invests. Mexico is currently a
major debtor nation (among developing countries) to commercial banks and
foreign governments.
The value of the Fund's portfolio investments may be affected by changes
in oil prices, interest rates, taxation and other political or economic
developments in Mexico, including recent rates of inflation which have
exceeded the rates of inflation in the U.S. and Canada. The Fund can provide
no assurance that future developments in the Mexican economy will not impair
its investment flexibility, operations or ability to achieve its investment
objective.
In September, 1982, Mexico imposed foreign exchange controls and
maintained a dual foreign exchange rate system, with a "controlled" rate and
a "free market" rate. Under economic policy initiatives implemented since
December, 1987, the Mexican government introduced a schedule of gradual
devaluation of the controlled rate which initially amounted to an average
depreciation of the Mexican peso against the U.S. dollar of one Mexican peso
per day. The extended initiatives included an adjustment in the scheduled
devaluation rate of the Mexican peso against
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<PAGE>
the U.S. dollar. The Fund's net asset value and its computation and
distribution of income to its shareholders will be adversely affected by
continued reductions in the value of the Mexican peso relative to the U.S.
dollar because all Fund assets must be converted to U.S. dollars prior to any
distributions to shareholders. On December 22, 1994, the Mexican government
determined to allow the Mexican peso to trade freely against the U.S. dollar
rather than within a controlled band, which action resulted in a significant
devaluation of the Mexican peso against the U.S. dollar.
Non-Diversified Status. The Fund is classified as a non-diversified
investment company under the Investment Company Act of 1940, as amended (the
"Act"), and as such is not limited by the Act in the proportion of its assets
that it may invest in the obligations of a single issuer. However, the Fund
intends to conduct its operations so as to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. See "Dividends,
Distributions and Taxes." In order to qualify, among other requirements, the
Fund will limit its investments so that at the close of each quarter of the
taxable year, (i) not more than 25% of the market value of the Fund's total
assets will be invested in the securities of a single issuer (other than U.S.
Government Securities) and, (ii) with respect to 50% of the market value of
its total assets not more than 5% will be invested in the securities of a
single issuer (other than U.S. Government Securities) and the Fund will not
own more than 10% of the outstanding voting securities of a single issuer. To
the extent that a relatively high percentage of the Fund's assets may be
invested in the obligations of a limited number of issuers, the Fund's
portfolio securities may be more susceptible to any single economic,
political or regulatory occurrence than the portfolio securities of a
diversified investment company. The limitations described in this paragraph
are not fundamental policies and may be revised to the extent applicable
Federal income tax requirements are revised.
Debt securities which are issued or guaranteed by an agency or
instrumentality of the United States, including certificates issued by GNMA,
are treated like U.S. Government Securities for purposes of the
diversification tests. However, securities issued or guaranteed by foreign
governments, their political subdivisions, agencies and instrumentalities,
including Canadian NHA Mortgage-Backed Securities, are not treated like U.S.
Government Securities for purposes of the diversification tests described in
the preceding paragraph, but instead are subject to these tests in the same
manner as the securities of non-governmental issuers. In this regard,
securities issued or guaranteed by a foreign government, its political
subdivisions, agencies or instrumentalities may in certain circumstances be
treated as issued by a single issuer for purposes of these diversification
tests. Thus, in order to meet the diversification tests and thereby maintain
its status as a regulated investment company, the Fund will be required to
diversify its portfolio of Canadian Government Securities and Mexican
Government Securities in a manner which would not be necessary if the Fund
limited its investments to U.S. Government Securities.
The risks of other investment techniques which may be utilized by the
Fund, including options and futures transactions, are described under "Other
Investment Policies," below.
OTHER INVESTMENT POLICIES
Asset-Backed Securities. The Fund may invest in Asset-Backed Securities.
Asset-Backed Securities represent the securitization techniques used to
develop Mortgage-Backed Securities 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.
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, including the bankruptcy laws, some of
which may reduce the ability
15
<PAGE>
to obtain full payment. In the case of automobile receivables, due to various
legal and economic factors, proceeds for repossessed collateral may not
always be sufficient to support payments on these securities.
New instruments and variations of existing Mortgage-Backed Securities and
Asset-Backed Securities continue to be developed. The Fund, following
revision to this Prospectus, may invest in any such instruments or variations
as may be developed, to the extent consistent with its investment objective
and policies and applicable regulatory requirements.
Repurchase Agreements. The Fund may enter into repurchase agreements,
which may be viewed as a type of secured lending by the Fund, and which
typically involve the acquisition by the Fund of debt securities, from a
selling financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying
security at a specified price and at a fixed time in the future, usually not
more than seven days from the date of purchase.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed
to minimize such risks. These procedures include effecting repurchase
transactions only with large, well-capitalized and well-established
financial institutions whose financial condition will be continually
monitored by the Adviser subject to procedures established by the Board of
Trustees of the Fund. In addition, 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 15% of its
net assets.
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. 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. 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 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.
Private Placements. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible
for resale pursuant to Rule 144A under the Securities Act, and determined to
be liquid pursuant to the procedures discussed in the following paragraph,
are not subject to the foregoing restriction.) These securities are generally
referred to as private placements or restricted securities. Limitations on
the resale of such securities may have an adverse effect on their market-
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ability, 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
Securites Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The 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 under current
policy may not exceed 15% of the Funds net assets.
When-Issued and Delayed Delivery Securities and Forward Commitments. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. The securities so purchased or sold
are subject to market fluctuation and no interest or dividends accrue to the
purchaser prior to the settlement date. 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.
At the time of delivery of the securities, the value may be more or less than
the purchase or sale price. An increase in the percentage of the Fund's
assets committed to the purchase of securities on a when issued, delayed
delivery or forward commitment basis may increase the volatility of the
Fund's net asset value. 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 buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. 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 the security will result automatically from the exchange
or conversion of a security owned by the Fund at the time of sale.
FORWARD FOREIGN CURRENCY EXCHANGE
CONTRACTS
The Fund may engage in transactions in forward foreign currency exchange
contracts. A forward foreign currency exchange contract ("forward contract")
involves an obligation to purchase or sell a currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by
the parties, at a price set at the time of the contract.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also limit the
opportunity for gain if the value of the hedged currency should rise.
Moreover, it may not be possible for the Fund to hedge against a devaluation
that is so generally anticipated that the Fund is not able to contract to
sell the currency at a price above the devaluation level it anticipates.
The Fund may enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in either the Canadian dollar or Mexican peso ("foreign
currency"), it may, for example, desire to "lock in" the price of the
security in U.S. dollars, Canadian dollars or Mexican pesos. At other times,
when, for example, the Adviser believes that the Canadian dollar or the
Mexican peso may suffer a substantial decline against the U.S. dollar, the
Fund may enter into a forward contract to sell, for a fixed
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amount of dollars or pesos, the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities (or securities which
the Fund has purchased for its portfolio) denominated in such foreign
currency.
If the Fund enters into forward contract transactions, and the currency in
which the Fund's portfolio securities (or anticipated portfolio securities)
are denominated rises in value with respect to the currency which is being
purchased (or sold), then the Fund will have realized fewer gains than had
the Fund not entered into the forward contracts. Moreover, the precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible, since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The Fund is not required to
enter into such transactions with regard to its foreign currency-denominated
securities and will not do so unless deemed appropriate by the Adviser.
Currently, only a limited market exists for certain hedging transactions in
future foreign exchange rates. This may limit the Fund's ability to
effectively hedge its investments in Mexico.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may engage in transactions involving options on securities and
currencies and futures contracts on securities, currencies and indexes, each
as described below.
Options. The Fund may purchase and sell (write) call and put options on
U.S. Treasury notes, bonds and bills and on the Canadian dollar or Mexican
peso which are or may in the future be listed on several U.S. and foreign
securities exchanges or are written in over-the-counter transactions ("OTC
options"). Listed options are issued or guaranteed by the exchange on which
they trade or by a clearing corporation such as the Options Clearing
Corporation. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the
Fund. The Fund is permitted to write covered call options on portfolio
securities and the U.S. dollar, the Canadian dollar and the Mexican peso,
without limit, in order to aid it in achieving its investment objective. The
Fund may also write covered put options; however, the aggregate value of the
obligations underlying the puts determined as of the date the options are
sold will not exceed 50% of the Fund's net assets.
The Fund may purchase listed and OTC call and put options in amounts
equalling up to 5% of its total assets. The Fund may purchase call options to
close out a covered call position or to protect against an increase in the
price of a security it anticipates purchasing or, in the case of call options
on a foreign currency, to hedge against an adverse exchange rate change of
the currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The Fund
may purchase put options on securities which it holds in its portfolio only
to protect itself against a decline in the value of the security. The Fund
may also purchase put options to close out written put positions. There are
no other limits on the Fund's ability to purchase call and put options.
Futures Contracts. The Fund may purchase and sell futures contracts that
are currently traded, or may in the future be traded, on U.S. and foreign
commodity exchanges on such underlying fixed-income securities as U.S.
Treasury bonds, notes, and bills and/or any Canadian or Mexican government
fixed-income security ("interest rate" futures), on the Canadian or Mexican
currencies ("currency" futures) and on such indexes of U.S. or foreign
fixed-income securities as may exist or come into being, such as the Moody's
Investment Grade Corporate Bond Index ("index" futures). The Fund will
purchase or sell interest rate futures contracts for the purpose of hedging
some or all of the value of its portfolio securities (or anticipated
portfolio securities) against changes in prevailing interest rates. The Fund
will purchase or sell index futures contracts for the purpose of hedging some
or all of its portfolio (or anticipated portfolio) securities against changes
in their prices.
The Fund also may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position.
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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.
Risks of Options and Futures Transactions. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures
contract, only if a liquid secondary market exists for options or futures
contracts of that series. There is no assurance that such a market will
exist, particularly in the case of OTC options, as such options may generally
only be closed out by entering into a closing purchase transaction with the
purchasing dealer. Also, exchanges may limit the amount by which the price of
many futures contracts may move on any day. If the price moves equal the
daily limit on successive days, then it may prove impossible to liquidate a
futures position until the daily limit moves have ceased.
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 Adviser's 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 Adviser's 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.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by the Adviser with a view to
achieving the Fund's investment objective. Philip A. Barach, James M.
Goldberg, Jeffrey E. Gundlach and Frederick H. Horton, Managing Directors of
the Adviser, are the Fund's primary portfolio managers, and, with the
exception of Mr. Horton, have been so since the Fund's inception. Mr. Horton
has been a primary portfolio manager since December, 1994. Messrs. Barach,
Gundlach and Goldberg have each been portfolio managers with affiliates of
TCW for over five years. Mr. Horton has been a portfolio manager with
affiliates of TCW since October, 1993. From June 1991--September, 1993, he
was Senior Portfolio Manager for Dewey Square Investors, prior to which he
was Senior Porfolio Manager for the Putnam Companies.
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Adviser 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 the Manager,
and others regarding economic developments and interest rate trends; and the
Adviser's own analysis of factors it deems relevant.
Brokerage commissions are not normally charged on the purchase or sale of
U.S., Canadian or Mexican 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. In addition, the Fund
may incur brokerage commissions on transactions conducted through DWR. Under
normal circumstances it is not anticipated that the portfolio trading will
result in the Fund's portfolio turnover rate exceeding 100% in any one year.
Except as specifically noted, all investment policies and practices
discussed in this Prospectus are not fundamental policies of the Fund and, as
such, may be changed without shareholder approval.
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INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
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. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry, except that the Fund will concentrate in
Mortgage-Backed Securities (unless it has adopted a temporary "defensive"
posture). This restriction does not apply to obligations issued or
guaranteed by the United States Government or its agencies or
instrumentalities.
2. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to
Mortgage-Backed Securities or Asset-Backed Securities or to any obligation
of the United States Government, its agencies or instrumentalities.
3. Purchase or sell commodities or commodities contracts except that
the Fund may purchase and sell financial futures contracts and related
options thereon.
In addition, as a non-fundamental policy, the Fund may not, as to 75% of
its total assets, purchase more than 10% of the voting securities of any
issuer.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered
a violation of any of the foregoing restrictions.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Manager, shares of
the Fund are distributed by the Distributor and offered by DWR and others
(which may include TCW Brokerage Services, an affiliate of the Adviser) which
have entered into selected dealer agreements with the Distributor ("Selected
Broker-Dealers"). The principal executive office of the Distributor is
located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000 and subsequent purchases of $100 or
more may be made by sending a check, payable to TCW/DW North American
Government 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 another 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).
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Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment generally is due on or before
the third business day (settlement date) after the order is placed with the
Distributor. Since DWR and other Selected Broker-Dealers forward investors'
funds on settlement date, they may benefit from the temporary use of the
funds where payment is made prior thereto. As noted above, orders placed
directly with the Transfer Agent must be accompanied by payment. Investors
will be entitled to receive dividends and capital gains distributions if
their order is received by the close of business on the day prior to the
record date for such distributions.
Sales personnel of a Selected Broker-Dealer are compensated for shares of
the Fund sold by them by the Distributor or any of its affiliates and/or the
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase order.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting all its liabilities, dividing by the number of shares outstanding
and adjusting to the nearest cent. The net asset value per share will not be
determined on Good Friday and on such other federal and non-federal holidays
as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange or quoted by NASDAQ is valued at its latest sale price on that
exchange or quotation service (if there were no sales that day, the security
is valued at the latest bid price), and (2) all other 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 Adviser 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). For valuation
purposes, quotations of foreign portfolio securities, other assets and
liabilities and forward contracts stated in foreign currency are translated
into U.S. dollar equivalents at the prevailing market rates prior to the
close of the New York Stock Exchange.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, in determining
what it believes is the fair valuation of the portfolio securities valued by
such pricing service.
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.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1
under the Act with the Distributor whereby the expenses of certain activities
and services, including personal services to shareholders and maintenance of
shareholder accounts, in connection with the distribution of the Fund's
shares are reimbursed. The principal activities and services which may be
provided by DWR, its affiliates or any other Selected Broker-Dealer under the
Plan include: (1)
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compensation to, and expenses of, account executives and others, including
overhead and telephone expenses; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales
of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements. Reimbursements for these services will be made in monthly
payments by the Fund, which will in no event exceed an amount equal to a
payment at the annual rate of 0.75% of the Fund's average daily net assets. A
portion of the amount payable pursuant to the Plan, which may not exceed
0.25% of the Fund's average daily net assets, is characterized as a service
fee within NASD guidelines. The service fee relates to ongoing personal
services to shareholders and maintenance of shareholder accounts by DWR, its
affiliates and any other Selected Broker-Dealer. Expenses incurred pursuant
to the Plan in any fiscal year in excess of 0.75% of the Fund's average daily
net assets will not be reimbursed by the Fund through payments accrued in any
subsequent fiscal year. The Fund accrued $5,756,266 to the Distributor
pursuant to the Plan for the fiscal year ended October 31, 1995. This is an
accrual at the annual rate of 0.71% of the Fund's average daily net assets.
SHAREHOLDER SERVICES
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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
TCW/DW Fund), unless the shareholder requests that they be paid in cash.
Investment of Distributions Received in Cash. Any shareholder who receives
a cash payment representing a dividend or capital gains distribution may
invest such dividend or distribution at the net asset value next determined
after receipt by the Transfer Agent by returning the check or the proceeds to
the Transfer Agent within thirty days after the payment date.
EasyInvestSM. 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
"Repurchases and Redemptions--Involuntary Redemption").
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 net asset value. The
Withdrawal Plan provides for monthly or quarterly (March, June, September and
December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Only shareholders
having accounts in which no share certificates have been issued will be
permitted to enroll in the Withdrawal Plan.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
Tax Sheltered Retirement Plans. Retirement plans are available for use by
the self-employed, eligible Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the Fund.
EXCHANGE PRIVILEGE
An "Exchange Privilege," that is, the privilege of exchanging shares of
certain Funds for shares of the Fund, exists whereby shares of TCW/DW Funds
which are open-end investment companies sold with a contingent deferred (at
time of redemption) sales charge ("CDSC Funds"), may be exchanged for shares
of the Fund, for shares of TCW/DW Income and Growth Fund, TCW/DW Balanced
Fund, and for
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shares of five money market funds for which InterCapital serves as investment
manager, Dean Witter Liquid Asset Fund Inc., Dean Witter U.S. Government
Money Market Trust, Dean Witter Tax-Free Daily Income Trust, Dean Witter
California Tax Free Daily Income Trust and Dean Witter New York Municipal
Money Market Trust (the foregoing eight investment companies, including the
Fund, are hereinafter collectively referred to as "Exchange Funds"). An
exchange from a CDSC Fund to an Exchange Fund that is not a money market fund
is on the basis of the next calculated net asset value per share of each fund
after the exchange order is received. When exchanging into a money market
fund from a CDSC Fund, shares of the CDSC Fund are redeemed at their next
calculated net asset value and exchanged for shares of the money market fund
at their net asset value determined the following business day. Additionally,
shares of any Exchange Fund received in an exchange for shares of a CDSC Fund
(regardless of the type of fund originally purchased) may be redeemed and
exchanged for shares of an Exchange Fund or a CDSC Fund. Any applicable
contingent deferred sales charge ("CDSC") will have to be paid upon ultimate
redemption of shares originally purchased from a CDSC Fund. During the period
of time the shares originally purchased from a CDSC Fund remain in the
Exchange Fund, the holding period (for the purpose of determining the rate of
CDSC) is frozen so that the charge is based upon the period of time the
shareholder held shares of a CDSC Fund. If those shares are subsequently
re-exchanged for shares of a CDSC Fund, the holding period previously frozen
when the first exchange was made resumes on the last day of the month in
which shares of a CDSC Fund are reacquired. Thus, the CDSC is based upon the
time (calculated as described above) the shareholder was invested in a CDSC
Fund. However, in the case of shares exchanged into an Exchange Fund, upon a
redemption of shares which results in a CDSC being imposed, a credit (not to
exceed the amount of the CDSC) will be given in an amount equal to the
Exchange Fund 12b-1 distribution fees which are attributable to those shares
(see "Purchase of Fund Shares--Plan of Distribution" in this Prospectus or
the respective other Exchange Fund prospectus for a description of Exchange
Fund 12b-1 distribution fees). Exchanges involving CDSC Funds may be made
after the shares of the CDSC Fund acquired by purchase (not by exchange or
dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Manager to be abusive and
contrary to the best interests of the Fund's other shareholders and, at the
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, each of the other TCW/DW Funds and each of the money market 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 other TCW/DW Funds or money market 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 Selected Broker-Dealer are referred to their
account executive regarding restrictions on exchange of shares pledged in the
margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated
for federal income tax purposes the same as a repurchase or redemption of
shares, on which the
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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 Funds for
which the Exchange Privilege is available by contacting their DWR or other
Selected Broker-Dealer 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
experience in the past with other funds managed by the Manager.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REPURCHASES AND REDEMPTIONS
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Repurchases. DWR and other Selected Broker- Dealers are authorized to
repurchase, as agent for the Fund, shares represented by a share certificate
which is delivered to any of their offices. Shares held in a shareholder's
account without a share certificate may also be repurchased by DWR and other
Selected Broker-Dealers upon the telephonic request of the shareholder. The
repurchase price is the net asset value next determined (see "Purchase of
Fund Shares-- Determination of Net Asset Value") after such repurchase order
is received by DWR or the other Selected Broker-Dealer. The offers by DWR and
other Selected Broker-Dealers to repurchase shares from 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 below under
"Redemptions."
Redemptions. Shares of the Fund can be redeemed for cash at any time at
net asset value per share next determined. If shares are held in a
shareholder's account at the Transfer Agent without a share certificate, a
written request for redemption must be sent to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303. The share certificate, or an
accompanying stock power, and the request for redemption, must be signed by
the shareholder or shareholders exactly as the shares are registered. Each
request for redemption, whether or not accompanied by a share
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<PAGE>
certificate, must be sent to the Fund's Transfer Agent, which will redeem the
shares at their net asset value next determined as described under "Purchase
of Fund Shares--Determination of Net Asset Value" after it receives the
request, and certificate, if any, in good order. Any redemption request
received after such determination will be redeemed at the next determined net
asset value. The term "good order" means that the share certificate, if any,
and request for redemption are properly signed, accompanied by any
documentation required by the Transfer Agent, and bear signature guarantees
when required by the Fund or the Transfer Agent. If redemption is requested
by a corporation, partnership, trust or fiduciary, the Transfer Agent may
require that written evidence of authority acceptable to the Transfer Agent
be submitted before such request is accepted. With regard to shares of the
Fund acquired pursuant to the Exchange Privilege, any applicable contingent
deferred sales charge will be imposed upon the redemption of such shares (see
"Purchase of Fund Shares--Exchange Privilege").
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than DWR or another Selected Broker-Dealer for the account of the
shareholder), partnership, trust or fiduciary, or sent to the shareholder at
an address other than the registered address, signatures must be guaranteed
by an eligible guarantor acceptable to the Transfer Agent (shareholders
should contact the Transfer Agent for a determination as to whether a
particular institution is such an eligible guarantor). A stock power may be
obtained from any dealer or commercial bank. The Fund may change the
signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a revised prospectus.
Payment for Shares Repurchased or Redeemed. 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. If the shares to be redeemed have
recently been purchased by check, payment of the redemption proceeds may be
delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of
receipt of the check by the Transfer Agent). Shareholders maintaining margin
accounts with DWR or another Selected Broker-Dealer are referred to their
account executive regarding restrictions on redemption of shares of the Fund
pledged in the margin account.
Reinstatement Privilege. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption
or repurchase in shares of the Fund at net asset value next determined after
a reinstatement request, together with the proceeds, is received by the
Transfer Agent.
Involuntary Redemption. The Fund reserves the right to redeem, on sixty
days' notice and at net asset value, the shares of any shareholder (other
than shares held in an Individual Retirement Account or Custodial Account
under Section 403(b)(7) of the 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 Trustees or, in the case of an account
opened through EasyInvest, if after twelve months the shareholder has
invested less than $1,000 in the account. However, before the Fund redeems
such shares and sends the proceeds to the shareholder, it will notify the
shareholder that the value of the shares is less than the applicable amount
and allow him or her 60 days to make an additional investment in an amount
which will increase the value of his or her account to at least the
applicable amount before the redemption is processed.
25
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund intends to pay monthly income
dividends and to distribute net short-term and net long-term capital gains,
if any, at least once each year. The Fund may, however, determine either to
distribute or to retain all or part of any long-term capital gains in any
year for reinvestment.
The Fund may, at times, make payments from sources other than net
investment income, net realized short-term capital gains and net realized
long- term capital gains. Payments from such sources would, in effect,
represent a return of a portion of each shareholder's investment. All, or a
portion, of such payments would not be taxable to shareholders.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends and/or distributions be paid in cash.
(See "Shareholder Services--Automatic Investment of Dividends and
Distributions.")
Taxes. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise 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.
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 calendar year prior to February 1, will be deemed, for tax
purposes, to have been received by the shareholder in the prior calendar
year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. It is not anticipated that any
portion of the Fund's distributions will be eligible for the dividends
received deduction to corporate shareholders.
After the end of the 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
and the portion taxable as long-term capital gains.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished
and certified as to their accuracy. Shareholders who are not citizens or
residents of, or entities organized in, the United States may be subject to
withholding taxes of up to 30% on certain payments received from the Fund.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and has made the appropriate election with the Internal Revenue Service, the
Fund will report annually to its shareholders the amount per share of such
taxes, to enable shareholders to claim United States foreign tax credits or
deductions with respect to such taxes. In the absence of such an election,
the Fund would deduct foreign tax in computing the amount of its
distributable income.
The foregoing discussion relates solely to the federal income tax
consequences of an investment in the Fund. Distributions may also be subject
to state and local taxes; therefore, each shareholder is advised to consult
his or her own tax adviser.
26
<PAGE>
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. Both the yield and the total return
of the Fund are based on historical earnings and yield of the Fund is
computed by dividing the net investment income of the Fund over a 30-day
period by an average value (using the average number of shares entitled to
receive dividends and the net asset value per share at the end of the
period), all in accordance with applicable regulatory requirements. Such
amount is compounded for six months and then annualized for a twelve-month
period to derive the yield of the Fund.
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 one year, as well
as over the life of the Fund. Average annual total return reflects all income
earned by the Fund, any appreciation or depreciation of the assets of the
Fund, and all expenses incurred by the Fund, for the stated periods. It also
assumes reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Fund may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. The Fund from time to time may also advertise its performance relative
to certain performance rankings and indexes compiled by independent
organizations(such as mutual fund performance rankings of Lipper Analytical
Services, Inc.).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by
the shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Fund, requires that Fund obligations include such disclaimer, and provides
indemnification and reimbursement of expenses out of the Fund's property for
any shareholder held personally liable for the obligations of the Fund. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be
unable to meet its obligations. Given the above limitations on shareholder
personal liability, and the nature of the Fund's assets and operations, the
possibility of the Fund being unable to meet its obligations is remote and
thus, in the opinion of Massachusetts counsel to the Fund, the risk to Fund
shareholders of personal liability is remote.
Code of Ethics. The Adviser is subject to a Code of Ethics with respect to
investment transactions in which the Adviser's officers, directors and
certain other persons have a beneficial interest to avoid any actual or
potential conflict or abuse of their fiduciary position. The Code of Ethics,
as it pertains to the TCW/DW Funds, contains several restrictions and
procedures designed to eliminate conflicts of interest including: (a)
pre-clearance of personal investment transactions to ensure that personal
transactions by employees are not being conducted at the same time as the
Adviser's clients; (b) quarterly reporting of
27
<PAGE>
personal securities transactions; (c) a prohibition against personally
acquiring securities in an initial public offering, entering into uncovered
short sales and writing uncovered options; (d) a seven day "black-out
period" prior or subsequent to a TCW/DW Fund transaction during which
portfolio managers are prohibited from making certain transactions in
securities which are being purchased or sold by a TCW/DW Fund; (e) a
prohibition, with respect to certain investment personnel, from profiting in
the purchase and sale, or sale and purchase, of the same (or equivalent)
securities within 60 calendar days; and (f) a prohibition against acquiring
any security which is subject to firm wide or, if applicable, a department
restriction of the Adviser. The Code of Ethics provides that exemptive relief
may be given from certain of its requirements, upon application. The
Adviser's Code of Ethics complies with regulatory requirements and, insofar
as it relates to persons associated with registered investment companies, the
Report of the Advisory Group on Personal Investing of the Investment Company
Institute.
Litigation. Several class action lawsuits have been consolidated in the
United States District Court, Southern District of New York, against the
Fund, some of its Trustees and officers, its underwriter and distributor, the
Adviser, the Manager, and other defendants, by certain shareholders of the
Fund. The consolidated amended complaint generally alleges that the
defendants made inadequate and misleading disclosures in the prospectuses for
the Fund, in particular, as such disclosures relate to the nature and risks
of the Fund's investments in mortgage-backed securities and Mexican
securities. The plaintiffs also challenge certain fees paid by the Fund as
excessive. Damages are sought in an unspecified amount. All defendants have
moved to dismiss the consolidated amended complaint. The Adviser and the
Manager believe that the litigation will not have a material adverse effect
on their ability to perform under their respective agreements with the Fund
or a material adverse effect on the Fund and its shareholders.
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.
28
<PAGE>
TCW/DW
North American
Government Income Trust
Two World Trade Center
New York, New York 10048
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Sheldon Curtis
Vice President, Secretary and
General Counsel
Philip A. Barach
Vice President
James M. Goldberg
Vice President
Jeffrey E. Gundlach
Vice President
Frederick H. Horton
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
TCW/DW
North
American
Government
Income Trust
PROSPECTUS
FEBRUARY 1,1996
<PAGE>
TCW/DW
NORTH AMERICAN
GOVERNMENT INCOME TRUST
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1996
- -----------------------------------------------------------------------------
TCW/DW North American Government Income Trust (the "Fund") is an open-end,
non-diversified management investment company, whose investment objective is
to earn a high level of current income while maintaining relatively low
volatility of principal. The Fund seeks to achieve its investment objective
by investing primarily in investment grade securities issued or guaranteed by
the U.S. Government, Canada or Mexico, or their subdivisions, or the agencies
or instrumentalities of any of the foregoing. See "Investment Practices and
Policies."
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.
TCW/DW North American Government 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>
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management ......... 3
Trustees and Officers ............... 6
Investment Practices and Policies .. 12
Investment Restrictions ............. 26
Portfolio Transactions and Brokerage 27
The Distributor ..................... 28
Shareholder Services ................ 31
Repurchases and Redemptions ......... 35
Dividends, Distributions and Taxes . 35
Performance Information ............. 37
Description of Shares ............... 38
Custodian and Transfer Agent ....... 39
Independent Accountants ............. 39
Reports to Shareholders ............. 39
Legal Counsel ....................... 39
Experts ............................. 39
Registration Statement .............. 39
Financial Statements--October 31,
1995 ............................... 40
Report of Independent Accountants .. 49
Appendix ............................ 50
</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 February 19, 1992. The Fund is one of the TCW/DW Funds,
which currently consist, in addition to the Fund, of TCW/DW Core Equity
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 Term Trust 2002, TCW/DW Term Trust 2003, TCW/DW Term Trust
2000, TCW/DW Emerging Markets Opportunities Trust and TCW/DW Total Return
Trust.
THE MANAGER
Dean Witter Services Company Inc. (the "Manager"), a Delaware corporation,
whose address is Two World Trade Center, New York, New York 10048, is the
Fund's Manager. The Manager is a wholly-owned subsidiary of Dean Witter
InterCapital Inc. ("InterCapital"), a Delaware corporation. 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, management and administrative
activities previously performed by the InterCapital Division of Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Manager. (As
hereinafter used in this Statement of Additional Information, the term
"InterCapital" refers to DWR's InterCapital Division prior to the internal
reorganization and to Dean Witter InterCapital Inc. thereafter.) The daily
management of the Fund is conducted by or under the direction of officers of
the Fund and of the Manager and Adviser (see below), subject to review by the
Fund's Board of Trustees. In addition, Trustees of the Fund may provide
guidance on economic factors and interest rate trends. Information as to
these Trustees and Officers is contained under the caption "Trustees and
Officers."
Pursuant to a management agreement (the "Management Agreement") with the
Manager, the Fund has retained the Manager to manage the Fund's business
affairs, supervise the overall day-to-day operations of the Fund (other than
rendering investment advice) and provide all administrative services to the
Fund. Under the terms of the Management Agreement, the Manager also maintains
certain of the Fund's books and records and furnishes, at its own expense,
such office space, facilities, equipment, supplies, clerical help and
bookkeeping and legal services as the Fund may reasonably require in the
conduct of its business, including the preparation of prospectuses,
statements of additional information, proxy statements and reports required
to be filed with federal and state securities commissions (except insofar as
the participation or assistance of independent accountants and attorneys is,
in the opinion of the Manager, necessary or desirable). In addition, the
Manager pays the salaries of all personnel, including officers of the Fund,
who are employees of the Manager. The Manager also bears the cost of the
Fund's telephone service, heat, light, power and other utilities.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Manager, the Fund pays the Manager
monthly compensation calculated daily by applying the following annual rates
to the Fund's daily net assets determined as of the close of each business
day: 0.39% of the portion of daily net assets not exceeding $3 billion; and
0.36% of the portion of daily net assets exceeding $3 billion. While the fee
payable under the Management Agreement may be higher than that paid by other
investment companies for similar services, the Board of Trustees determined
that the total fees payable under the Management Agreement and the Advisory
Agreement (as defined below) are reasonable in relation to the scope and
quality of services to be provided thereunder. In this regard, in evaluating
the Management Agreement, the Board of Trustees recognized that the Manager
and the Adviser had, pursuant to an agreement described under the section
entitled "The Adviser," agreed to a division as between themselves of the
total fees necessary for the management of the business affairs of and the
furnishing of investment advice to the Fund. Accordingly, in reviewing the
Management Agreement and Advisory Agreement, the Board viewed as most
significant the question as to whether the total fees payable under the
Management and Advisory Agreements were in the aggregate reasonable in
relation to the services to be provided thereunder. For the fiscal years
ended October 31, 1993, 1994 and 1995, the Fund accrued to the Manager and/or
(under previous management agreements) InterCapital total compensation of
$6,934,891, $6,068,227 and $3,166,169, respectively.
3
<PAGE>
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Manager is not liable to the Fund or any of its
investors for any act or omission by the Manager or for any losses sustained
by the Fund or its investors. The Management Agreement in no way restricts
the Manager from acting as manager to others.
InterCapital paid the organizational expenses of the Fund incurred prior
to the offering of the Fund's shares. The Fund has reimbursed the Manager for
$200,000 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 was initially approved by the Trustees on June 4,
1994 and became effective on April 17, 1995. The Management Agreement
replaced a prior management agreement in effect between the Fund and the
Manager, which in turn had replaced a management agreement between the Fund
and InterCapital, the parent company of the Manager. (That management
agreement in turn had replaced, on June 30, 1993 upon the spin-off by Sears,
Roebuck and Co. of its remaining shares of DWDC, an earlier substantially
identical management agreement (originally with DWR, and assumed by
InterCapital effective January, 1993) which was approved by the Trustees on
October 30, 1992.) The nature and scope of services provided to the Fund, and
the formula to determine fees paid by the Fund under the Management
Agreement, are identical to those of the Fund's previous management
agreements. The Management Agreement may be terminated at any time, without
penalty, on thirty days' notice by the Trustees of the Fund.
Under its terms, the Management Agreement had an initial term ending April
30, 1995, and will continue in effect from year to year thereafter, provided
continuance of the Agreement is approved at least annually by the Trustees of
the Fund, including the vote of a majority of the Independent Trustees who
are not parties to the Management or Advisory Agreement or "interested
persons" (as defined in the Investment Company Act of 1940, as amended (the
"Act")) of any such party (the "Independent Trustees"). Continuation of the
Management Agreement until April 30, 1996 was approved by the Trustees,
including a majority of the Independent Trustees, at a meeting held on April
20, 1995.
THE ADVISER
TCW Funds Management, Inc. (the "Adviser"), a California corporation, is a
wholly-owned subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries,
including Trust Company of the West and TCW Asset Management Company, provide
a variety of trust, investment management and investment advisory services.
As of September 30, 1995, the Adviser and its affiliates had approximately
$52 billion under management or committed to management. Trust Company of the
West and its affiliates have managed securities portfolios for institutional
investors since 1971. The Adviser is headquartered at 865 South Figueroa
Street, Suite 1800, Los Angeles, California 90017 and is registered as an
investment adviser under the Investment Advisers Act of 1940. In addition to
the Fund, the Adviser currently serves as investment adviser to eleven other
TCW/DW Funds: TCW/DW Core Equity Trust, TCW/DW Latin American Growth Fund,
TCW/DW Term Trust 2002, TCW/DW Income and Growth Fund, TCW/DW Term Trust
2003, TCW/DW Small Cap Growth Fund, TCW/DW Balanced Fund, TCW/DW Term Trust
2000, TCW/DW Emerging Markets Opportunities Trust, TCW/DW Mid-Cap Equity Trust
and TCW/DW Total Return Trust. The Adviser also serves as investment adviser to
TCW Convertible Securities Fund, Inc., a closed-end investment company listed on
the New York Stock Exchange, and to The TCW Galileo Funds, Inc., an open-end
investment company, and acts as adviser or sub-adviser to other investment
companies.
Robert A. Day, who is Chairman of the Board of Directors of TCW, may be
deemed to be a control person of the Adviser by virtue of the aggregate
ownership of Mr. Day and his family of more than 25% of the outstanding
voting stock of TCW.
Pursuant to an investment advisory agreement (the "Advisory Agreement")
with the Adviser, the Fund has retained the Adviser to invest the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. The Adviser obtains and evaluates such information and
advice relating to the economy, securities markets, and specific securities
as it considers necessary or useful to continuously manage the assets of the
Fund in a manner consistent with its investment objective. In addition, the
Adviser pays the salaries of all personnel, including officers of the Fund,
who are employees of the Adviser.
4
<PAGE>
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Adviser, the Fund pays the Adviser
monthly compensation calculated daily by applying the following annual rates
to the Fund's daily net assets determined as of the close of each business
day: 0.26% of the portion of daily net assets not exceeding $3 billion; and
0.24% of the portion of daily net assets exceeding $3 billion. For the fiscal
years ended October 31, 1993, 1994 and 1995, the Fund accrued to the Adviser
total compensation under the Advisory Agreement of $4,623,162, $9,102,341 and
$2,110,779, respectively.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Adviser is not liable to the Fund or any of its
investors for any act or omission by the Adviser or for any losses sustained
by the Fund or its investors. The Advisory Agreement in no way restricts the
Adviser from acting as investment adviser to others.
The Advisory Agreement was initially approved by the Trustees on May 1,
1992 and by DWR, as then sole shareholder, on May 11, 1992. The Advisory
Agreement may be terminated at any time, without penalty, on thirty days'
notice by the Trustees of the Fund, by the holders of a majority, as defined
in the Act, of the outstanding shares of the Fund, or by the Adviser. The
Agreement will automatically terminate in the event of its assignment (as
defined in the Act).
Under its terms, the Advisory Agreement had an initial term ending April
30, 1994, and provides that it will continue from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Act, of the outstanding
shares of the Fund, or by the Trustees of the Fund; provided that in either
event such continuance is approved annually by the vote of a majority of the
Independent Trustees of the Fund, which vote must be cast in person at a
meeting called for the purpose of voting on such approval. Continuation of
the Advisory Agreement until April 30, 1996 was approved by the Trustees,
including a majority of the Independent Trustees, at a meeting called for
that purpose on April 20, 1995.
Expenses not expressly assumed by the Manager under the Management
Agreement, by the Adviser under the Advisory Agreement or by the Distributor
of the Fund's shares Dean Witter Distributors Inc. ("Distributors" or the
"Distributor") (see "The Distributor"), will be paid by the Fund. The
expenses borne by the Fund include, but are not limited to: expenses of the
Plan of Distribution pursuant to Rule 12b-1 (see "The Distributor"); charges
and expenses of any registrar; custodian, stock transfer and dividend
disbursing agent; brokerage commissions and securities transaction costs;
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 Manager or Adviser or any
corporate affiliate of either; all expenses incident to any dividend,
withdrawal or redemption options; charges and expenses of any outside service
used for pricing of the Fund's shares; fees and expenses of legal counsel,
including counsel to the Trustees who are not interested persons of the Fund
or of the Manager or the Adviser (not including compensation or expenses of
attorneys who are employees of the Manager or the Adviser) and independent
accountants; membership dues of industry associations; interest on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and trustees) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification relating thereto); and all other
costs of the Fund's operation.
Pursuant to the Management and Advisory Agreements, 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 Manager and the Adviser will
reimburse the Fund, on a pro rata basis, for the amount of such excess. Such
amount, if any, will be calculated daily and credited on a monthly basis. The
Fund's expenses did not exceed the limitation set forth above during the
fiscal years ended October 31, 1993, 1994 and 1995.
5
<PAGE>
DWR and TCW have entered into an Agreement for the purpose of creating,
managing, administering and distributing a family of investment companies and
other managed pooled investment vehicles offered on a retail basis within the
United States. The Agreement contemplates that, subject to approval of the
board of trustees or directors of a particular investment entity, DWR or its
affiliates will provide management and distribution services and TCW or its
affiliates will provide investment advisory services for each such investment
entity. The Agreement sets forth the terms and conditions of the relationship
between TCW and its affiliates and DWR or its affiliates and the manner in
which the parties will implement the creation and maintenance of the
investment entities, including the parties' expectations as to respective
allocation of fees to be paid by an investment entity to each party for the
services to be provided to it by such party.
The Fund has acknowledged that each of DWR and TCW owns its own name,
initials and logo. The Fund has agreed to change its name at the request of
either the Manager or the Adviser, if the Management Agreement between the
Manager and the Fund or the Advisory Agreement between the Adviser and the
Fund is terminated.
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
the Manager or the Adviser, and the affiliated companies of either, and with
the 12 TCW/DW Funds and with the 79 investment companies of which
InterCapital serves as investment manager or as investment adviser (the "Dean
Witter Funds"), are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------------- -----------------------------------------------------------------
<S> <C>
John C. Argue (64) Of Counsel, Argue Pearson Harbison & Myers (law firm); Director, Avery
Trustee Dennison Corporation (manufacturer of self-adhesive products and office
c/o Argue Pearson Harbison & Myers supplies) and CalMat Company (producer of aggregates, asphalt and ready
801 South Flower Street mixed concrete); Chairman, Rose Hills Memorial Park (cemetery); advisory
Los Angeles, California director, LAACO Ltd. (owner and operator of private clubs and real
estate); director or trustee of various business and not-for-profit
corporations; Director, TCW Galileo Funds, Inc.; Trustee, University
of Southern California, Occidental College and Pomona College; Trustee
of the TCW/DW Funds.
Richard M. DeMartini* (43) President and Chief Operating Officer of Dean Witter Capital, a division
Trustee of DWR; Director of DWR, the Manager, InterCapital, Distributors and
Two World Trade Center Dean Witter Trust Company ("DWTC"); Executive Vice President of Dean
New York, New York Witter Discover & Co. ("DWDC"); Member of the DWDC Management Committee;
Trustee of the TCW/DW Funds; Member (since January, 1993) and Chairman
(since January, 1995) of the Board of Directors of NASDAQ.
Charles A. Fiumefreddo* (62) Chairman and Chief Executive Officer of the Manager, InterCapital and
Chairman of the Board, Chief Distributors; Executive Vice President and Director of DWR; Chairman
Executive Officer and Trustee of the Board, Chief Executive Officer and Trustee of the TCW/DW Funds;
Two World Trade Center Chairman of the Board, Director or Trustee, President and Chief Executive
New York, New York Officer of the Dean Witter Funds; Chairman and Director of DWTC; Director
of various DWDC subsidiaries; Formerly Executive Vice President and
Director of DWDC (until February, 1993).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------------- -----------------------------------------------------------------
<S> <C>
John R. Haire (70) Chairman of the Audit Committee and Chairman of the Committee of
Trustee Independent Directors or Trustees of each of the Dean Witter Funds;
Two World Trade Center formerly President, Council for Aid to Education (1978-1989) and Chairman
New York, New York and Chief Executive Officer of Anchor Corporation, an Investment Adviser
(1964-1978); Director of Washington National Corporation (insurance);
Trustee of the TCW/DW Funds.
Dr. Manuel H. Johnson (46) Senior Partner, Johnson Smick International, Inc., a consulting firm;
Trustee Koch Professor of International Economics and Director of the Center
c/o Johnson Smick International, Inc. for Global Market Studies at George Mason University (since September,
1133 Connecticut Avenue, N.W. 1990); Co-Chairman and a founder of the Group of Seven Council (G7C),
Washington, D.C. an international economic commission (since September, 1990); 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); Trustee of the TCW/DW Funds;
Director or Trustee of the Dean Witter Funds.
Paul Kolton (72) Chairman of the Audit Committee and Chairman of the Committee of
Trustee Independent Trustees and Trustee of the TCW/DW Funds; former Chairman
c/o Gordon Altman Butowsky Weitzen of the Financial Accounting Standards Advisory Council and Chairman
Shalov & Wein and Chief Executive Officer of the American Stock Exchange; Director
Counsel to the Independent Trustees of UCC Investors Holding Inc. (Uniroyal Chemical Company Inc.); director
114 West 47th Street or trustee of various not-for-profit organizations; Director or Trustee
New York, New York of the Dean Witter Funds.
Thomas E. Larkin, Jr.* (56) Executive Vice President, The TCW Group, Inc.; President, and Director
President and Trustee of Trust Company of the West and Vice Chairman and Director of TCW
865 South Figueroa Street Asset Management Company; Chairman of the Adviser; Vice Chairman of
Los Angeles, California the Advisory Council for the College of Business Administration of
the University of Notre Dame; Director (and formerly President of the
Board of Directors) of the California Pediatric and Family Medicine
Center; President and Director of TCW Galileo Funds, Inc.; Senior Vice
President of TCW Convertible Securities Fund, Inc.; President and Trustee
of the TCW/DW Funds.
Michael E. Nugent (59) General Partner, Triumph Capital, L.P., a private investment partnership;
Trustee c/o Triumph Capital, L.P. formerly Vice President, Bankers Trust Company and BT Capital Corporation
237 Park Avenue (1984-1988); Director of various business organizations; Trustee of
New York, New York the TCW/DW Funds; Director or Trustee of the Dean Witter Funds.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------------- -----------------------------------------------------------------
<S> <C>
John L. Schroeder (65) Retired; Director or Trustee of the Dean Witter Funds; Trustee of the
Trustee TCW/DW Funds; formerly Executive Vice President and Chief Investment
c/o Gordon Altman Butowsky Weitzen Officer of the Home Insurance Company (August, 1991-September, 1995);
Shalov & Wein Director or Trustee of Dean Witter Funds; Director of Citizens Utilities
Counsel to the Independent Trustees Company; formerly Chairman and Chief Investment Officer of Axe-Houghton
114 West 47th Street Management and the Axe-Houghton Funds (April, 1983-June 1991) and
New York, New York President of USF&G Financial Services, Inc. (June, 1990-June, 1991).
Marc. I. Stern* (51) President, The TCW Group, Inc. (since May, 1992); President and Director
Trustee of the Adviser (since May, 1992); Vice Chairman and Director of TCW
865 South Figueroa Street Asset Management Company (since May, 1992); Executive Vice President
Los Angeles, California and Director of Trust Company of the West; Chairman and Director of
the TCW Galileo Funds, Inc.; Trustee of the TCW/DW Funds; Chairman
of TCW Americas Development, Inc. (since November, 1990); Chairman
of TCW Asia, Limited (since January 1993); Chairman of TCW London
International, Limited (since March, 1993); formerly President of
SunAmerica, Inc. (financial services company); Director of Qualcomm,
Incorporated (wireless communications); Director or Trustee of various
not-for-profit organizations.
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel of InterCapital
Vice President, Secretary and General Counsel and the Manager; Senior Vice President and Secretary of DWTC; Senior
Two World Trade Center Vice President, Assistant Secretary and Assistant General Counsel of
New York, New York Distributors; Assistant Secretary of DWR and Vice President, Secretary
and General Counsel of the TCW/DW Funds and of the Dean Witter Funds.
Philip A. Barach (43) Managing Director of the Adviser; Managing Director, Mortgage-Backed
Vice President Securities of Trust Company of the West and TCW Asset Management Company;
865 South Figueroa Street Vice President of various TCW/DW Funds.
Los Angeles, California
James M. Goldberg (50) Managing Director of the Adviser; Managing Director and Chairman of
Vice President the Fixed Income Policy Committee of Trust Company of the West and
865 South Figueroa Street TCW Asset Management Company; Vice President of various TCW/DW Funds.
Los Angeles, California
Jeffrey E. Gundlach (36) Managing Director of the Adviser; Managing Director, Mortgage-Backed
Vice President Securities of Trust Company of the West and TCW Asset Management Company;
865 South Figueroa Street Vice President of various TCW/DW Funds.
Los Angeles, California
Frederick H. Horton (37) Managing Director of the Adviser, Trust Company of the West and TCW
Vice President Asset Management Company (since October, 1993); previously Senior
865 South Figueroa Street Portfolio Manager for Dewey Square Investors (June, 1991-September,
Los Angeles, California 1993) and prior thereto Senior Portfolio Manager of the Putnam Companies.
</TABLE>
8
<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 of the
Treasurer Manager and InterCapital and Treasurer of the TCW/DW Funds and the
Two World Trade Center Dean Witter Funds; Assistant Treasurer of Distributors; previously
New York, New York Vice President of InterCapital.
</TABLE>
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
the Manager and InterCapital, Executive Vice President of Distributors and
DWTC and Director of DWTC, David A. Hughey, Executive Vice President and
Chief Administrative Officer of the Manager, InterCapital, Distributors and
DWTC and Director of DWTC, and Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and DWTC, are Vice Presidents of the Fund,
and Marilyn K. Cranney and Barry Fink, First Vice Presidents and Assistant
General Counsels of the Manager and InterCapital, Lou Anne D. McInnis and
Ruth Rossi, Vice Presidents and Assistant General Counsels of the Manager and
InterCapital, and Carsten Otto, a Staff Attorney with InterCapital, are
Assistant Secretaries of the Fund.
BOARD OF TRUSTEES; THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of ten (10) trustees. These same
individuals also serve as trustees for all of the TCW/DW Funds. As of the
date of this Statement of Additional Information, there are a total of 12
TCW/DW Funds. As of December 31, 1995, the TCW/DW Funds had total net assets
of approximately $4.1 billion and approximately a quarter of a million
shareholders.
Six Trustees (60% of the total number) have no affiliation or business
connection with TCW Funds Management, Inc. or Dean Witter Services Company
Inc. or any of their affiliated persons and do not own any stock or other
securities issued by DWDC or TCW, the parent companies of Dean Witter
Services Company Inc. and TCW Funds Management, Inc., respectively. These are
the "disinterested" or "independent" Trustees. The other four Trustees (the
"management Trustees") are affiliated with either Dean Witter Services
Company Inc. or TCW. Five of the six independent Trustees are also
Independent Trustees of the Dean Witter Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The TCW/DW 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. Four 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 nineteen meetings. The
Committees hold some meetings at the offices of the Manager or Adviser and
some outside those offices. Management Trustees or officers do not attend
these meetings unless they are invited for purposes of furnishing information
or making a report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Each of the open-end TCW/DW Funds
has such a plan.
9
<PAGE>
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 accounts; 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 Fund's
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 Adviser and the 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 TCW/DW Funds and as an Independent
Director or Trustee of the Dean Witter Funds. The current Committee Chairman
has had a combined total of more than 35 years experience in the securities,
financial and investment company industries. He has served as Chairman and
Chief Executive of the American Stock Exchange, Inc. and Chairman of the
Financial Accounting Standards Advisory Council.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL TCW/DW
FUNDS
The Independent Trustees and the Fund's management believe that having the
same Independent Trustees for each of the TCW/DW 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 costs
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 TCW/DW Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $3,500 plus a per
meeting fee of $350 for meetings of the Board of Trustees or committees of
the Board of Trustees attended by the Trustee (the Fund pays the Chairman of
the Audit Committee an annual fee of $1,200 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).
10
<PAGE>
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
Manager or the Adviser or an affiliated company of either receive no
compensation or expense reimbursement from the Fund. The Trustees of the
TCW/DW Funds do not have retirement or deferred compensation plans.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended October 31, 1995.
Mr. Schroeder was elected as a Trustee of the Fund on April 20, 1995.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME OF INDEPENDENT COMPENSATION
TRUSTEE FROM THE FUND
- -------------------------- --------------
<S> <C>
John C. Argue ............. $6,675
John R. Haire ............. 6,975
Dr. Manuel H. Johnson .... 7,725
Paul Kolton ............... 8,975(1)
Michael E. Nugent ......... 7,375
John L. Schroeder ......... 4,218
<FN>
- ------------
(1) Of Mr. Kolton's compensation from the Fund, $3,600 was paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($1,200).
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 11 TCW/DW Funds and, in the case of Messrs. Haire, Johnson,
Kolton, Nugent and Schroeder, the 79 Dean Witter Funds that were in operation
at December 31, 1995, and, in the case of Mr. Argue, TCW Galileo Funds, Inc.
With respect to Messrs. Haire, Johnson, Kolton, Nugent and Schroeder, the
Dean Witter Funds are included solely because of a limited exchange privilege
between various TCW/DW Funds and five Dean Witter Money Market Funds. With
respect to Mr. Argue, TCW Galileo Funds, Inc. is included solely because the
Fund's Adviser, TCW Funds Management, Inc., also serves as Adviser to that
investment company.
CASH COMPENSATION FROM FUND GROUPS
</TABLE>
<TABLE>
<CAPTION>
FOR SERVICE AS TOTAL CASH
FOR SERVICE AS CHAIRMAN OF COMPENSATION FOR
FOR SERVICE AS DIRECTOR OR COMMITTEES OF SERVICES TO 79 DEAN
TRUSTEE AND TRUSTEE AND FOR SERVICE AS INDEPENDENT WITTER FUNDS, 11
COMMITTEE MEMBER COMMITTEE MEMBER DIRECTOR OF DIRECTORS/ TCW/DW FUNDS AND
NAME OF INDEPENDENT OF 11 TCW/DW OF 79 DEAN TCW GALILEO TRUSTEES AND TCW GALILEO FUNDS,
TRUSTEE FUNDS WITTER FUNDS FUNDS, INC. AUDIT COMMITTEES INC.
- -------------------------- ---------------- ---------------- -------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
John C. Argue ............. $68,038 -- $37,500 -- $105,538
John R. Haire ............. 82,038 $ 98,450 -- $217,350(2) 397,838
Dr. Manuel H. Johnson .... 82,038 136,450 -- -- 218,488
Paul Kolton ............... 54,788 136,450 -- 36,900(3) 228,138
Michael E. Nugent ......... 75,038 124,200 -- -- 199,238
John L. Schroeder ......... 46,964 136,450 -- -- 183,414
<FN>
- ------------
(2) For the 79 Dean Witter Funds in operation at December 31, 1995.
(3) For the 11 TCW/DW Funds in operation at December 31, 1995.
</TABLE>
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
11
<PAGE>
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
Mexican Sovereign Debt. Sovereign Debt differs from debt obligations
issued by private entities in that usually remedies from defaults must be
pursued in the courts of the defaulting party. Legal recourse is therefore
somewhat diminished. Political conditions, in terms of a country or agency's
willingness to meet the terms of its debt obligations, is of considerable
significance. Also, there can be no assurance that the holders of commercial
bank debt may not contest payments to the holders of Sovereign Debt in the
event of default under commercial bank loan agreements.
Sovereign Debt generally offers high yields, reflecting not only perceived
credit risk, but also the need to compete with other local investments in
domestic financial markets. Mexico is among the largest debtors to commercial
banks and foreign governments. A foreign debtor's willingness or ability to
repay principal and interest due in a timely manner may be affected by, among
other factors, its cash flow situation, the extent of its foreign reserves,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole, the
foreign debtor's policy towards the International Monetary Fund and the
political constraints to which a sovereign debtor may be subject. Mexico may
also be dependent on expected disbursements from foreign governments,
multilateral agencies and others abroad to reduce principal and interest
arrearages on their debt. The commitment on the part of these governments
agencies and others to make such disbursements may be conditioned on its
implementation of economic reforms and/or economic performance and the timely
service of its obligations. Failure to implement such reforms, achieve such
levels of economic performance or repay principal or interest when due, may
result in the cancellation of such third parties' commitments to lend funds
to Mexico, which may further impair its ability or willingness to service its
debts.
The ability of the Mexican government to make timely payments on its
Sovereign Debt is likely to be influenced strongly by its balance of trade
and its access to trade and other international credits. In addition, the
occurrence of political, social or diplomatic changes could adversely affect
the Fund's investments. Mexico is faced with social and political issues and
has experienced high rates of inflation in recent years. Among other effects,
high inflation and internal debt service requirements may adversely affect
the cost and availability of future domestic sovereign borrowing to finance
governmental programs, and may have other adverse social, political and
economic consequences. Political changes or a deterioration of Mexico's
domestic economy or balance of trade may affect its willingness to service
its Sovereign Debt. While the Adviser intends to invest the Fund's portfolio
in a manner that will minimize the exposure to the risks of Sovereign Debt
(specifically by limiting the Fund's investments to investment grade
securities with maturities of one year or less), there can be no assurance
that adverse political changes will not cause the Fund to suffer a loss of
all or a portion of interest and/or principal on any of its holdings.
MONEY MARKET SECURITIES
As stated in the Prospectus, the money market instruments which the Fund
may purchase include U.S. Government securities, bank obligations, Eurodollar
certificates of deposit, obligations of savings institutions, fully insured
certificates of deposit and commercial paper. Such securities include:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as
the Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, bankers'
acceptances, commercial paper (see below) and other debt obligations) of
banks subject to regulation by the U.S. Government and having total assets of
$1 billion or more, and instruments secured by such obligations, not
including obligations of foreign branches of domestic banks except as
permitted below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1
billion or more (investments in Eurodollar certificates may be affected by
changes in currency rates or exchange control regulations, or changes in
governmental administration or economic or monetary policy in the United
States and abroad);
12
<PAGE>
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more (investments in savings institutions above $100,000 in principal amount
are not protected by federal deposit insurance);
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is insured by the Bank Insurance Fund or
the Savings Association Insurance Fund (each of which is administered by the
Federal Deposit Insurance Corporation), limited to $100,000 principal amount
per certificate and to 15% or less of the Fund's total assets in all such
obligations and in all illiquid assets, in the aggregate;
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation or the highest grade by Moody's Investors
Service, Inc. or, if not rated, issued by a company having an outstanding
debt issue rated at least AAA by Standard & Poor's or Aaa by Moody's.
MORTGAGE-BACKED SECURITIES
As stated in the Prospectus, the Fund may invest a portion of its assets
in securities that directly or indirectly represent a participation in, or
are secured by and payable from, mortgage loans secured by real property
("Mortgage-Backed Securities"). The Fund will invest in mortgage pass-through
securities representing participation interests in 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 semi- annually) 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.
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.
Private Mortgage Pass-Through Securities. Private mortgage pass-through
securities 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 loans. Since private mortgage pass-through
securities typically are not guaranteed by a governmental entity, such
securities generally are structured with one or more types of credit
enhancement.
Adjustable Rate Mortgage Securities. As stated in the Prospectus, 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, twenty-four, thirty-six or longer
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.
13
<PAGE>
Types of Credit Enhancement. Mortgage-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 regarding 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.
In addition, any circumstance adversely affecting the ability of third
parties, such as insurance companies, to satisfy any of their obligations
with respect to any Mortgage-Backed Securities, such as a diminishment of
their creditworthiness, could affect the rating, and thus the value, of the
securities. The Fund will not pay any fees for credit support, although the
existence of credit support may increase the price of a security.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As discussed in the Prospectus, the Fund may enter into forward foreign
currency exchange contracts ("forward contracts") as a hedge against
fluctuations in future foreign exchange rates. The Fund will conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large, commercial and investment
banks) and their customers. Such forward contracts will only be entered into
with United States banks and their foreign branches or foreign banks whose
assets total $1 billion or more. A forward contract generally has no deposit
requirement, and no commissions are charged at any stage for trades.
The Fund will enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in either the Canadian dollar or Mexican peso ("foreign
currency"), it may, for example, desire to "lock in" the price of the
security in U.S. dollars, Canadian dollars or Mexican pesos. By entering into
a forward contract for the purchase or sale, for a fixed amount of dollars or
other currency, of the amount of foreign currency involved in the underlying
security transactions, the Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between
the U.S. dollar or other currency which is being used for the security
purchase and the foreign currency in which the security is denominated during
the period between the date on which the security is purchased or sold and
the date on which payment is made or received.
At other times, when, for example, the Adviser believes that the Canadian
dollar or Mexican peso may suffer a substantial decline against the U.S.
dollar or some other foreign currency, the Fund may enter into a forward
contract to sell, for a fixed amount of U.S. dollars, the amount of that
currency approximating the value of some or all of the Fund's portfolio
securities (or securities which the Fund has purchased for its portfolio)
denominated in such foreign currency.
In addition, when the Adviser anticipates purchasing securities at some
time in the future, and wishes to lock in the current exchange rate of the
currency in which those securities are denominated against the U.S. dollar,
the Fund may enter into a forward contract to purchase an amount of currency
equal to some or all of the value of the anticipated purchase, for a fixed
amount of U.S. dollars.
Finally, the Fund is permitted to enter into forward contracts with
respect to currencies in which certain of its portfolio securities are
denominated and on which options have been written (see "Options and Futures
Transactions," below).
The Fund will not enter into such forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of Canadian dollars or Mexican
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pesos in excess of the value of the Fund's portfolio securities or other
assets denominated in that currency. The Fund's custodian bank will place
cash, U.S. Government securities or other appropriate liquid high grade debt
securities in a segregated account of the Fund in an amount equal to the
value of the Fund's total assets committed to the consummation of forward
contracts entered into under the circumstances set forth above. If the value
of the securities placed in the segregated account declines, additional cash
or securities will be placed in the account on a daily basis so that the
value of the account will equal the amount of the Fund's commitments with
respect to such contracts.
Where, for example, the Fund is hedging a portfolio position consisting of
foreign fixed-income securities denominated in the Canadian dollar or Mexican
peso against adverse exchange rate moves vis-a-vis the U.S. dollar, at the
maturity of the forward contract for delivery by the Fund of the Canadian
dollar or Mexican peso, the Fund may either sell the portfolio security and
make delivery of the foreign currency, or it may retain the security and
terminate its contractual obligation to deliver the Canadian dollar or
Mexican peso by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount
of the Canadian dollar or Mexican peso. It is impossible to forecast the
market value of portfolio securities at the expiration of the contract.
Accordingly, it may be necessary for the Fund to purchase additional Canadian
dollars or Mexican pesos on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made
to sell the security and make delivery of the Canadian dollars or Mexican
pesos. Conversely, it may be necessary to sell on the spot market some of the
Canadian dollars or Mexican pesos received upon the sale of the portfolio
securities if its market value exceeds the amount of Canadian dollars or
Mexican pesos the Fund is obligated to deliver.
If the Fund retains the portfolio securities and engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been movement in spot or forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of Canadian
dollars or Mexican pesos and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
Fund will suffer a loss to the extent the price of the currency it has agreed
to purchase exceeds the price of the currency it has agreed to sell.
If the Fund purchases a fixed-income security which is denominated in U.S.
dollars but which will pay out its principal based upon a formula tied to the
exchange rate between the U.S. dollar and the Canadian dollar or Mexican
peso, it may hedge against a decline in the principal value of the security
by entering into a forward contract to sell or purchase an amount of the
relevant foreign currency equal to some or all of the principal value of the
security.
At times when the Fund has written a call or put option on a fixed-income
security or the currency in which it is denominated, it may wish to enter
into a forward contract to purchase or sell the foreign currency in which the
security is denominated. A forward contract would, for example, hedge the
risk of the security on which a call currency option has been written
declining in value to a greater extent than the value of the premium received
for the option. The Fund will maintain with its Custodian at all times, cash,
U.S. Government securities or other appropriate high grade liquid debt
obligations in a segregated account equal in value to all forward contract
obligations and option contract obligations entered into in hedge situations
such as this.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of Canadian dollars and Mexican pesos
into U.S. dollars on a daily basis. It will, however, do so from time to
time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the spread between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the dealer.
The Fund generally will not enter into a forward contract with a term of
greater than one year, although it may enter into forward contracts for
periods of up to five years. The Fund may be limited in its ability to enter
into hedging transactions involving forward contracts by the Internal Revenue
Code requirements relating to qualifications as a regulated investment
company (see "Dividends, Distributions and Taxes").
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OPTIONS AND FUTURES TRANSACTIONS
As discussed in the Prospectus, the Fund may write covered call options
against securities held in its portfolio and covered put options on eligible
portfolio securities and purchase options of the same series to effect
closing transactions, and may hedge against potential changes in the market
value of its investments (or anticipated investments) by purchasing put and
call options on portfolio (or eligible portfolio) securities (and the
currencies in which they are denominated) and engaging in transactions
involving futures contracts and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and on
various foreign currencies are listed on several U.S. and foreign securities
exchanges and are written in over-the-counter transactions ("OTC Options").
Listed options are issued or guaranteed by the exchange on which they trade
or by a clearing corporation such as the Options Clearing Corporation
("OCC"). Ownership of a listed call option gives the Fund the right to buy
from the OCC (in the U.S.) or other clearing corporation or exchange, the
underlying security or currency covered by the option at the stated exercise
price (the price per unit of the underlying security or currency) by filing
an exercise notice prior to the expiration date of the option. The writer
(seller) of the option would then have the obligation to sell, to the OCC (in
the U.S.) or other clearing corporation or exchange, the underlying security
or currency at that exercise price prior to the expiration date of the
option, regardless of its then current market price. Ownership of a listed
put option would give the Fund the right to sell the underlying security or
currency to the OCC (in the U.S.) or other clearing corporation or exchange
at the stated exercise price. Upon notice of exercise of the put option, the
writer of the option would have the obligation to purchase the underlying
security or currency from the OCC (in the U.S.) or other clearing corporation
or exchange at the exercise price.
Options on Treasury Bonds and Notes. Because trading interest in options
written on Treasury bonds and notes tends to center on the most recently
auctioned issues, the exchanges on which such securities trade will not
continue indefinitely to introduce options with new expirations to replace
expiring options on particular issues. Instead, the expirations introduced at
the commencement of options trading on a particular issue will be allowed to
run their course, with the possible addition of a limited number of new
expirations as the original ones expire. Options trading on each issue of
bonds or notes will thus be phased out as new options are listed on more
recent issues, and options representing a full range of expirations will not
ordinarily be available for every issue on which options are traded.
Options on Treasury Bills. Because a deliverable Treasury bill changes
from week to week, writers of Treasury bill calls cannot provide in advance
for their potential exercise settlement obligations by acquiring and holding
the underlying security. However, if the Fund holds a long position in
Treasury bills with a principal amount of the securities deliverable upon
exercise of the option, the position may be hedged from a risk standpoint by
the writing of a call option. For so long as the call option is outstanding,
the Fund will hold the Treasury bills in a segregated account with its
Custodian, so that they will be treated as being covered.
Options on GNMA Certificates. Currently, options on GNMA Certificates are
only traded over-the-counter. Since the remaining principal balance of GNMA
Certificates declines each month as a result of mortgage payments, the Fund,
as a writer of a GNMA call holding GNMA Certificates as "cover" to satisfy
its delivery obligation in the event of exercise, may find that the GNMA
Certificates it holds no longer have a sufficient remaining principal balance
for this purpose. Should this occur, the Fund will purchase additional GNMA
Certificates from the same pool (if obtainable) or replacement GNMA
Certificates in the cash market in order to maintain its cover. A GNMA
Certificate held by the Fund to cover an option position in any but the
nearest expiration month may cease to represent cover for the option in the
event of a decline in the GNMA coupon rate at which new pools are originated
under the FHA/VA loan ceiling in effect at any given time, as such decline
may increase the prepayments made on other mortgage pools. If this should
occur, the Fund will no longer be covered, and the Fund will either enter
into a closing purchase transaction or replace such Certificate with a
Certificate which represents cover. When the Fund closes out its position or
replaces such Certificate, it may realize an unanticipated loss and incur
transaction costs.
Options on Foreign Currencies. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Fund may purchase put options on an
amount of such foreign currency equivalent to the current value of the
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<PAGE>
portfolio securities involved. As a result, the Fund would be enabled to sell
the foreign currency for a fixed amount of U.S. dollars, thereby "locking in"
the dollar value of the portfolio securities (less the amount of the premiums
paid for the options). Conversely, the Fund may purchase call options on
foreign currencies in which securities it anticipates purchasing are
denominated to secure a set U.S. dollar price for such securities and protect
against a decline in the value of the U.S. dollar against such foreign
currency. The Fund may also purchase call and put options to close out
written option positions.
The Fund may also write call options on foreign currency to protect
against potential declines in its portfolio securities which are denominated
in foreign currencies. If the U.S. dollar value of the portfolio securities
falls as a result of a decline in the exchange rate between the foreign
currency in which it is denominated and the U.S. dollar, then a loss to the
Fund occasioned by such value decline would be ameliorated by receipt of the
premium on the option sold. At the same time, however, the Fund gives up the
benefit of any rise in value of the relevant portfolio securities above the
exercise price of the option and, in fact, only receives a benefit from the
writing of the option to the extent that the value of the portfolio
securities falls below the price of the premium received. The Fund may also
write options to close out long call option positions. A put option on a
foreign currency would be written by the Fund for the same reason it would
purchase a call option, namely, to hedge against an increase in the U.S.
dollar value of a foreign security which the Fund anticipates purchasing.
Here, the receipt of the premium would offset, to the extent of the size of
the premium, any increased cost to the Fund resulting from an increase in the
U.S. dollar value of the foreign security. However, the Fund could not
benefit from any decline in the cost of the foreign security which is greater
than the price of the premium received. The Fund may also write options to
close out long put and call option positions.
The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. Although the Fund will not
purchase or write such options unless and until, in the opinion of the
Adviser, the market for them has developed sufficiently to ensure that the
risks in connection with such options are not greater than the risks in
connection with the underlying currency, there can be no assurance that a
liquid secondary market will exist for a particular option at any specific
time. In addition, options on foreign currencies are affected by all of those
factors which influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of
the option position may vary with changes in the value of either or both
currencies and have no relationship to the investment merits of a foreign
security, including foreign securities held in a "hedged" investment
portfolio. Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved
in the use of foreign currency options, investors may be disadvantaged by
having to deal in an odd lot market (generally consisting of transactions of
less than $1 million) for the underlying foreign currencies at prices that
are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e., less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. options markets are
closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that are not reflected in the options market.
OTC Options. Exchange-listed options are issued by the OCC (in the U.S.)
or other clearing corporation or exchange which assures that all transactions
in such options are properly executed. OTC options are purchased from or sold
(written) to dealers or financial institutions which have entered into direct
agreements with the Fund. With OTC options, such variables as expiration
date, exercise price and premium will be agreed upon between the Fund and the
transacting dealer, without the intermediation of a third party such as the
OCC. If the transacting dealer fails to make or take delivery of the
securities or amount of foreign currency underlying an option it has written,
in accordance with the terms of that option, the Fund would lose the premium
paid for the option as well as any anticipated benefit of the transaction.
The Fund will engage in OTC option transactions only with member banks of the
Federal Reserve System or primary dealers in U.S. Government securities or
with affiliates of such banks or dealers which have capital of at least $50
million or whose obligations are guaranteed by an entity having capital of at
least $50 million.
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Covered Call Writing. As stated in the Prospectus, the Fund is permitted
to write covered call options on portfolio securities and on the U.S. Dollar
and foreign currencies in which they are denominated, without limit, in order
to aid in achieving its investment objectives. Generally, a call option is
"covered" if the Fund owns, or has the right to acquire, without additional
cash consideration (or for additional cash consideration held for the Fund by
its Custodian in a segregated account) the underlying security (currency)
subject to the option except that in the case of call options on U.S.
Treasury Bills, the Fund might own U.S. Treasury Bills of a different series
from those underlying the call option, but with a principal amount and value
corresponding to the exercise price and a maturity date no later than that of
the security (currency) deliverable under the call option. A call option is
also covered if the Fund holds a call on the same security as the underlying
security (currency) of the written option, where the exercise price of the
call used for coverage is equal to or less than the exercise price of the
call written or greater than the exercise price of the call written if the
mark to market difference is maintained by the Fund in cash, U.S. Government
securities or other high grade liquid debt obligations which the Fund holds
in a segregated account maintained with its Custodian.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these
premiums may better enable the Fund to earn a higher level of current income
than it would earn from holding the underlying securities (currencies) alone.
Moreover, the premium received will offset a portion of the potential loss
incurred by the Fund if the securities (currencies) underlying the option are
ultimately sold (exchanged) by the Fund at a loss. Furthermore, a premium
received on a call written on a foreign currency will ameliorate any
potential loss of value on the portfolio security due to a decline in the
value of the currency. However, during the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price should the market price of
the underlying security (or the exchange rate of the currency in which it is
denominated) increase, but has retained the risk of loss should the price of
the underlying security (or the exchange rate of the currency in which it is
denominated) decline. The premium received will fluctuate with varying
economic market conditions. If the market value of the portfolio securities
(or the currencies in which they are denominated) upon which call options
have been written increases, the Fund may receive a lower total return from
the portion of its portfolio upon which calls have been written than it would
have had such calls not been written.
As regards listed options and certain OTC options, during the option
period, the Fund may be required, at any time, to deliver the underlying
security (currency) against payment of the exercise price on any calls it has
written (exercise of certain listed and OTC options may be limited to
specific expiration dates). This obligation is terminated upon the expiration
of the option period or at such earlier time when the writer effects a
closing purchase transaction. A closing purchase transaction is accomplished
by purchasing an option of the same series as the option previously written.
However, once the Fund has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit
on an outstanding call option, to prevent an underlying security (currency)
from being called, to permit the sale of an underlying security (or the
exchange of the underlying currency) or to enable the Fund to write another
call option on the underlying security (currency) with either a different
exercise price or expiration date or both. The Fund may realize a net gain or
loss from a closing purchase transaction depending upon whether the amount of
the premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be wholly or partially offset by unrealized
appreciation in the market value of the underlying security (currency).
Conversely, a gain resulting from a closing purchase transaction could be
offset in whole or in part or exceeded by a decline in the market value of
the underlying security (currency).
If a call option expires unexercised, the Fund realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security (currency) during the option period. If a call option is exercised,
the Fund realizes a gain or loss from the sale of the underlying security
(currency) equal to the difference between the purchase price of the
underlying security (currency) and the proceeds of the sale of the security
(currency) plus the premium received on the option less the commission paid.
Options written by the Fund will normally have expiration dates of up to
eighteen months from the date written. The exercise price of a call option
may be below, equal to or above the current market value of the underlying
security at the time the option is written. See "Risks of Options and Futures
Transactions," below.
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Covered Put Writing. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period,
at the purchaser's election (certain listed and OTC put options written by
the Fund will be exercisable by the purchaser only on a specific date). A put
is "covered" if, at all times, the Fund maintains, in a segregated account
maintained on its behalf at the Fund's Custodian, cash, U.S. Government
Securities or other high grade liquid debt obligations in an amount equal to
at least the exercise price of the option, at all times during the option
period. Similarly, a short put position could be covered by the Fund by its
purchase of a put option on the same security (currency) as the underlying
security of the written option, where the exercise price of the purchased
option is equal to or more than the exercise price of the put written or less
than the exercise price of the put written if the marked to market difference
is maintained by the Fund in cash, U.S. Government Securities or other high
grade liquid debt obligations which the Fund holds in a segregated account
maintained at its Custodian. In writing puts, the Fund assumes the risk of
loss should the market value of the underlying security (currency) decline
below the exercise price of the option (any loss being decreased by the
receipt of the premium on the option written). In the case of listed options,
during the option period, the Fund may be required, at any time, to make
payment of the exercise price against delivery of the underlying security
(currency). The operation of and limitations on covered put options in other
respects are substantially identical to those of call options.
The Fund will write put options for three purposes: (1) to receive the
income derived from the premiums paid by purchasers; (2) when the Adviser
wishes to purchase the security (or a security denominated in the currency
underlying the option) underlying the option at a price lower than its
current market price, in which case it will write the covered put at an
exercise price reflecting the lower purchase price sought; and (3) to close
out a long put option position. The potential gain on a covered put option is
limited to the premium received on the option (less the commissions paid on
the transaction) while the potential loss equals the differences between the
exercise price of the option and the current market price of the underlying
securities (currencies) when the put is exercised, offset by the premium
received (less the commissions paid on the transaction).
Purchasing Call and Put Options. As stated in the Prospectus, the Fund may
purchase listed and OTC call and put options in amounts equalling up to 5% of
its total assets. The Fund may purchase a call option in order to close out a
covered call position (see "Covered Call Writing" above), to protect against
an increase in price of a security it anticipates purchasing or, in the case
of a call option on foreign currency, to hedge against an adverse exchange
rate move of the currency in which the security it anticipates purchasing is
denominated vis-a-vis the currency in which the exercise price is
denominated. The purchase of the call option to effect a closing transaction
on a call written over-the-counter may be a listed or an OTC option. In
either case, the call purchased is likely to be on the same securities
(currencies) and have the same terms as the written option. If purchased
over-the-counter, the option would generally be acquired from the dealer or
financial institution which purchased the call written by the Fund.
The Fund may purchase put options on securities (currencies) which it
holds in its portfolio to protect itself against a decline in the value of
the security and to close out written put option positions. If the value of
the underlying security (currency) were to fall below the exercise price of
the put purchased in an amount greater than the premium paid for the option,
the Fund would incur no additional loss. In addition, the Fund may sell a put
option which it has previously purchased prior to the sale of the securities
(currencies) underlying such option. Such a sale would result in a net gain
or loss depending on whether the amount received on the sale is more or less
than the premium and other transaction costs paid on the put option which is
sold. And such gain or loss could be offset in whole or in part by a change
in the market value of the underlying security (currency). If a put option
purchased by the Fund expired without being sold or exercised, the premium
would be lost.
Risks of Options Transactions. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price should the market price of
the underlying security (or the value of its denominated currency) increase,
but has retained the risk of loss should the price of the underlying security
(or the value of its denominated currency) decline. The writer has no control
over the time when it may be required to fulfill its obligation as a writer
of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver or receive the underlying
securities at the exercise price.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction or to
purchase
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an offsetting OTC option, it cannot sell the underlying security until the
option expires or the option is exercised. Accordingly, a covered call option
writer may not be able to sell an underlying security at a time when it might
otherwise be advantageous to do so. A secured put option writer who is unable
to effect a closing purchase transaction or to purchase an offsetting OTC
option would continue to bear the risk of decline in the market price of the
underlying security until the option expires or is exercised. In addition, a
secured put writer would be unable to utilize the amount held in cash or U.S.
Government or other high grade liquid debt obligations securities as security
for the put option for other investment purposes until the exercise or
expiration of the option.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on Option
Exchanges. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options will generally only be closed out
by entering into a closing purchase transaction with the purchasing dealer.
However, the Fund may be able to purchase an offsetting option which does not
close out its position as a writer but constitutes an asset of equal value to
the obligation under the option written. If the Fund is not able to either
enter into a closing purchase transaction or purchase an offsetting position,
it will be required to maintain the securities subject to the call, or the
collateral underlying the put, even though it might not be advantageous to do
so, until a closing transaction can be entered into (or the option is
exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes
or series of options or underlying securities; (iv) interruption of the
normal operations on an Exchange; (v) inadequacy of the facilities of an
Exchange or the OCC to handle current trading volume; or (vi) a decision by
one or more Exchanges to discontinue the trading of options (or a particular
class or series of options), in which event the secondary market on that
Exchange (or in that class or series of options) would cease to exist,
although outstanding options on that Exchange that had been issued by the OCC
as a result of trades on that Exchange would generally continue to be
exercisable in accordance with their terms.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur
a loss of all or part of its margin deposits with the broker. Similarly, in
the event of the bankruptcy of the writer of an OTC option purchased by the
Fund, the Fund could experience a loss of all or part of the value of the
option. Transactions are entered into by the Fund only with brokers or
financial institutions deemed creditworthy by the Fund's management.
Each of the Exchanges has established limitations governing the maximum
number of options on the same underlying security or futures contract
(whether or not covered) which may be written by a single investor, whether
acting alone or in concert with others (regardless of whether such options
are written on the same or different Exchanges or are held or written on one
or more accounts or through one or more brokers). An Exchange may order the
liquidation of positions found to be in violation of these limits and it may
impose other sanctions or restrictions. These position limits may restrict
the number of listed options which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the option markets.
The extent to which the Fund may enter into transactions involving options
may be limited by the Internal Revenue Code's requirements for qualification
as a regulated investment company and the Fund's intention to qualify as such
(see "Dividends, Distributions and Taxes").
Futures Contracts. As stated in the Prospectus, the Fund may purchase and
sell interest rate, currency, and index futures contracts ("futures
contracts"), that are traded on U.S. and foreign commodity exchanges, on such
underlying securities as U.S. Treasury bonds, notes and bills and/or any
foreign government fixed-income security ("interest rate" futures), on
various currencies ("currency futures") and on such indexes of U.S. and
foreign securities as may exist or come into being ("index" futures).
The Fund will purchase or sell interest rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest
rates. If the Adviser anticipates that interest rates may rise and,
concomitantly, the price of certain of its portfolio securities fall,
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the Fund may sell an interest rate futures contract. If declining interest
rates are anticipated, the Fund may purchase an interest rate futures
contract to protect against a potential increase in the price of securities
the Fund intends to purchase. Subsequently, appropriate securities may be
purchased by the Fund in an orderly fashion; as securities are purchased,
corresponding futures positions would be terminated by offsetting sales of
contracts.
The Fund will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices. If the Adviser anticipates that the prices
of securities held by the Fund may fall, the Fund may sell an index futures
contract. Conversely, if the Fund wishes to hedge against anticipated price
rises in those securities which the Fund intends to purchase, the Fund may
purchase an index futures contract.
The Fund will purchase or sell currency futures on currencies in which its
portfolio securities (or anticipated portfolio securities) are denominated
for the purposes of hedging against anticipated changes in currency exchange
rates. The Fund will enter into currency futures contracts for the same
reasons as set forth above for entering into forward foreign currency
contracts; namely, to "lock-in" the value of a security purchased or sold in
a given currency vis-a-vis a different currency or to hedge against an
adverse currency exchange rate movement of a portfolio security's (or
anticipated portfolio security's) denominated currency vis-a-vis a different
currency.
In addition to the above, interest rate, index and currency futures will
be bought or sold in order to close out a short or long position maintained
by the Fund in a corresponding futures contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. A futures contract
sale is closed out by effecting a futures contract purchase for the same
aggregate amount of the specific type of security (currency) and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the
offsetting purchase price exceeds the sale price, the seller would pay the
difference and would realize a loss. Similarly, a futures contract purchase
is closed out by effecting a futures contract sale for the same aggregate
amount of the specific type of security (currency) and the same delivery
date. If the offsetting sale price exceeds the purchase price, the purchaser
would realize a gain, whereas if the purchase price exceeds the offsetting
sale price, the purchaser would realize a loss. There is no assurance that
the Fund will be able to enter into a closing transaction.
Interest Rate Futures Contracts. When the Fund enters into an interest
rate futures contract, it is initially required to deposit with the Fund's
Custodian, in a segregated account in the name of the broker performing the
transaction, an "initial margin" of cash or U.S. Government securities or
other high grade liquid debt obligations equal to approximately 2% of the
contract amount. Initial margin requirements are established by the Exchanges
on which futures contracts trade and may, from time to time, change. In
addition, brokers may establish margin deposit requirements in excess of
those required by the Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a brokers' client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper
termination of the futures contract. The margin deposits made are marked to
market daily and the Fund may be required to make subsequent deposits of cash
or U.S. Government Securities called "variation margin," with the Fund's
futures contract clearing broker, which are reflective of price fluctuations
in the futures contract. Currently, interest rate futures contracts can be
purchased on debt securities such as U.S. Treasury Bills and Bonds, U.S.
Treasury Notes with maturities between 6 1/2 and 10 years, GNMA Certificates
and Bank Certificates of Deposit.
Currency Futures. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the exercise date, for
a set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and
under the same circumstances as forward foreign currency exchange contracts.
The Adviser will assess such factors as cost spreads, liquidity and
transaction costs in determining whether to utilize futures contracts or
forward contracts in its foreign currency transactions and hedging strategy.
Currently, currency futures exist for, among other foreign currencies,
Canadian dollars.
Purchasers and sellers of foreign currency futures contracts are subject
to the same risks that apply to the buying and selling of futures generally.
In addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those associated with
options on foreign currencies described
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above. Further, settlement of a foreign currency futures contract must occur
within the country issuing the underlying currency. Thus, the Fund must
accept or make delivery of the underlying foreign currency in accordance with
any U.S. or foreign restrictions or regulations regarding the maintenance of
foreign banking arrangements by U.S. residents and may be required to pay any
fees, taxes or charges associated with such delivery which are assessed in
the issuing country.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market. To reduce
this risk, the Fund will not purchase or write options on foreign currency
futures contracts unless and until, in the Adviser's opinion, the market for
such options has developed sufficiently that the risks in connection with
such options are not greater than the risks in connection with transactions
in the underlying foreign currency futures contracts.
Index Futures Contracts. As discussed in the Prospectus, the Fund may
invest in index futures contracts. An index futures contract sale creates an
obligation by the Fund, as seller, to deliver cash at a specified future
time. An index futures contract purchase would create an obligation by the
Fund, as purchaser, to take delivery of cash at a specified future time.
Futures contracts on indexes do not require the physical delivery of
securities, but provide for a final cash settlement on the expiration date
which reflects accumulated profits and losses credited or debited to each
party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. In addition, due to
current industry practice, daily variations in gains and losses on open
contracts are required to be reflected in cash in the form of variation
margin payments. The Fund may be required to make additional margin payments
during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will operate
to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required
to be paid by or released to the Fund and the Fund realizes a loss or gain.
Options on Futures Contracts. The Fund may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in a futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the term of the option.
Upon exercise of the option, the delivery of the futures position by the
writer of the option to the holder of the option is accompanied by delivery
of the accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract at
the time of exercise exceeds, in the case of a call, or is less than, in the
case of a put, the exercise price of the option on the futures contract.
The Fund will purchase and write options on futures contracts for
identical purposes to those set forth above for the purchase of a futures
contract (purchase of a call option or sale of a put option) and the sale of
a futures contract (purchase of a put option or sale of a call option), or to
close out a long or short position in futures contracts. If, for example, the
Adviser wished to protect against an increase in interest rates and the
resulting negative impact on the value of a portion of its fixed-income
portfolio, it might write a call option on an interest rate futures contract,
the underlying security of which correlates with the portion of the portfolio
the Adviser seeks to hedge. Any premiums received in the writing of options
on futures contracts may, of course, provide a further hedge against losses
resulting from price declines in portions of the Fund's portfolio.
Limitations on Futures Contracts and Options on Futures. The Fund may not
enter into futures contracts or purchase related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid
for premiums for unexpired options on futures contracts exceeds 5% of the
value of the Fund's total assets, after taking into account unrealized gains
and unrealized losses on such contracts it has entered into, provided,
however, that in the case of an option that is in-the-money (the exercise
price of the call (put) option is less (more) than the market price of the
underlying security) at the time of purchase, the in-the-money amount may be
excluded in calculating the 5%. However, there is no overall limitation on
the percentage of the Fund's assets which may be subject to a hedge position.
Except as described above, there are no other limitations on the use of
futures and options thereon by the Fund.
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The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an
option on a futures contract are included in initial margin deposits.
Risks of Transactions in Futures Contracts and Related Options. As stated
in the Prospectus, the Fund may sell a futures contract to protect against
the decline in the value of securities (or the currency in which they are
denominated) held by the Fund. However, it is possible that the futures
market may advance and the value of securities (or the currency in which they
are denominated) held in the portfolio of the Fund may decline. If this
occurred, the Fund would lose money on the futures contract and also
experience a decline in value of its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio will tend to move in the same direction
as the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currencies) decreases, then
the Fund may determine not to invest in the securities as planned and will
realize a loss on the futures contract that is not offset by a reduction in
the price of the securities.
If the Fund has sold a call option on a futures contract, it will cover
this position by holding, in a segregated account maintained at its
Custodian, cash, U.S. Government Securities or other high grade liquid debt
obligations equal in value (when added to any initial or variation margin on
deposit) to the market value of the securities (currencies) underlying the
futures contract or the exercise price of the option. Such a position may
also be covered by owning the securities (currencies) underlying the futures
contract, or by holding a call option permitting the Fund to purchase the
same contract at a price no higher than the price at which the short position
was established.
In addition, if the Fund holds a long position in a futures contract it
will hold cash, U.S. Government Securities or other high grade liquid debt
obligations equal to the purchase price of the contract (less the amount of
initial or variation margin on deposit) in a segregated account maintained
for the Fund by its Custodian. Alternatively, the Fund could cover its long
position by purchasing a put option on the same futures contract with an
exercise price as high or higher than the price of the contract held by the
Fund.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin
on open futures positions. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Fund may be required to take or make delivery of the instruments
underlying interest rate futures contracts it holds at a time when it is
disadvantageous to do so. The inability to close out options and futures
positions could also have an adverse impact on the Fund's ability to
effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on
foreign commodities exchanges may have greater price volatility than their
U.S. counterparts. Furthermore, foreign commodities exchanges may be less
regulated and under less governmental scrutiny than U.S. exchanges. Brokerage
commissions, clearing costs and other transaction costs may be higher on
foreign exchanges. Greater margin requirements may limit the Fund's ability
to enter into certain commodity transactions on foreign exchanges. Moreover,
differences in clearance and delivery requirements on foreign exchanges may
occasion delays in the settlement of the Fund's transactions effected on
foreign exchanges.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in futures or options thereon, the Fund could experience
delays and/or losses in liquidating open positions purchased or sold through
the broker and/or incur a loss of all or part of its margin deposits with the
broker. Similarly, in the event of the bankruptcy of the writer of an OTC
option purchased by the Fund, the Fund could experience a loss of all or part
of the value of the option. Transactions are entered into by the Fund only
with brokers or financial institutions deemed creditworthy by the Adviser.
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
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securities (and the currencies in which they are denominated) is that the
prices of securities and indexes subject to futures contracts (and thereby
the futures contract prices) may correlate imperfectly with the behavior of
the cash prices of the Fund's portfolio securities (and the currencies in
which they are denominated). Another such risk is that prices of interest
rate futures contracts may not move in tandem with the changes in prevailing
interest rates against which the Fund seeks a hedge. A correlation may also
be distorted by the fact that the futures market is dominated by short-term
traders seeking to profit from the difference between a contract or security
price objective and their cost of borrowed funds. Such distortions are
generally minor and would diminish as the contract approached maturity.
There may exist an imperfect correlation between the price movements of
futures contracts purchased by the Fund and the movements in the prices of
the securities (currencies) which are the subject of the hedge. If
participants in the futures market elect to close out their contracts through
offsetting transactions rather than meet margin deposit requirements,
distortions in the normal relationship between the debt securities or
currency markets and futures markets could result. Price distortions could
also result if investors in futures contracts opt to make or take delivery of
underlying securities rather than engage in closing transactions due to the
resultant reduction in the liquidity of the futures market. In addition, due
to the fact that, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin requirements
in the cash market, increased participation by speculators in the futures
market could cause temporary price distortions. Due to the possibility of
price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities and movements in
the prices of futures contracts, a correct forecast of interest rate trends
may still not result in a successful hedging transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which the Fund
may invest. In the event a liquid market does not exist, it may not be
possible to close out a futures position, and in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments
of variation margin. In addition, limitations imposed by an exchange or board
of trade on which futures contracts are traded may compel or prevent the Fund
from closing out a contract which may result in reduced gain or increased
loss to the Fund. The absence of a liquid market in futures contracts might
cause the Fund to make or take delivery of the underlying securities
(currencies) at a time when it may be disadvantageous to do so.
The extent to which the Fund may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the
Fund's intention to qualify as such (see "Dividends, Distributions and
Taxes").
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a futures contract would result in a loss
to the Fund notwithstanding that the purchase or sale of a futures contract
would not result in a loss, as in the instance where there is no movement in
the prices of the futures contract or underlying securities (currencies).
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS
As stated in the Prospectus, 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.
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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.
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
money market instruments, which are maintained in a segregated account
pursuant to applicable regulations and that are equal to at least the market
value, determined daily, of the loaned securities. The advantage of such
loans is that the Fund continues to receive the income on the loaned
securities while at the same time earning interest on the cash amounts
deposited as collateral, which will be invested in short-term obligations.
The Fund will not lend its portfolio securities if such loans are not
permitted by the laws or regulations of any state in which its shares are
qualified for sale and will not lend more than 25% of the value of its total
assets. A loan may be terminated by the borrower on one business day's
notice, or by the Fund on two business days' notice. If the borrower fails to
deliver the loaned securities within two days after receipt of notice, the
Fund could use the collateral to replace the securities while holding the
borrower liable for any excess of replacement cost over collateral. As with
any extensions of credit, there are risks of delay in recovery and in some
cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities
will only be made to firms deemed by the Fund's management to be creditworthy
and when the income which can be earned from such loans justifies the
attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price
during the loan period would inure to the Fund. The creditworthiness of firms
to which the Fund lends its portfolio securities will be monitored on an
ongoing basis by the Adviser 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.
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 and may
purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. The securities so purchased or sold are subject to
market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date. 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 or sell securities on a when-issued, delayed delivery
or forward commitment basis, the Fund will record the transaction and
thereafter reflect the value, each day, of such security purchased or, if a
sale, the proceeds to be received, in determining its net asset value. At the
time of delivery of the securities, the value may be more or less than the
purchase or sale price. The Fund will also establish a segregated account
with the Fund's custodian bank in which it will continuously maintain cash or
U.S. Government Securities or other high grade liquid debt portfolio
securities equal in value to commitments to purchase securities on a
when-issued, delayed delivery or forward commitment basis; 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.
WHEN, AS AND IF ISSUED SECURITIES
The Fund may purchase securities on a "when, as and if issued" basis under
which the issuance of the security depends upon the occurrence of a
subsequent event, such as approval of a merger, corporate reorganization,
leveraged buyout or debt restructuring. The commitment for the purchase of
any such security will not be
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recognized in the portfolio of the Fund until the Adviser determines that
issuance of the security is probable. At such time, the Fund will record the
transaction and, in determining its net asset value, will reflect the value
of the security daily. At such time, the Fund will also establish a
segregated account with its custodian bank in which it will continuously
maintain cash or U.S. Government securities or other high grade liquid debt
portfolio securities equal in value to recognized commitments for such
securities. Settlement of the trade will occur within five business days of
the occurrence of the subsequent event. Once a segregated account has been
established, if the anticipated event does not occur and the securities are
not issued the Fund will have lost an investment opportunity. The Fund may
purchase securities on such basis without limit. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of its net asset
value. The Fund may also sell securities on a "when, as and if issued" basis
provided that the issuance of the security will result automatically from the
exchange or conversion of a security owned by the Fund at the time of the
sale.
PORTFOLIO TURNOVER
It is anticipated that the Fund's portfolio turnover rate generally will
not exceed 100%. A 100% turnover rate would occur, for example, if 100% of
the securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced
within one year.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at
a meeting of shareholders, if the holders of 50% of the outstanding shares of
the Fund are present or represented by proxy or (b) more than 50% of the
outstanding shares of the Fund.
The Fund may not:
1. 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. Borrow money, except that the Fund (i) may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed), and (ii) may engage in reverse repurchase agreements and
dollar rolls.
4. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(3). 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.
5. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement; (b) purchasing any securities on a
when-issued or delayed delivery basis; (c) purchasing or selling any
financial futures contracts or options thereon; (d) borrowing money in
accordance with restrictions described above; or (e) lending portfolio
securities.
6. 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
agreements; or (c) by lending its portfolio securities.
7. Make short sales of securities.
8. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts is not considered the purchase of a security on margin.
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9. 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.
10. Invest for the purpose of exercising control or management of any
other issuer.
In addition, as a nonfundamental policy, the Fund may not invest in
securities of any issuer if, to the knowledge of the Fund, any officer or
trustee of the Fund or any officer or director of the Manager or the Adviser
owns more than 1/2 of 1% of the outstanding securities of such issuer, and
such officers, trustees and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuers.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered
a violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------
Subject to the general supervision of the Trustees, the Adviser is
responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their
own accounts without a stated commission, although the price of the security
usually includes a profit to the dealer. In addition, securities may be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as the underwriter's concession
or discount. Futures transactions will usually be effected through a broker
and a commission will be charged. On occasion, the Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid. During the fiscal years ended October 31,
1993, 1994 and 1995, the Fund paid no brokerage commissions.
The Adviser currently serves as investment adviser to a number of clients,
including other investment companies, and may in the future act as investment
adviser to others. It is the practice of the Adviser to cause purchase and
sale transactions to be allocated among the Fund and others whose assets it
manages in such manner as it deems equitable. In making such allocations
among the Fund and other client accounts, the main factors considered are the
respective investment objectives, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment,
the size of investment commitments generally held and the opinions of the
persons responsible for managing the portfolios of the Fund and other client
accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with
this policy, when securities transactions are effected on a stock exchange,
the Fund's policy is to pay commissions which are considered fair and
reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a
requirement always to seek the lowest possible commission cost could impede
effective portfolio management and preclude the Fund and the Adviser from
obtaining a high quality of brokerage and research services. In seeking to
determine the reasonableness of brokerage commissions paid in any
transaction, the Adviser relies upon its experience and knowledge regarding
commissions generally charged by various brokers and on its judgment in
evaluating the brokerage and research services received from the broker
effecting the transaction. Such determinations are necessarily subjective and
imprecise, as in most cases an exact dollar value for those services is not
ascertainable.
In seeking to implement the Fund's policies, the Adviser effects
transactions with those brokers and dealers who the Adviser believes provide
the most favorable prices and are capable of providing efficient executions.
If the Adviser believes such prices and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and
other services to the Fund or the Adviser. Such services may include, but are
not limited to, any one or more of the following: reports on industries and
companies, economic analyses and review of business conditions, portfolio
strategy, analytic computer software, account performance services, computer
terminals and various trading and/or quotation equipment. They also include
advice from broker-dealers as to the value of securities, availability of
securities, availability of buyers, and availability of sellers. In addition,
they include recommendations as to
27
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purchase and sale of individual securities and timing of such transactions.
The Fund will not purchase at a higher price or sell at a lower price in
connection with transactions effected with a dealer, acting as principal, who
furnishes research services to the Fund than would be the case if no weight
were given by the Fund to the dealer's furnishing of such services.
The information and services received by the Adviser from brokers and
dealers may be of benefit to the Adviser 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 Adviser and thereby reduce its expenses, it is of
indeterminable value and the advisory fee paid to the Adviser is not reduced
by any amount that may be attributable to the value of such services.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration
received by DWR must be reasonable and fair compared to the commissions, fees
or other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on an
exchange during a comparable period of time. This standard would allow DWR to
receive no more than the remuneration which would be expected to be received
by an unaffiliated broker in a commensurate arm's-length transaction.
Furthermore, the Board of Trustees of the Fund, including a majority of the
Trustees who are not "interested" persons of the Fund, as defined in the Act,
have adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid to DWR are consistent with the
foregoing standard. During the fiscal years ended October 31, 1993, 1994 and
1995, the Fund paid no brokerage commissions to DWR.
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 (including
TCW Brokerage Services, an affiliate of the Adviser). The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of DWDC. The Trustees of
the Fund, including a majority of the Independent Trustees, approved, at
their meeting on October 30, 1992, the current Distribution Agreement
appointing the Distributor exclusive distributor of the Fund's shares and
providing for the Distributor to bear distribution expenses not borne by the
Fund. The present Distribution Agreement is substantively identical to the
Fund's previous distribution agreements. The Distribution Agreement took
effect on June 30, 1993 upon the spin-off by Sears, Roebuck and Co. of its
remaining shares of DWDC. By its terms, the Distribution Agreement had an
initial term ending April 30, 1994, and provides that it will remain in
effect from year to year thereafter if approved by the Trustees. Continuation
of the Distribution Agreement until April 30, 1996 was approved by the
Trustees at their meeting on April 20, 1995.
The Distributor bears all expenses it or any selected dealer 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
As discussed in the Prospectus, the Fund has entered into a Plan of
Distribution pursuant to Rule 12b-1 under the Act with the Distributor
whereby the expenses of certain activities in connection with the
distribution of shares
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<PAGE>
of the Fund are reimbursed. The Plan was initially approved by the Trustees
of the Fund on May 1, 1992 and by the then sole shareholder of the Fund on
May 11, 1992. The vote of the Trustees included a majority of the Trustees
who are not and were not at the time of their votes 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"), cast in person at a meeting called for the purpose of voting on
such Plan. In determining to approve the Plan, the Trustees, including the
Independent 12b-1 Trustees, concluded that, in their judgment, there is a
reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
The Plan provides that the Distributor will bear the expense of all
promotional and distribution related activities on behalf of the Fund, except
for expenses that the Trustees determine to reimburse, as described below.
The following activities and services may be provided by the Distributor and
DWR or any other selected broker-dealer under the Plan: (1) compensation to
and expenses of account executives and other employees of DWR and other
selected dealers, including overhead and telephone expenses; (2) sales
incentives and bonuses to sales representatives and to marketing personnel in
connection with promoting sales of the Fund's shares; (3) expenses incurred
in connection with promoting sales of the Fund's shares; (4) preparing and
distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio,
newspaper, magazine and other media advertisements.
The Fund is authorized to reimburse specific expenses incurred or to be
incurred in promoting the distribution of the Fund's shares and in servicing
shareholder accounts. 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 0.75 of 1% of the Fund's average daily net assets during the
month. No interest or other financing charges, if any, incurred on any
distribution expenses will be reimbursable under the Plan. In making
quarterly determinations of the amounts that may be expended by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses to be incurred on behalf of the Fund,
together with a report explaining the purposes and anticipated benefits of
incurring such expenses. The Trustees will determine which particular
expenses, and the portions thereof, that may be borne by the Fund, and in
making such a determination shall consider the scope of the Distributor's
commitment to promoting the distribution of the Fund's shares.
The Distributor has informed the Fund that a portion of the fees payable
by the Fund each year pursuant to the Plan equal to 0.25% of the Fund's
average daily net assets is characterized as a "service fee" under the Rules
of Fair Practice of the National Association of Securities Dealers (of which
the Distributor is a member). Such portion of the fee is a payment made for
personal service and/or the maintenance of shareholder accounts. The
remaining portion of the Plan fees payable by the Fund is characterized as an
"asset-based sales charge" as defined in the aforementioned Rules of Fair
Practice.
DWR's account executives are credited with an annual gross residual
commission, currently a gross residual of up to 0.75% of the current value of
the respective accounts for which they are the account executives or dealers
of record. The "gross residual" is a charge which reflects residual
commissions paid by DWR to its account executives and expenses of DWR and its
affiliates associated with the servicing of shareholders' accounts, including
the expenses of operating branch offices in connection with the servicing of
shareholders' accounts, which expenses include lease costs, the salaries and
employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies and other
expenses relating to branch office servicing of shareholder accounts. The
portion of an account executive's annual gross residual commission allocated
to servicing of shareholder accounts does not exceed 0.25% of the average
annual net asset value of shares of accounts for which he or she is account
executive of record.
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.
The Fund accrued $5,756,266 to the Distributor, pursuant to the Plan, for
the fiscal year ended October 31, 1995. This amount represents an annual rate
of 0.71 of 1% of the Fund's average daily net assets for the fiscal period.
Based upon the total amounts spent by the Distributor during the period, it
is estimated that the amount
29
<PAGE>
paid by the Fund to the Distributor for distribution was spent in
approximately the following ways: (i) advertising--$-0-; (ii) printing and
mailing prospectuses to other than current shareholders--$-0-; (iii)
compensation to underwriters--$-0-; (iv) compensation to dealers--$-0-; (v)
compensation to sales personnel--$-0-; and (vi) other, which includes
payments to DWR for expenses substantially all of which relate to
compensation of sales personnel (including compensation for servicing
shareholder accounts and associated overhead expenses)-- $5,756,266.
The Plan remained in effect until April 30, 1993, and under its terms will
continue from year to year thereafter, provided such continuance is approved
annually by a vote of the Trustees, including a majority of the Independent
Trustees. At their meeting held April 20, 1995, the Trustees, including a
majority of the Independent 12b-1 Trustees, approved the continuance of the
Plan until April 30, 1996. Any amendment to increase materially the maximum
amount authorized to be spent under the Plan must be approved by the
shareholders of the Fund, and all material amendments to the Plan must be
approved by the Trustees in the manner described above. The Plan may be
terminated at any time, without payment of any penalty, by vote of a majority
of the Independent Trustees or by a vote of the holders 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 Trustees is
committed to the discretion of the Independent Trustees.
Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each calendar
quarter, a written report regarding the distribution expenses incurred on
behalf of the Fund during such calendar 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, has any direct or
indirect financial interest in the operation of the Plan except to the extent
that DWR, the Distributor, the Manager or InterCapital 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.
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
that such price does not reflect their market value, in which case they will
be valued at their fair value as determined by the Trustees. All other
securities and other assets are valued at their fair value as determined in
good faith under procedures established by and under the supervision of the
Trustees.
As discussed in the Prospectus, the net asset value per share of the Fund
is determined at 4:00 p.m., New York time (or, on days when the New York
Stock Exchange closes prior to 4:00 p.m., at such earlier time), on each day
the New York Stock Exchange is open, by taking the value of all the assets of
the Fund, subtracting all liabilities, dividing by the number of shares
outstanding and adjusting the result 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.
30
<PAGE>
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Shareholder Investment Account. Upon purchase of shares of the Fund, a
Shareholder Investment Account is opened for the investor on the books of the
Fund, maintained by Dean Witter Trust Company (the "Transfer Agent"), in full
and fractional shares of the Fund (rounded to the nearest 1/100 of a share).
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. No certificates will be issued for fractional shares or to
shareholders who have elected the Systematic Withdrawal Plan for withdrawing
cash from their accounts. Whenever a shareholder instituted transaction takes
place in the Shareholder Investment Account, the shareholder will be mailed a
confirmation of the transaction from the Fund or from DWR or another selected
broker-dealer.
Automatic Investment of Dividends and Distributions. All dividends and
capital gains distributions are automatically paid in full and fractional
shares of the Fund, unless the shareholder requests that they be paid in
cash. Each purchase of shares of the Fund is made upon the condition that the
Transfer Agent is thereby automatically appointed as agent of the investor to
receive all dividends and capital gains distributions on shares owned by the
investor. Such dividends and distributions will be paid in shares of the Fund
(or in cash if the shareholder so requests) at the net asset value per share
as of the close of business on the record date. At any time an investor may
request the Transfer Agent in writing to have subsequent dividends and/or
capital gains distributions paid in cash rather than shares. To assure
sufficient time to process the change, such request should be received by the
Transfer Agent at least five (5) business days prior to the record date for
which it commences to take effect. In case of recently purchased shares for
which registration instructions have not been received on the record date,
cash payments will be made to DWR or other selected broker-dealer, and will
be forwarded to the shareholder, upon the receipt of proper instructions.
EasyInvest. (Service Mark) Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund. Shares purchased through EasyInvest will be
added to the shareholder's existing account at the net asset value calculated
the same business day the transfer of funds is effected. For further
information or to subscribe to EasyInvest, shareholders should contact their
DWR or other selected broker-dealer account executive or the Transfer Agent.
Investment of Distributions Received in Cash. As discussed in the
Prospectus, any shareholder who receives a cash payment representing a
dividend or capital gains distribution may invest such dividend or
distribution at net asset value (without sales charge) by returning the check
or the proceeds to the Transfer Agent within 30 days after the payment date.
If the shareholder returns the proceeds of a dividend or distribution, such
funds must be accompanied by a signed statement indicating that the proceeds
constitute a dividend or distribution to be invested. Such investment will be
made at the net asset value per share next determined after receipt of the
check or the proceeds by the Transfer Agent.
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 TCW/DW North
American Government Income Trust, directly to the 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.
Targeted Dividends. (Service Mark) In states where it is legally
permissible to do so, shareholders may also have all income dividends and
capital gains distributions automatically invested in shares of an open-end
TCW/DW Fund other than TCW/DW North American Government Income Trust. Such
investment will be made as described above for automatic investment in shares
of the Fund, at the net asset value per share of the selected TCW/DW Fund as
of the close of business on the payment date of the dividend or distribution,
and will begin to earn dividends, if any, in the selected TCW/DW Fund the
next business day. To participate in the Targeted Dividends program,
shareholders should contact their DWR or other Selected Broker-Dealer account
executive or the Transfer Agent. Shareholders of the Fund must be
shareholders of the TCW/DW Fund targeted to receive investments from
dividends at the time they enter the Targeted Dividends program. Investors
should review the prospectus of the targeted TCW/DW Fund before entering the
program.
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<PAGE>
Systematic Withdrawal Plan. As discussed in the Prospectus, 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 net asset
value. The 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 shares will be
redeemed at their net asset value determined, at the shareholder's option, on
the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be
mailed by the Transfer Agent, or amounts credited to a shareholder's DWR or
other selected broker-dealer brokerage account, within five business days
after the date of redemption.
Dividends and capital gains distributions on shares held under the
Systematic Withdrawal Plan will be invested in additional full and fractional
shares at net asset value (without a sales charge). Shares will be credited
to an open account for the investor by the Transfer Agent; no share
certificates will be issued. A shareholder is entitled to a share certificate
upon written request to the Transfer Agent, although in that event the
shareholder's Systematic Withdrawal Plan will be terminated.
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.
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.
A shareholder, may, at any time change the amount and interval of
withdrawal payments and the address to which checks are mailed by written
notification to the Transfer Agent. The shareholder's signature on such
notification 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). The shareholder may also terminate the Systematic 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 Shareholder Investment
Account. The shareholder may also redeem all or part of the shares held in
the Systematic Withdrawal Plan account (see "Repurchases and Redemptions" in
the Prospectus) at any time.
EXCHANGE PRIVILEGE
As discussed in the Prospectus under the caption "Exchange Privilege," an
Exchange Privilege exists whereby investors who have purchased shares of any
TCW/DW Fund sold with a contingent deferred sales charge ("CDSC Funds") will
be permitted, after the shares of the fund acquired by purchase (not by
exchange or dividend reinvestment) have been held for thirty days, to redeem
all or part of their shares in that fund, have the proceeds invested in
shares of the Fund, TCW/DW Income and Growth Fund, TCW/DW Balanced Fund, and
in shares of five money market funds for which InterCapital serves as
investment manager: Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free
Daily Income Trust, Dean Witter California Tax-Free Daily Income Trust, Dean
Witter New York Municipal Money Market Trust, or Dean Witter U.S. Government
Money Market Trust (these eight funds, including the Fund, are hereinafter
collectively referred to as "Exchange Funds"). There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment. Shares of
Exchange Funds received in an exchange for shares of a CDSC Fund (regardless
of the type of fund originally purchased) may be redeemed and exchanged for
shares of other Exchange Funds. Ultimately, any applicable contingent
deferred sales charge ("CDSC") will have to be paid upon redemption of shares
originally purchased from a CDSC Fund. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares,
on which the shareholder may realize a capital gain or loss.
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<PAGE>
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)
When shares of any CDSC Fund are exchanged for shares of an Exchange Fund,
the exchange is executed at no charge to the shareholder, without the
imposition of the CDSC at the time of the exchange. During the period of time
the shareholder remains in the Fund or in the money market fund (calculated
from the last day of the month in which the Exchange Fund shares were
acquired), the holding period or "year since purchase payment made" is
frozen. When shares are redeemed out of the Exchange Fund, they will be
subject to a CDSC which would be based upon the period of time the
shareholder held shares in a CDSC Fund. However, in the case of shares of a
CDSC Fund exchanged into an Exchange Fund, upon redemption of shares which
results in a CDSC being imposed, a credit (not to exceed the amount of the
CDSC) will be given in an amount equal to the Exchange Fund 12b-1
distribution fees which are attributable to those shares. Shareholders
acquiring shares of an Exchange Fund, pursuant to this exchange privilege may
exchange those shares back into a CDSC Fund from the Exchange Fund, with no
CDSC being imposed on such exchange. The holding period previously frozen
when shares were first exchanged for shares of the Exchange Fund resumes on
the last day of the month in which shares of a CDSC Fund are reacquired.
Thus, a CDSC is imposed only upon an ultimate redemption, based upon the time
(calculated as described above) the shareholder was invested in a CDSC Fund.
When shares initially purchased in a CDSC Fund are exchanged for shares of
another CDSC Fund or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments
between funds for purposes of the CDSC, the amount which represents the
current net asset value of shares at the time of the exchange which were (i)
purchased more than six years prior to the exchange and (ii) originally
acquired through reinvestment of dividends or distributions (all such shares
called "Free Shares"), will be exchanged first. After an exchange, all
dividends earned on shares in the Exchange Fund will be considered Free
Shares. If the exchanged amount exceeds the value of such Free Shares, an
exchange is made, on a block-by-block basis, of non-Free Shares held for the
longest period of time (except that if shares held for identical periods of
time but subject to different CDSC schedules are held in the same Exchange
Privilege Account, the shares of that block that are subject to a lower CDSC
rate will be exchanged prior to the shares of that block that are subject to
a higher CDSC rate). Shares equal to any appreciation in the value of
non-Free Shares exchanged will be treated as Free Shares, and the amount of
the purchase payments for the non-Free Shares of the fund exchanged into will
be equal to the lesser of (a) the purchase payments for, or (b) the current
net asset value of, the exchanged non-Free Shares. If an exchange between
funds would result in exchange of only part of a particular block of non-Free
Shares, then shares equal to any appreciation in the value of the block (up
to the amount of the exchange) will be treated as Free Shares and exchanged
first, and the purchase payment for that block will be allocated on a
pro-rata basis between the non-Free Shares of that block to be retained and
the non-Free Shares to be exchanged. The prorated amount of such purchase
payment attributable to the retained non-Free Shares will remain as the
purchase payment for such shares, and the amount of purchase payment for the
exchanged non-Free Shares will be equal to the lesser of (a) the prorated
amount of the purchase payment for, or (b) the current net asset value of,
those exchanged non-Free Shares. Based upon the procedures described in the
CDSC Fund Prospectus under the caption "Contingent Deferred Sales Charge,"
any applicable CDSC will be imposed upon the ultimate redemption of shares of
any fund, regardless of the number of exchanges since those shares were
originally purchased.
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 or telegraph 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.
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<PAGE>
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any
other of the funds and the general administration of the Exchange Privilege,
the Transfer Agent acts as agent for the Distributor and for the
shareholder's selected broker-dealer, if any, in the performance of such
functions.
With respect to exchanges, redemptions or repurchases, the Transfer Agent
shall be liable for its own negligence and not for the default or negligence
of its correspondents or for losses in transit. The Fund shall not be liable
for any default or negligence of the Transfer Agent, the Distributor or any
selected broker-dealer.
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
the shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000
for Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter California Tax-Free Daily Income Trust, and Dean Witter
New York Municipal Money Market Trust, although those funds may, at their
discretion, accept initial investments of as low as $1,000. The minimum
initial investment for Dean Witter U.S. Government Money Market Trust and all
TCW/DW Funds is $1,000.) Upon exchange into a money market fund, the shares
of that fund will be held in a special Exchange Privilege Account separately
from accounts of those shareholders who have acquired their shares directly
from that fund. As a result, certain services normally available to
shareholders of money market funds, including the check writing feature, will
not be available for funds held in that account.
The Fund, each of the other TCW/DW Funds and each of the money market
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 any of the TCW/DW Funds
or the money market funds, upon such notice as may be required by applicable
regulatory agencies (presently sixty days for termination or material
revision), provided that six months' prior written notice of termination will
be given to the shareholders who hold shares of the Exchange Funds pursuant
to this Exchange Privilege, and provided further that the Exchange Privilege
may be terminated or materially revised at times (a) when the New York Stock
Exchange is closed for other than customary weekends and holidays, (b) when
trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, (d) during any other period
when the Securities and Exchange Commission by order so permits (provided
that applicable 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. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. In the case of any shareholder
holding a share certificate or certificates, no exchanges may be made until
all applicable share certificates have been received by the Transfer Agent
and deposited in the shareholder's account. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares,
on which the shareholder may realize a capital gain or loss. However, the
ability to deduct capital losses on an exchange may be limited in situations
where there is an exchange of shares within ninety days after the shares are
purchased. The Exchange Privilege is only available in states where an
exchange may legally be made. Shareholders maintaining margin accounts with
DWR or another selected broker-dealer are referred to their account executive
regarding restrictions on exchange of shares of the Fund pledged in the
margin account.
For further information regarding the Fund's Exchange Privilege,
shareholders should contact their DWR or other selected broker-dealer account
executive or the Transfer Agent.
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<PAGE>
REPURCHASES AND REDEMPTIONS
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Payment for Shares Repurchased or Redeemed. As discussed in the
Prospectus, payment for shares presented for repurchase or redemption will be
ordinarily made by check within seven days after receipt by the Transfer
Agent of the certificate and/or written request in good order. Such payment
may be postponed or the right of redemption suspended at times (a) when the
New York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on that Exchange is restricted, (c) when an
emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund to fairly 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 and the check has not yet cleared, payment of redemption proceeds
may be delayed until the check has cleared.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
The Fund intends to continue to qualify and elect to be treated as a
regulated investment company for each taxable year under the Internal Revenue
Code of 1986, as amended (the "Code"). To so qualify, the Fund must meet
certain requirements as to the nature of its income and the nature of its
assets.
As a regulated investment company, the Fund will not be subject to United
States federal income tax on its income that it distributes to its
shareholders, provided that an amount equal to at least 90% of its investment
company taxable income (i.e., 90% of its taxable income minus the excess, if
any, of its net realized long-term capital gains over its net realized
short-term capital losses including any capital loss carryovers), plus or
minuscertain other adjustments as specified in section 852 of the Code) for
the taxable year is distributed, but will be subject to tax at regular
corporate rates on any income or gains that it does not distribute.
Furthermore, the Fund will be subject to a United States corporate income tax
with respect to such distributed amounts in any year that it fails to qualify
as a regulated investment company or fails to meet this distribution
requirement.
Gains or losses on the Fund's transactions in certain listed options on
securities and on futures and options on futures traded on U.S. exchanges
generally are treated as 60% long-term gain or loss and 40% short-term gain
or loss. When the Fund engages in options and futures transactions, various
tax regulations applicable to the Fund may have the effect of causing the
Fund to recognize a gain or loss for tax purposes before that gain or loss is
realized, or to defer recognition of a realized loss for tax purposes.
Recognition, for tax purposes, of an unrealized loss may result in a lesser
amount of the Fund's realized net gains being available for distribution.
As a regulated investment company, the Fund is subject to the requirement
that less than 30% of its gross income be derived from the sale of certain
investments held for less than three months. This requirement may limit the
Fund's ability to engage in options and futures transactions and to engage in
a large number of short-term transactions.
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 expects to
designate such retained amounts as undistributed capital gains in a notice to
its shareholders who (a) will be required to include in income for United
States federal income tax purposes, as long-term capital gains, their
proportionate shares of the undistributed amount, (b) will be entitled to
credit their proportionate shares of the 35% tax paid by the Fund on the
undistributed amount against their United States federal income tax
liabilities, if any, and to claim refunds to the extent their credits exceed
their liabilities, if any, and (c) will be entitled to increase their tax
basis, for United States federal income tax purposes, in their shares by an
amount equal to 65% of the amount of undistributed capital gains included in
the shareholder's income.
The Code imposes a 4% nondeductible excise tax on the Fund to the extent
the Fund does not distribute by the end of any calendar year at least 98% of
its net investment income for that year and 98% of the net amount of its
capital gains (both long- and short-term) for the one-year period ending, as
a general rule, on October 31 of that year. For this purpose, however, any
income or gain retained by the Fund that is subject to corporate income tax
will be considered to have been distributed by year-end. The Fund anticipates
that it will pay such dividends and will make such distributions as are
necessary in order to avoid the application of this tax.
35
<PAGE>
Gains or losses on sales of securities by the Fund will generally be
long-term capital gains or losses if the securities have been held by the
Fund for more than twelve months. Gains or losses on the sale of securities
held for twelve months or less will be generally short-term gains or losses.
The Fund may invest in securities having original issue discount which may
generate income in excess of the cash received by the Fund. Consequently, the
Fund may be required to borrow or to liquidate securities in order to make
distributions.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value
of the shareholder's stock in that company by the exact amount of the
dividend or capital gains distribution. Furthermore, capital gains
distributions and dividends are subject to federal income taxes. If the net
asset value of the shares should be reduced below a shareholder's cost as a
result of the payment of dividends or the distribution of realized net
long-term capital gains, such payment or distribution would be in part a
return of the shareholder's investment to the extent of such reduction below
the shareholder's cost, but nonetheless would be fully taxable. Therefore, an
investor should consider the tax implications of purchasing Fund shares
immediately prior to a distribution record date.
Any loss realized by shareholders upon a redemption of shares within six
months of the date of their purchase will be treated as a long-term capital
loss to the extent of any distributions of net long-term capital gains during
the six-month period.
Dividends, interest and capital gains received by the Fund may give rise
to withholding and other taxes imposed by foreign countries. Tax treaties
between certain countries and the United States may reduce or eliminate such
taxes. Investors may be entitled to claim United States foreign tax credits
or deductions with respect to such taxes, subject to certain provisions and
limitations contained in the Code. If more than 50% of the Fund's total
assets at the close of its fiscal year consist of securities of foreign
corporations, the Fund would be eligible and would determine whether or not
to file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their respective pro
rata portions of such withholding taxes in their United States income tax
returns as gross income, treat such respective pro rata portions as taxes
paid by them, and deduct such respective pro rata portions in computing their
taxable income or, alternatively, use them as foreign tax credits against
their United States income taxes. The Fund will report annually to its
shareholders the amount per share of such withholding.
Special Rules for Certain Foreign Currency Transactions. In general, gains
from foreign currencies and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in
stock, securities or foreign currencies are currently considered to be
qualifying income for purposes of determining whether the Fund qualifies as a
regulated investment company. It is currently unclear, however, who will be
treated as the issuer of certain foreign currency instruments or how foreign
currency options, futures, or forward foreign currency contracts will be
valued for purposes of the regulated investment company diversification
requirements applicable to the Fund. The Fund may request a private letter
ruling from the Internal Revenue Service on some or all of these issues.
Under Code Section 988, special rules are provided for certain
transactions in a foreign currency other than the taxpayer's functional
currency (i.e., unless certain special rules apply, currencies other than the
U.S. dollar). In general, foreign currency gains or losses from forward
contracts, from futures contracts that are not "regulated futures contracts",
and from unlisted options will be treated as ordinary income or loss under
Code Section 988. Also, certain foreign exchange gains or losses derived with
respect to foreign fixed-income securities are also subject to Section 988
treatment. In general, therefore, Code Section 988 gains or losses will
increase or decrease the amount of the Fund's investment company taxable
income available to be distributed to shareholders as ordinary income, rather
than increasing or decreasing the amount of the Fund's net capital gain.
Additionally, if Code Section 988 losses exceed other investment company
taxable income during a taxable year, the Fund may not be able to make any
ordinary dividend distributions and distributions paid during the year may be
characterized for tax purposes as a return of capital.
Exchange control regulations may restrict repatriations of investment
income and capital or the proceeds of securities sales by foreign investors
such as the Fund and may limit the Fund's ability to pay sufficient dividends
and to make sufficient distributions to satisfy the 90% and excise tax
distribution requirements.
36
<PAGE>
The Fund's transactions, if any, in foreign currencies, forward contracts,
options and futures contracts (including options and futures contracts on
foreign currencies) may be subject to special provisions of the Code that,
among other things, may affect the character of gains and losses realized by
the Fund (i.e., may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to the Fund and defer Fund losses. These
rules could therefore affect the character, amount and timing of
distributions to shareholders. These rules also (a) could require the Fund to
mark-to-market certain types of the positions in its portfolio (i.e., treat
them as they were closed out) and (b) may cause the Fund to recognize income
without receiving cash with which to pay dividends or make distributions in
amounts necessary to satisfy the distribution requirements for avoiding
income and excise taxes.
If the Fund invests in an entity which is classified as a "passive foreign
investment company" ("PFIC") for U.S. tax purposes, the application of
certain technical tax provisions applying to such companies could result in
the imposition of federal income tax with respect to such investments at the
Fund level which could not be eliminated by distributions to shareholders.
The U.S. Treasury is currently considering various solutions to this problem
and, in any event, it is not anticipated that any taxes on the Fund with
respect to investments in PFIC's would be significant.
Distributions in excess of the Fund's current and accumulated earnings and
profits will, as to each shareholder, be treated as a tax-free return of
capital, to the extent of a shareholder's basis in his shares of the Fund,
and as a capital gain thereafter (if the shareholder held his or her shares
of the Fund as capital assets).
Shareholders receiving dividends or distributions in the form of
additional Fund shares should be treated for United States federal income tax
purposes as receiving a distribution in an amount equal to the amount of
money that the shareholders receiving cash dividends or distributions will
receive, and should have a cost basis in the shares received equal to such
amount.
Any loss realized on the redemption by a shareholder of his shares will be
disallowed to the extent the shares disposed of are replaced, including
replacement through the reinvesting of dividends and capital gains
distributions in the Fund, within a period (of 61 days) beginning 30 days
before and ending 30 days after the disposition of the shares. In such a
case, the basis of the shares acquired will be increased to reflect the
disallowed loss. Any loss realized by a shareholder on the sale of a Fund
share held by the shareholder for six months or less will be treated for
United States income tax purposes as a long-term capital loss to the extent
of any distributions or deemed distributions of long-term capital gains
received by the shareholder with respect to such share.
Distributions may also be subject to state, local and foreign taxes
depending on each shareholder's particular situation.
The foregoing discussion is a general summary of certain of the current
Federal income tax laws regarding the Fund and investors. The discussion does
not purport to deal with all of the Federal income tax consequences
applicable to the Fund, or to all categories of investors, some of which may
be subject to special rules. Investors should consult their own tax advisors
regarding the tax consequences to them of investments in shares.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature.
Yield is calculated for any 30-day period as follows: the amount of interest
and/or dividend income for each security in the Fund's portfolio is
determined in accordance with regulatory requirements; the total for the
entire portfolio constitutes the Fund's gross income for the period. Expenses
accrued during the period are subtracted to arrive at "net investment
income". The resulting amount is divided by the product of the net asset
value per share on the last day of the period multiplied by the average
number of Fund shares outstanding during the period that were entitled to
dividends. This amount is added to 1 and raised to the sixth power. 1 is then
subtracted from the result and the difference is multiplied by 2 to arrive at
the annualized yield. The Fund's yield for the 30-day period ended October
31, 1995 was 6.91%.
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
37
<PAGE>
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 for the Fund for the year
ended October 31, 1995 and for the period from July 31, 1992 (commencement of
operations) through October 31, 1995, were 1.61% and 2.06%, 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. 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. The Fund's total returns for the year ended October 31, 1995
and for the period from July 31, 1992 through October 31, 1995, were 1.61%
and 6.84%, 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 and multiplying by $10,000, $50,000 or $100,000, as
the case may be. Investments of $10,000, $50,000 and $100,000 in the Fund at
inception would have grown to $10,684, $53,420 and $106,840, respectively, at
October 31, 1995.
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. The Trustees have been elected by DWR as the then sole
shareholder of the Fund on May 11, 1992, or, in the case of Messrs. Schroeder
and Stern, by the other Trustees of the Fund on April 20, 1995. The Trustees
themselves have the power to alter the number and the terms of office of the
Trustees, and they may at any time lengthen their own terms or make their
terms of unlimited duration and appoint their own successors, provided that
always at least a majority of the Trustees has been elected by the
shareholders of the Fund. Under certain circumstances the Trustees may be
removed by action of the Trustees. The shareholders also have the right to
remove the Trustees following a meeting called for that purpose requested in
writing by the record holders of not less than ten percent of the Fund's
outstanding shares. The voting rights of shareholders are not cumulative, so
that holders of more than 50 percent of the shares voting can, if they
choose, elect all Trustees being selected, while the holders of the remaining
shares would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future
regulations or other unforeseen circumstances). However, the Trustees have
not authorized any such additional series or classes of shares.
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, nor is any
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Fund, except as such liability may arise from his own
bad faith, willful misfeasance, gross negligence, or reckless disregard of
his duties. It also provides that all third persons shall look solely to the
Fund'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 liabilities 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.
38
<PAGE>
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 Services
Company Inc., the Fund's Manager, and Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust Company's responsibilities include maintaining shareholder
accounts, including providing subaccounting and recordkeeping services for
certain retirement accounts; disbursing cash dividends and reinvesting
dividends; processing account registration changes; handling purchase and
redemption transactions; mailing prospectuses and reports; mailing and
tabulating proxies; processing share certificate transactions; and
maintaining shareholder records and lists. For these services Dean Witter
Trust Company receives a per shareholder account fee.
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report
containing financial statements audited by independent accountants will be
sent to shareholders each year.
The Fund's fiscal year ends on October 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- -----------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
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.
39
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Portfolio of Investments October 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON
THOUSANDS) RATE MATURITY DATE VALUE
- ----------- -------------------------------------------------- ---------- ----------------- --------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (48.6%)
U.S. GOVERNMENT AGENCIES (45.4%)
$17,179 Federal Home Loan Mortgage Corp. 1067 I .......... 8.00 % 04/15/21 $ 17,449,129
40 Federal Home Loan Mortgage Corp. 1370 K
(PAC I/O) ........................................ 1089.16+ 09/15/22 1,046,553
10,966 Federal Home Loan Mortgage Corp. 1504 A (PAC) .... 7.00 07/15/22 10,927,357
13,897 Federal Home Loan Mortgage Corp. 1560 A (PAC) .... 6.50 02/15/23 13,350,404
13,420 Federal Home Loan Mortgage Corp. 1606 LB ......... 6.27+ 05/15/08 10,913,010
28,102 Federal Home Loan Mortgage Corp. 1610 A .......... 6.50 11/15/23 27,309,106
17,746 Federal Home Loan Mortgage Corp. G 93 P .......... 6.50 08/25/20 17,557,570
38,090 Federal Home Loan Mortgage Corp. G 21 M .......... 6.50 10/25/23 36,463,149
2,257 Federal Home Loan Mortgage Corp. 1508 Q1 ......... 6.75+ 05/15/23 1,549,266
20,338 Federal National Mortgage Assoc. 1993-121 A ...... 7.00 10/25/22 20,229,872
18,304 Federal National Mortgage Assoc. 1993-138 MA (PAC) 7.00 05/25/23 18,207,194
54,098 Federal National Mortgage Assoc. 1993-139 M (PAC) 6.50 08/25/23 51,706,432
10,394 Federal National Mortgage Assoc. 1993-163 A ...... 7.00 03/25/23 10,338,194
9,181 Federal National Mortgage Assoc. 1993-163 SB ..... 10.00+ 04/25/23 8,056,094
9,017 Federal National Mortgage Assoc. 1993-165 SE ..... 6.84+ 09/25/23 6,139,055
15,544 Federal National Mortgage Assoc. 1993-166 M (PAC) 7.00 06/25/23 15,459,813
22,036 Federal National Mortgage Assoc. 1993-167 M (PAC) 6.00 09/25/23 20,138,602
17,857 Federal National Mortgage Assoc. 1993-179 SJ ..... 6.84+ 10/25/23 12,417,853
--------------
299,258,653
--------------
PRIVATE ISSUES (3.2%)
2,075 Citicorp Mortgage Securities, Inc. 1991-1 A ...... 8.50 03/25/06 2,029,530
12,232 CountryWide Funding Corp. 1993-7 AS3 (TAC) ....... 14.33+ 11/25/23 10,527,051
3,901 General Electric Capital Mortgage Services, Inc.
1992-11 M ........................................ 8.00 09/25/22 3,984,265
4,376 Resolution Trust Corp. 1991-6 C1 .................. 9.00 09/25/28 4,342,601
--------------
20,883,447
--------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $344,756,544) ................................................ 320,142,100
--------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(27.1%)
16,955 Federal Home Loan Mortgage Corp. ARM .............. 6.96++ 03/01/25 17,368,629
16,653 Federal Home Loan Mortgage Corp. ARM .............. 7.87++ 08/01/23 17,082,428
26,804 Federal Home Loan Mortgage Corp. PC GOLD ......... 6.00 11/01/00-12/01/00 26,435,087
12,581 Federal Home Loan Mortgage Corp. PC GOLD ......... 7.00 02/01/98 12,726,250
2,400 Federal National Mortgage Assoc. .................. 9.50 06/01/20 2,514,491
44,506 Government National Mortgage Assoc. II ............ 6.00 08/20/22 44,561,457
12,028 Government National Mortgage Assoc. II ............ 7.00 10/20/24-12/20/24 12,268,061
31,362 Government National Mortgage Assoc. II ............ 7.375 06/20/22-04/20/23 31,823,392
13,119 Small Business Administration ARM ................. 7.25++ 03/25/16 13,562,709
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $178,532,293) ................................................ 178,342,504
--------------
40
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Portfolio of Investments October 31, 1995 (continued)
PRINCIPAL
AMOUNT (IN COUPON
THOUSANDS) RATE MATURITY DATE VALUE
- ----------- -------------------------------------------------- ---------- ----------------- --------------
SHORT-TERM INVESTMENTS (25.6%)
MEXICAN GOVERNMENT SECURITIES (a) (18.8%)
$125,612 Tesobonos ......................................... 7.875 %- 11/01/95-
21.50 % 02/15/96 $123,934,183
--------------
COMMERCIAL PAPER (a) (1.5%)
FINANCIAL SERVICES
10,000 Associate Corp. of North America .................. 5.90 11/01/95 10,000,000
--------------
U.S. GOVERNMENT AGENCY (a) (2.3%)
15,000 Federal Home Loan Mortgage Corp ................... 5.85 11/01/95 15,000,000
--------------
REPURCHASE AGREEMENT (3.0%)
19,565 The Bank of New York (dated 10/31/95; proceeds
$19,568,176; collateralized by $5,536,172
Government National Mortgage Assoc. 6.125% due
10/20/22 valued at $4,540,935 and $13,745,768
U.S. Treasury Bond 7.875% due 02/15/21 valued at
$16,366,242) ..................................... 5.8125 11/01/95 19,565,017
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $167,482,420) ................................................ 168,499,200
--------------
TOTAL INVESTMENTS
(IDENTIFIED COST $690,771,257) (B) .......................... 101.3% 666,983,804
LIABILITIES IN EXCESS OF OTHER ASSETS ........................ (1.3) (8,676,466)
--------------
NET ASSETS ................................................... 100.0% $658,307,338
==============
<FN>
- ------------
ARM Adjustable rate mortgage.
I/O Interest-only securities.
PC Participation Certificate.
PAC Planned Amortization Class.
TAC Targeted Amortization Class.
+ Inverse floater: coupon rate moves inversely to a designated index,
such as LIBOR (London Inter-Bank Offered Rate) or COFI (Cost of Funds
Index), typically at a multiple of the changes of the relevant index
rate. Rate shown is the rate in effect at October 31, 1995.
++ Floating rate security. Rate shown is the rate in effect at October
31, 1995.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost of investments for federal income tax purposes is
$690,771,257; the aggregate gross unrealized appreciation is
$4,346,969 and the aggregate gross unrealized depreciation is
$28,134,422, resulting in net unrealized depreciation of $23,787,453.
</TABLE>
See Notes to Financial Statements
41
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Financial Statements
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $690,771,257) ............ $ 666,983,804
Receivable for:
Interest .................................. 3,090,426
Principal paydowns ........................ 1,033,683
Shares of beneficial interest sold ....... 897,606
Compensated foreign currency contracts ... 105,587
Deferred organizational expenses ........... 70,208
Prepaid expenses and other assets .......... 239,599
---------------
TOTAL ASSETS ............................. 672,420,913
---------------
LIABILITIES:
Payable for:
Investments purchased ..................... 9,840,206
Shares of beneficial interest repurchased 2,821,430
Plan of distribution fee .................. 445,499
Dividends to shareholders ................. 391,745
Management fee ............................ 231,660
Investment advisory fee ................... 154,440
Accrued expenses and other payables ....... 228,595
Contingencies (Note 10) ....................
---------------
TOTAL LIABILITIES ........................ 14,113,575
---------------
NET ASSETS:
Paid-in-capital ............................ 896,132,002
Net unrealized depreciation ................ (23,787,453)
Distributions in excess of net investment
income .................................... (391,745)
Accumulated net realized loss .............. (213,645,466)
---------------
NET ASSETS ............................... $ 658,307,338
===============
NET ASSET VALUE PER SHARE, 79,073,584
shares outstanding (unlimited shares
authorized of $.01 par value) ............. $8.33
===============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ....................... $ 80,194,529
---------------
EXPENSES
Plan of distribution fee ............. 5,756,266
Management fee ....................... 3,166,169
Investment advisory fee .............. 2,110,779
Transfer agent fees and expenses .... 814,060
Registration fees .................... 383,800
Professional fees .................... 265,314
Custodian fees ....................... 142,609
Shareholder reports and notices ..... 96,547
Organizational expenses .............. 39,978
Trustees' fees and expenses .......... 34,080
Other ................................ 125,731
---------------
TOTAL EXPENSES ...................... 12,935,333
---------------
NET INVESTMENT INCOME ............... 67,259,196
---------------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized loss on:
Investments .......................... (244,050,043)
Foreign exchange transactions ....... (12,373,176)
---------------
TOTAL LOSS .......................... (256,423,219)
Net change in unrealized depreciation 162,024,285
---------------
NET LOSS ............................ (94,398,934)
---------------
NET DECREASE ........................ $ (27,139,738)
===============
</TABLE>
See Notes to Financial Statements
42
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Financial Statements (continued)
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED OCTOBER ENDED OCTOBER
31, 1995 31, 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ..................................................... $ 67,259,196 $ 159,532,551
Net realized loss ......................................................... (256,423,219) (106,304,030)
Net change in unrealized depreciation ..................................... 162,024,285 (182,144,828)
---------------- ----------------
Net Decrease ............................................................. (27,139,738) (128,916,307)
---------------- ----------------
Dividends and distributions from:
Net investment income ..................................................... -- (111,457,152)
Net realized gain ......................................................... -- (6,378,851)
Paid-in-capital ........................................................... (64,021,457) (56,645,215)
---------------- ----------------
Total .................................................................... (64,021,457) (174,481,218)
Net decrease from transactions in shares of beneficial interest ........... (610,142,782) (1,323,313,917)
---------------- ----------------
Total Decrease ........................................................... (701,303,977) (1,626,711,442)
NET ASSETS:
Beginning of period ........................................................ 1,359,611,315 2,986,322,757
---------------- ----------------
END OF PERIOD (including distributions in excess of net investment income
of $391,745 and $1,308,948, respectively) .................................. $ 658,307,338 $ 1,359,611,315
================ ================
</TABLE>
See Notes to Financial Statements
43
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Notes to Financial Statements October 31, 1995
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES --TCW/DW North American Government
Income Trust (the "Fund") is registered under the Investment Company Act of
1940, as amended (the "Act"), as a non-diversified, open-end management
investment company. The Fund was organized as a Massachusetts business trust
on February 19, 1992 and commenced operations on July 31, 1992.
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, including circumstances
under which it is determined by the Adviser 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 Trustees
(valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities
which are comparable in coupon, rating and maturity or an appropriate
matrix utilizing similar factors); and (3) 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 over the life of the respective securities. Interest income is
accrued daily.
C. Foreign Currency Translation -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market
value of investment securities, other assets and liabilities and forward
contracts are translated at the exchange rates prevailing at the end of
the period; and (2) purchases, sales, income and expenses are translated
at the exchange rates prevailing on the respective dates of such
transactions. The resultant exchange gains and losses are included in
the Statement of Operations as realized and unrealized gain/loss on
foreign exchange transactions. Pursuant to U.S. Federal income tax
regulations, certain foreign exchange gains/losses included in realized
and unrealized gain/loss are included in or are a reduction of ordinary
income for federal income tax purposes. The Fund does not isolate that
portion of the results of operations arising as a result of changes in
the foreign exchange rates from the changes in the market prices of the
securities.
D. Forward Foreign Currency Contracts -- The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant unrealized exchange gains and losses are
included in the Statement of Operations as unrealized foreign currencies
gain or loss. The Fund records realized gains or losses on delivery of
the currency or at the time the forward contract is extinguished
(compensated) by entering into a closing transaction prior to delivery.
E. 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.
F. 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.
44
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Notes to Financial Statements October 31, 1995 (continued)
- ------------------------------------------------------------------------
G. 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.
H. Organizational Expenses -- Dean Witter InterCapital Inc., an
affiliate of Dean Witter Services Company Inc. (the "Manager"), paid the
organization expenses which have been reimbursed by the Fund in the
amount of $200,000. Such expenses have been deferred and are being
amortized by the Fund on the straight-line method over a period not to
exceed five years from the commencement of operations.
2. MANAGEMENT AGREEMENT -- Pursuant to a Management Agreement, the Fund pays
a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the
close of each business day: 0.39% to the average daily net assets of the Fund
not exceeding $3 billion and 0.36% to the average daily net assets exceeding
$3 billion.
Under the terms of the Agreement, the 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 Manager. The Manager also bears the cost of telephone
services, heat, light, power and other utilities provided to the Fund.
3. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory
Agreement with TCW Funds Management, Inc. (the "Adviser"), the Fund pays an
advisory fee, calculated daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.26% to the average daily net assets of the Fund not exceeding
$3 billion and 0.24% to the average daily net assets exceeding $3 billion.
Under the terms of the Agreement, the Fund has retained the Adviser to
invest the Fund's assets, including placing orders for the purchase and sale
of portfolio securities. The Adviser obtains and evaluates such information
and advice relating to the economy, securities markets, and specific
securities as it considers necessary or useful to continuously manage the
assets of the Fund in a manner consistent with its investment objective. In
addition, the Adviser pays the salaries of all personnel, including officers
of the Fund, who are employees of the Adviser.
4. PLAN OF DISTRIBUTION -- Dean Witter Distributors Inc. (the "Distributor"),
an affiliate of the 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.
45
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Notes to Financial Statements October 31, 1995 (continued)
___________________________________________________________________________
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 Manager and Distributor, and other
employees or 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 0.75% of the
Fund's average daily net assets during the month. Expenses incurred pursuant
to the Plan in any fiscal year in excess of 0.75% of the Fund's average daily
net assets will not be reimbursed by the Fund through payments accrued in any
subsequent fiscal year. For the year ended October 31, 1995, the distribution
fee was accrued at the annual rate of 0.71%.
5. 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 as
follows:
<TABLE>
<CAPTION>
SALES/
PURCHASES PREPAYMENTS
------------- -------------
<S> <C> <C>
Foreign Government Obligations $ 35,751,847 $ 35,518,136
U.S. Government Agencies ...... 222,522,764 505,722,139
Private Issue CMOs ............. -- 115,156,036
</TABLE>
Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent. At October 31, 1995, the Fund had transfer agent
fees and expenses payable of approximately $116,000.
6. 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 ......................... 11,625,629 $ 96,045,510 156,152,730 $ 1,548,418,896
Reinvestment of dividends and
distributions ............... 5,930,740 48,356,244 14,740,453 141,335,062
-------------- -------------- --------------- ---------------
17,556,369 144,401,754 170,893,183 1,689,753,958
Repurchased .................. (91,392,898) (754,544,536) (313,455,527) (3,013,067,875)
-------------- -------------- --------------- ---------------
Net decrease ................. (73,836,529) $(610,142,782) (142,562,344) $(1,323,313,917)
============== ============== =============== ===============
</TABLE>
7. FEDERAL INCOME TAX STATUS -- At October 31, 1995, the Fund had a net
capital loss carryover of approximately $213,645,000 of which $53,085,000
will be available through October 31, 2002 and $160,560,000 will be available
through October 31, 2003 to offset future capital gains to the extent
provided by regulations.
46
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Notes to Financial Statements October 31, 1995 (continued)
___________________________________________________________________________
As of October 31, 1995, the Fund had temporary book/tax differences
primarily attributable to dividend payable and permanent book/tax differences
primarily attributable to a net operating loss and foreign currency losses.
To reflect reclassifications arising from permanent book/tax differences for
the year ended October 31, 1995, distributions in excess of net investment
income was charged $66,341,993, paid-in-capital was charged $29,554,165 and
accumulated net realized loss was credited $95,896,158.
8. 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 of the agreement 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.
9. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS -- The
Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio
transactions or to manage foreign currency exposure associated with foreign
currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk
of an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their
contracts.
10. LITIGATION -- Several purported class action lawsuits have been
consolidated in the United States District Court, in New York, against the
Fund, some of its Trustees and officers, its underwriter and distributor, the
Adviser, the Manager, and other defendants, by certain shareholders of the
Fund. The consolidated amended complaint asserts claims under the Securities
Act of 1933 and generally alleges that the defendants made inadequate and
misleading disclosures in the prospectuses for the Fund, in particular as
such disclosures relate to the nature and risks of the Fund's investments in
mortgage-backed securities and Mexican securities. The plaintiffs also
challenge certain fees paid by the Fund as excessive. Damages are sought in
an unspecified amount. All defendants have moved to dismiss the consolidated
amended complaint.
The ultimate outcome of this matter is not presently determinable, and no
provision has been made in the Fund's financial statements for the effect, if
any, of such matter.
47
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT 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
FOR THE YEAR ENDED OCTOBER JULY 31, 1992*
31, THROUGH
----------------------------- OCTOBER 31, 1992
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $ 8.89 $10.11 $ 9.96 $10.00
-------- --------- -------- ----------------
Net investment income .................. 0.69 0.68 0.77 0.18
Net realized and unrealized gain (loss) (0.59) (1.18) 0.14 (0.05)
-------- --------- -------- ----------------
Total from investment operations ...... 0.10 (0.50) 0.91 0.13
-------- --------- -------- ----------------
Less dividends and distributions from:
Net investment income ................. -- (0.47) (0.76) (0.17)
Net capital gain ...................... -- (0.02) -- --
Paid-in-capital ....................... (0.66) (0.23) -- --
-------- --------- -------- ----------------
Total dividends and distributions ..... (0.66) (0.72) (0.76) (0.17)
-------- --------- -------- ----------------
Net asset value, end of period ......... $ 8.33 $ 8.89 $10.11 $ 9.96
======== ========= ======== ================
TOTAL INVESTMENT RETURN + .............. 1.61% (5.06)% 9.35% 1.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 1.59% 1.52% 1.54% 1.80%(2)
Net investment income .................. 8.28% 6.85% 7.78% 8.36%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions $658 $1,360 $2,986 $762
Portfolio turnover rate ................ 44% 27% 77% 2%(1)
<FN>
- ------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
48
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
Report of Independent Accountants
- -----------------------------------------------------------------------------
To the Shareholders and Trustees of TCW/DW North American Government Income
Trust
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of TCW/DW North
American Government Income Trust (the "Fund") at October 31, 1995, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the three years in the period then ended and for the
period July 31, 1992 (commencement of operations) through October 31, 1992,
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.
As discussed in Note 10 to the financial statements, the Fund is one of
several defendants in litigation. The ultimate outcome of the litigation
cannot be determined at present. No provision for any liability that may
result upon resolution of the matter has been made in the accompanying
financial statements.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 14, 1995
49
<PAGE>
APPENDIX
- -----------------------------------------------------------------------------
RATINGS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S)
FIXED-INCOME SECURITY RATINGS
Aaa Fixed-income securities which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa Fixed Income securities which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise
what are generally known as high grade fixed-income securities. They
are rated lower than the best fixed-income securities because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A Fixed-income securities which are rated A possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Fixed-income securities which are rated Baa are considered as medium
grade obligations; i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such fixed-income securities lack outstanding
investment characteristics and in fact have speculative
characteristics as well.
Fixed-income securities rated Aaa, Aa, A and Baa are considered
investment grade.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its corporate and
municipal fixed-income security rating system. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and a modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess
of nine months. Moody's employs the following three designations, all judged
to be investment grade, to indicate the relative repayment capacity of rated
issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3
have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
FIXED-INCOME SECURITY RATINGS
A Standard & Poor's fixed-income security rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
50
<PAGE>
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other reasons.
AAA Fixed-income securities rated AAA have the highest rating assigned
by Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA Fixed-income securities rated AA have a very strong capacity to pay
interest and repay principal and differs from the highest-rated
issues only in small degree.
A Fixed-income securities rated A have a strong capacity to pay
interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances and
economic conditions than fixed-income securities in higher-rated
categories.
BBB Fixed-income securities rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for fixed-income
securities in this category than for fixed-income securities in
higher-rated categories.
Fixed-income securities rated AAA, AA, A and BBB are considered
investment grade.
NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard
& Poor's does not rate a particular type of obligation as a matter
of policy.
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to
purchase or sell a security. The ratings are based upon current information
furnished by the issuer or obtained by S&P from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into
group categories, ranging from "A" for the highest quality obligations to "D"
for the lowest. The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the
designation 1, 2 and 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely payment is very
strong.
A-2 indicates capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is not
as overwhelming as for issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations
carrying this designation are, however, somewhat more vulnerable to
the adverse effects of changes in circumstances than obligations
carrying the higher designations.
51
TCW/DW NORTH AMERICAN GOVERNMENT 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 July 31, 1992 through
October 31, 1992 and for the fiscal years ended October
31, 1993, 1994 and 1995.................................... 5
(2) Financial statements included in the Statement of Page in
Additional Information (Part B): SAI
----------
Portfolio of Investments at October 31, 1995 .............. 40
Statement of Assets and Liabilities at October 31, 1995... 42
Statement of Operations for the fiscal year ended October
31, 1995................................................... 42
Statement of Changes in Net Assets for the fiscal years
ended October 31, 1994 and 1995............................ 43
Notes to Financial Statements.............................. 44
Financial Highlights for the period July 31, 1992 through
October 31, 1992 and for the fiscal years ended October
31, 1993, 1994 and 1995.................................... 48
(3) Financial statements included in Part C:
None.
Exhibit
Number Description
- -------- -----------
1. (a)-- Form of Declaration of Trust of Registrant*
(b)-- Form of Amendment to the Declaration of Trust
of Registrant*
2. -- Amended and Restated By-Laws of Registrant
5. -- Form of Investment Advisory Agreement between Registrant and
TCW Funds Management Inc.*
6. (a)-- Form of Distribution Agreement between Registrant and
Dean Witter Distributors Inc.*
(b)-- Forms of Selected Dealer Agreement*
1
8.(a) -- Form of Custodian Agreement between Registrant and The Bank
of New York*
(b) -- Form of Transfer Agency and Services Agreement between
Registrant and Dean Witter Trust Company*
9. -- Form of Management Agreement between Registrant and Dean
Witter Services Company Inc.
11. -- Consent of Independent Accountants
15. -- Form of Amended and Restated Plan of Distribution between
Registrant and Dean Witter Distributors Inc.*
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
Other -- Powers of Attorney*
---------------
* Previously filed; re-filed via EDGAR with this Amendment to the
Registration Statement.
Item 25. Persons Controlled by or Under Common Control With Registrant.
None
Item 26. Number of Holders of Securities.
(1)
(2)
Number of Record Holders
Title of Class at December 29, 1995
-------------- ------------------------
Shares of Beneficial Interest 46,392
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.
2
Pursuant to Section 5.2 of the Registrant's Declaration of
Trust and paragraph 8 of the Registrant's Management and Advisory
Agreements, none of the Manager, the Adviser or any trustee, officer,
employee or agent of the Registrant shall be liable for any action or
failure to act, except in the case of bad faith, willful misfeasance, gross
negligence or reckless disregard of duties to the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer, or controlling person of
the Registrant in connection with the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such trustee,
officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with
Release 11330 of the Securities and Exchange Commission under the
Investment Company Act of 1940, so long as the interpretation of Sections
17(h) and 17(i) of such Act remains in effect.
Registrant, in conjunction with the Manager, Registrant's
Trustees, and other registered investment management companies managed by
the 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.
The TCW Funds Management, Inc. (the "Adviser") is a 100% owned
subsidiary of The TCW Group, Inc., a Nevada corporation. The Adviser
presently serves as investment adviser to: (1) TCW Funds, Inc., a
diversified open-end management investment company, (2) TCW Convertible
Securities Fund, Inc., a diversified closed-end management investment
company; (3) TCW/DW Core Equity Trust, an open-end, non-diversified
management company, (4) TCW/DW North American Government Income Trust, an
open-end, non-diversified management company, (5) TCW/DW Income and Growth
3
Fund, an open-end, non-diversified management company, (6) TCW/DW Latin
American Growth Fund, an open-end non-diversified management company, (7)
TCW/DW Small Cap Growth Fund, an open-end non-diversified management
company, (8) TCW/DW Term Trust 2000, a closed-end, diversified management
company, (9) TCW/DW Term Trust 2002, a closed-end diversified management
company, (10) TCW/DW Term Trust 2003, a closed-end diversified management
company, (11) TCW/DW Balanced Fund, an open-end, diversified management
company, (12) TCW/DW Mid-Cap Equity Trust, an open-end, diversified management
company, (13) TCW/DW Emerging Markets Opportunities Trust, a closed-end,
non-diversified management company and (14) TCW/DW Total Return Trust, an
open-end, non-diversified management investment company. The Adviser also
serves as investment adviser or sub-adviser to other investment companies,
including foreign investment companies. The list required by this Item 28
of the officers and directors of the Adviser together with information as
to any other business, profession, vocation or employment of a substantive
nature engaged in by the Adviser and such officers and directors during the
past two years, is incorporated by reference to Form ADV (File No. 801-
29075) filed by the Adviser pursuant to the Investment Advisers Act.
Item 29. Principal Underwriters.
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Global Utilities Fund
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Global Asset Allocation Fund
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
4
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Short-Term Bond Fund
(45) Dean Witter National Municipal Trust
(46) Dean Witter High Income Securities
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Hawaii Municipal Trust
(49) Dean Witter Balanced Growth Fund
(50) Dean Witter Balanced Income Fund
(51) Dean Witter Intermediate Term U.S. Treasury Trust
(52) Dean Witter Mid-Cap Growth Fund
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) 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
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(b) The following information is given regarding directors and
officers of Dean Witter Distributors Inc. ("Distributors"). The
principal address of Distributors is Two World Trade Center, New
York, New York 10048.
5
Positions and
Office with Distributors
Name and the Registrant
- ---- -------------------------
Charles A. Fiumefreddo Chairman, Chief Executive
Officer and Director of
Distributors and Chairman,
Chief Executive Officer
and Trustee of the
Registrant.
Philip J. Purcell Director of Distributors.
Richard M. DeMartini Director of Distributors.
James F. Higgins Director of Distributors.
Thomas C. Schneider Executive Vice President, Chief
Financial Officer and Director
of Distributors.
Christine A. Edwards Executive Vice President,
Secretary, Chief Legal Officer
and Director of Distributors.
Robert Scanlan Executive Vice President of
Distributors and Vice President
of the Registrant.
David A. Hughey Executive Vice President and
Chief Administrative Officer
of Distributors and Vice
President of the Registrant.
Robert S. Giambrone Senior Vice President of
Distributors and Vice President
of the Registrant.
Sheldon Curtis Senior Vice President,
Assistant General Counsel and
Assistant Secretary of
Distributors and Vice President,
Secretary and General Counsel of
the Registrant.
Frederick K. Kubler Senior Vice President,
Assistant Secretary and Chief
Compliance Officer of
Distributors.
6
Positions and Office
with Distributors
Name and the Registrant
- ---- ---------------------
Michael T. Gregg Vice President and Assistant
Secretary of Distributors.
Edward C. Oelsner III Vice President of Distributors.
Samuel Wolcott III Vice President of Distributors.
Thomas F. Caloia Assistant Treasurer of
Distributors and Treasurer of
the Registrant.
Michael Interrante Assistant Treasurer of
Distributors.
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 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.
7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Post-Effective Amendment to
the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and
State of New York on the 23rd day of January, 1996.
TCW/DW NORTH AMERICAN GOVERNMENT 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. 4 has been signed below by the
following persons in the capacities and on the dates indicated.
Signatures Title Date
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 01/23/96
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 01/23/96
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman) Richard M. DeMartini
Thomas E. Larkin Robert A. Day
By /s/ Sheldon Curtis 01/23/96
Sheldon Curtis
Attorney-in-Fact
John C. Argue Michael E. Nugent
Paul Kolton Manuel H. Johnson
John R. Haire David S. Tappan, Jr.
By /s/ David M. Butowsky 01/23/96
David M. Butowsky
Attorney-in-Fact
EXHIBIT INDEX
1. (a) -- Form of Declaration of Trust of Registrant*
(b) -- Form of Amendment to the Declaration of Trust
of Registrant*
2. -- Amended and Restated By-Laws of Registrant
5. -- Form of Investment Advisory Agreement between Registrant
and TCW Funds Management Inc.*
6. (b) -- Form of Distribution Agreement between Registrant and
Dean Witter Distributors Inc.*
(c) -- Form of Selected Dealer Agreement*
8.(a) -- Form of Custodian Agreement between Registrant and The
Bank of New York*
(b) -- Form of Transfer Agency and Services Agreement between
Registrant and Dean Witter Trust Company*
9. -- Form of Management Agreement between Registrant and Dean
Witter Services Company Inc.
11. -- Consent of Independent Accountants
15. -- Form of Amended and Restated Plan of Distribution
between Registrant and Dean Witter Distributors Inc.*
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
Other -- Powers of Attorney*
- ---------------
* Previously filed; re-filed via EDGAR with this Amendment to the
Registration Statement.
/tcwtnora/exhibit.96
</TABLE>
TCW/DW NORTH AMERICAN GOVERNMENT BOND TRUST
TWO WORLD TRADE CENTER
NEW YORK, NY 10048
DECLARATION OF TRUST
DATED: FEBRUARY 19, 1992
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
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 ...................................... 5
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....... 6
Section 4.1 Investment Adviser and Manager ................................. 6
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 ........ 7
Section 5.1 No Personal Liability of Shareholders, Trustees, etc. ......... 7
Section 5.2 Non-Liability of Trustees, etc. ................................ 8
Section 5.3 Indemnification ................................................ 8
Section 5.4 No Bond Required of Trustees ................................... 8
Section 5.5 No Duty of Investigation; Notice in Trust Instruments, etc. ... 8
Section 5.6 Reliance on Experts, etc. ...................................... 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
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 ..................................................... 9
Section 6.4 Issuance of Shares ............................................. 9
Section 6.5 Register of Shares ............................................. 10
Section 6.6 Transfer of Shares ............................................. 10
Section 6.7 Notices ........................................................ 10
Section 6.8 Voting Powers .................................................. 10
Section 6.9 Series or Classes of Shares .................................... 11
ARTICLE VII --Redemptions............................................................. 13
Section 7.1 Redemptions .................................................... 13
Section 7.2 Redemption at the Option of the Trust .......................... 13
Section 7.3 Effect of Suspension of Determination of Net Asset Value ...... 13
Section 7.4 Suspension of Right of Redemption .............................. 13
ARTICLE VIII -- Determination of Net Asset Value, Net Income and Distributions.... 14
Section 8.1 Net Asset Value ................................................ 14
Section 8.2 Distributions to Shareholders .................................. 14
Section 8.3 Determination of Net Income .................................... 14
Section 8.4 Power to 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 .................................................. 16
ARTICLE X -- Reports to Shareholders ................................................. 17
ARTICLE XI -- Miscellaneous .......................................................... 17
Section 11.1 Filing ......................................................... 17
Section 11.2 Resident Agent ................................................. 17
Section 11.3 Governing Law .................................................. 17
Section 11.4 Counterparts ................................................... 17
Section 11.5 Reliance by Third Parties ...................................... 17
Section 11.6 Provisions in Conflict with Law or Regulations ................. 17
Section 11.7 Use of the Name "TCW/DW" ....................................... 18
Section 11.8 Principal Place of Business .................................... 18
SIGNATURE PAGE ....................................................................... 19
</TABLE>
ii
<PAGE>
DECLARATION OF TRUST
OF
TCW/DW NORTH AMERICAN GOVERNMENT BOND TRUST
Dated: February 19, 1992
THE DECLARATION OF TRUST of TCW/DW North American Government Board Trust
is made the 19th day of February, 1992 by the parties signatory hereto, as
trustees (such persons, so long as they shall continue in office in
accordance with the terms of this Declaration of Trust, and all other persons
who at the time in question have been duly elected or appointed as trustees
in accordance with the provisions of this Declaration of Trust and are then
in office, being hereinafter called the "Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed
thereto; and
WHEREAS, it is provided that the beneficial interest in the trust assets
be divided into transferable shares of beneficial interest as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is the "TCW/DW
North American Government Bond Trust," and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue
or be sued under that name, which name (and the word "Trust" wherever herein
used) shall refer to the Trustees as Trustees, and not as individuals, or
personally, and shall not refer to the officers, agents, employees or
Shareholders of the Trust. Should the Trustees determine that the use of such
name is not advisable, they may use such other name for the Trust as they
deem proper and the Trust may hold its property and conduct its activities
under such other name.
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-Laws" means the By-Laws referred to in Section 3.9 hereof, as
from time to time amended.
(b) the terms "Commission," "Affiliated Person" and "Interested
Person," have the meanings given them in the 1940 Act.
(c) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration,"
"hereof," "herein" and "hereunder" shall be deemed to refer to this
Declaration rather than the article or section in which such words appear.
(d) "Distributor" means the party, other than the Trust, to a contract
described in Section 4.3 hereof.
(e) "Fundamental Policies" shall mean the investment policies and
restrictions set forth in the Prospectus and Statement of Additional
Information and designated as fundamental policies therein.
(f) "Investment Adviser" means any party, other than the Trust, to an
investment advisory 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) "Manager" means any party, other than the Trust, to a management
contract described in Section 4.1 hereof.
(i) "1940 Act" means the Investment Company Act of 1940 and the rules
and regulations thereunder as amended from time to time.
(j) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
(k) "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.
(l) "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.
(m) "Shareholder" means a record owner of outstanding Shares.
2
<PAGE>
(n) "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.
(o) "Transfer Agent" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.
(p) "Trust" means the TCW/DW North American Government Bond Trust.
(q) "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.
(r) "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 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
3
<PAGE>
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 organized under the laws of the
United States or of any state, territory or possession thereof, and of
corporations or organizations organized under foreign laws, or in "when
issued" contracts for any such securities, or retain Trust assets in cash
and from time to time change the investments of the assets of the Trust;
and to exercise any and all rights, powers and privileges of ownership or
interest in respect of any and all such investments of every kind and
description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more
persons, firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional securities in which the Trust may invest should the
Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by
any law limiting the investments which may be made by fiduciaries.
Section 3.3. Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust, or in the name
of any other Person as nominee, on
4
<PAGE>
such terms as the Trustees may determine, provided that the interest of the
Trust therein is appropriately protected. The right, title and interest of
the Trustees in the Trust Property shall vest automatically in each Person
who may hereafter become a Trustee. Upon the resignation, removal or death of
a Trustee he shall automatically cease to have any right, title or interest
in any of the Trust Property, and the right, title and interest of such
Trustee in the Trust Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or
not conveyancing documents have been executed and delivered.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares
and, subject to the provisions set forth in Articles VII, VIII and IX and
Section 6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 3.5. Borrowing Money; Lending Trust Assets. Subject to the
Fundamental Policies, the Trustee shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person and to lend Trust assets.
Section 3.6. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of
the Trust and the Trust Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Trustees or otherwise as the Trustees may deem
expedient.
Section 3.7. Collection and Payment. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay
all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which
any property is owed to the Trust; and to enter into releases, agreements and
other instruments.
Section 3.8. Expenses. Subject to Section 6.9 hereof, the Trustees shall
have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust
to themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
Section 3.9. Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken
by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment
by means of which all persons participating in the meeting can hear each
other, or by written consents of all the Trustees. The Trustees may adopt
By-Laws not inconsistent with this Declaration to provide for the conduct of
the business of the Trust and may amend or repeal such By-Laws to the extent
such power is not reserved to the Shareholders.
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
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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.
ARTICLE IV
INVESTMENT ADVISER, MANAGER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
Section 4.1. Investment Adviser and Manager. 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
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net asset value per Share (as described in Article VIII hereof) and pursuant
to which the Trust may either agree to sell the Shares to the other parties
to the contracts, or any of them, or appoint any such other party its sales
agent for such Shares. In either case, any such contract shall be on such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article IV, including, without
limitation, the provision for the repurchase or sale of shares of the Trust
by such other party as principal or as agent of the Trust.
Section 4.4. Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or
more Persons.
Section 4.5. Custodian. The Trustees may appoint or otherwise engage one
or more banks or trust companies, each having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least
five million dollars ($5,000,000) to serve as Custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in the By-Laws of the Trust.
Section 4.6. Parties to Contract. Any contract of the character described
in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other
contract may be entered into with any Person, although one or more of the
Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence
of any such relationship; nor shall any Person holding such relationship be
liable merely by reason of such relationship for any loss or expense to the
Trust under or by reason of said contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract when
entered into was not inconsistent with the provisions of this Article IV. The
same Person may be the other party to any contracts entered into pursuant to
Sections 4.1, 4.2, 4.3, 4.4 or 4.5 above or otherwise, and any individual may
be financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts mentioned in this Section 4.6.
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 out of
the property of the Trust and hold each Shareholder harmless from and against
all claims and liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability; provided that, in the event the
Trust shall consist of more than one Series, Shareholders of a particular
Series who are faced with claims or liabilities solely by reason of their
status as Shareholders of that Series shall be limited to the assets of that
Series for recovery of such loss and related expenses. The rights accruing to
a Shareholder under this Section 5.1 shall not exclude any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically
provided herein.
Section 5.2. Non-Liability of Trustees, etc. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to
any Shareholder, Trustee, officer, employee, or agent thereof for any action
or failure to act (including without limitation the failure to compel in any
way any former or acting Trustee to redress any breach of trust) except for
his own bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties.
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Section 5.3. Indemnification. (a) The Trustees shall provide for
indemnification by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, of any
person who is, or has been, a Trustee, officer, employee or agent of the
Trust against all liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been a Trustee, officer, employee or agent and against amounts paid or
incurred by him in the settlement thereof, in such manner as the Trustees may
provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
Section 5.4. No Bond Required of Trustees. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust or a Series thereof
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent
or be liable for the application of money or property paid, loaned or
delivered to or on the order of the Trustees or of said officer, employee or
agent. Every obligation, contract, instrument, certificate, Share, other
security of the Trust or a Series thereof or undertaking, and every other act
or thing whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as officers, employees or agents of the Trust or a
Series thereof. Every written obligation, contract, instrument, certificate,
Share, other security of the Trust or undertaking made or issued by the
Trustees shall recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the obligations
of the Trust or a Series thereof under any such instrument are not binding
upon any of the Trustees or Shareholders, individually, but bind only the
Trust Estate (or, in the event the Trust shall consist of more than one
Series, in the case of any such obligation 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 or classes of shares. Each share of any
Series shall represent an equal proportionate share in the assets of that
Series with each other Share in that Series. The Trustees may divide or
combine the shares of any Series into a greater or lesser number of shares in
that Series without thereby changing the proportionate interests in the
assets of that Series. Subject to the provisions of Section 6.9 hereof, the
Trustees may also authorize the creation of additional
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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 of
division of any property, profits, rights or interests of the Trust nor can
they be called upon to assume any losses of the Trust or suffer an assessment
of any kind by virtue of their ownership of Shares. The Shares shall be
personal property giving only the rights in the Declaration specifically set
forth. The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may
determine with respect to any series of Shares.
Section 6.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the Trustees
to create a general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal relationship other
than a trust. Nothing in the Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members
of a joint stock association.
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 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 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.
(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
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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.
(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 by an instrument executed by
a majority of their number abolish that Series or class and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
(i) Shareholders of a Series shall not be entitled to participate in a
derivative or class action with respect to any matter which only affects
another Series or its Shareholders.
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(j) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a
Series shall be entitled to receive his pro rata share of distributions of
income and capital gains made with respect to such Series. In the event of
the liquidation of a particular Series, the Shareholders of that Series
which has been established and designated and which is being liquidated
shall be entitled to receive, when and as declared by the Trustees, the
excess of the assets belonging to that Series over the liabilities
belonging to that Series. The holders of Shares of any Series shall not be
entitled hereby to any distribution upon liquidation of any other Series.
The assets so distributable to the Shareholders of any Series shall be
distributed among such Shareholders in proportion to the number of Shares
of that Series held by them and recorded on the books of the Trust. The
liquidation of any particular Series in which there are Shares then
outstanding may be authorized by an instrument in writing, without a
meeting, signed by a majority of the Trustees then in office, subject to
the approval of a majority of the outstanding voting securities of that
Series, as that phrase is defined in the 1940 Act.
ARTICLE VII
REDEMPTIONS
Section 7.1. Redemptions. Each Shareholder of a particular Series shall
have the right at such times as may be permitted by the Trust to require the
Trust to redeem all or any part of his Shares of that Series, upon and
subject to the terms and conditions provided in this Article VII. The Trust
shall, upon application of any Shareholder or pursuant to authorization from
any Shareholder, redeem or repurchase from such Shareholder outstanding
shares for an amount per share determined by the Trustees in accordance with
any applicable laws and regulations; provided that (a) such amount per share
shall not exceed the cash equivalent of the proportionate interest of each
share or of any class or Series of shares in the assets of the Trust at the
time of the redemption or repurchase and (b) if so authorized by the
Trustees, the Trust may, at any time and from time to time charge fees for
effecting such redemption or repurchase, at such rates as the Trustees may
establish, as and to the extent permitted under the 1940 Act and the rules
and regulations promulgated thereunder, and may, at any time and from time to
time, pursuant to such Act and such rules and regulations, suspend such right
of redemption. The procedures for effecting and suspending redemption shall
be as set forth in the Prospectus from time to time. Payment will be made in
such manner as described in the Prospectus.
Section 7.2. Redemption at the Option of the Trust. Each Share of the
Trust or any Series of the Trust shall be subject to redemption at the option
of the Trust at the redemption price which would be applicable if such Share
were then being redeemed by the Shareholder pursuant to Section 7.1: (i) at
any time, if the Trustees determine in their sole discretion that failure to
so redeem may have materially adverse consequences to the holders of the
Shares of the Trust or of any Series, or (ii) upon such other conditions with
respect to maintenance of Shareholder accounts of a minimum amount as may
from time to time be determined by the Trustees and set forth in the then
current Prospectus of the Trust. Upon such redemption the holders of the
Shares so redeemed shall have no further right with respect thereto other
than to receive payment of such redemption price.
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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 Adviser, the Custodian,
the Transfer Agent or such other person as the Trustees by resolution may
determine. The Trustees may suspend the daily determination of net asset
value to the extent permitted by the 1940 Act.
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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 or
of such Series such amount as they may deem necessary to pay the debts or
expenses of the Trust or of such Series or to meet obligations of the Trust
or of such Series, or as they may deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders of the Trust or of any
Series such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted 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.
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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 a Majority Shareholder 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 a Majority Shareholder Vote of the Trust or the appropriate
Series thereof, or by such other vote as may be established by the Trustees
with respect to any class or Series of Shares, or (iii) with respect to a
Series as provided in Section 6.9(h). Upon the termination of the Trust or
the Series:
(i) The Trust or the Series shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust or
the Series and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust or
the Series, collect its assets, sell, convey, assign, exchange, transfer
or otherwise dispose of all or any part of the remaining Trust Property or
Trust Property allocated or belonging to such Series to one or more
persons at public or private sale for consideration which may consist in
whole or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and to do all other acts appropriate to
liquidate its business; provided that any sale, conveyance, assignment,
exchange, transfer or other disposition of all or substantially all the
Trust 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.
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(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.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by
the affirmative vote of a majority of the Trustees or by an instrument signed
by a majority of the Trustees.
Section 9.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all
or substantially all of the Trust Property or Trust Property allocated or
belonging to such Series, including its good will, upon such terms and
conditions and for such consideration when and as authorized, at any meeting
of Shareholders called for the purpose, by the affirmative vote of the
holders of not less than two-thirds of the Shares of the Trust or such Series
outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of not less than
two-thirds of such Shares, or by such other vote as may be established by the
Trustees with respect to any series or class of Shares; provided, however,
that, if such merger, consolidation, sale, lease or exchange is recommended
by the Trustees, a Majority Shareholder Vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange
shall be deemed for all purposes to have been accomplished under and pursuant
to the laws of the Commonwealth of Massachusetts.
Section 9.5. Incorporation. With approval of a Majority Shareholder Vote,
or by such other vote as may be established by the Trustees with respect to
any Series or class of Shares, the Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other
organization to take over all of the Trust Property or the Trust Property
allocated or belonging to such Series or to carry on any business in which
the Trust shall directly or indirectly have any interest, and to sell, convey
and transfer the Trust Property or the Trust Property allocated or belonging
to such Series to any such corporation, trust, partnership, association or
organization in exchange for the shares or 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.
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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 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.
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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 "TCW/DW." Dean Witter Reynolds Inc. ("DWR")
and Trust Company of the West ("TCW") have consented to the use by the Trust
of the identifying name "TCW/DW," which is a property right of DWR and TCW.
The Trust will only use the name "TCW//DW" 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 "TCW/DW" for any purpose. DWR or TCW, or any corporate
affiliate of the parent of either, may use or grant to others the right to
use the name "TCW/DW", 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 TCW or their respective parents or affiliates, the Trust
will take such action as may be required to provide its consent to the use by
DWR or TCW or their respective parents or affiliates, or any corporate
affiliate of such parents or affiliates, or by any person to whom DWR or TCW
or their respective parents or affiliates, shall have granted the right to
the use, of the name "TCW/DW," or any combination or abbreviation thereof.
Upon the termination of (i) any management agreement into which DWR and the
Trust may enter, (ii) any investment advisory agreement into which TCW and
the Fund may enter, or (iii) the alliance agreement between DWR and TCW under
which DWR and TCW, or affiliates of either, have agreed to provide their
respective services pursuant to contracts with the Trust, the Trust shall,
upon request by DWR or TCW or their respective parents or affiliates, cease to
use the name "TCW/DW" 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 TCW or their respective parents or
affiliates, may request to effect the foregoing and to reconvey to DWR or TCW or
their respective parents or affiliates, any and all rights to such name.
Section 11.8. Principal Place of Business. The principal place of business
of the Trust shall be Two World Trade Center, New York, New York 10048, or
such other location as the Trustees may designate from time to time.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Declaration of
Trust this 19th day of
February, 199
/s/ Charles A. Fiumefreddo
--------------------------------
Charles A. Fiumefreddo, as
Trustee and not individually
Two World Trade Center
New York, New York 10048
/s/ Richard M. DeMartini
--------------------------------
Richard M. DeMartini, as
Trustee and not individually
Two World Trade Center
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 19th day of February 1992, RICHARD M. DEMARTINI, 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, 1992
My commission expires: December 31, 1992
19
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument this 19th
day of February, 1992.
/s/ Joseph F. Mazzella
---------------------------------
Joseph F. Mazzella, as Trustee
and not individually
101 Federal Street
Boston, MA 02110
COMMONWEALTH OF MASSACHUSETTS
Suffolk, SS. Boston, MA
February 19, 1992
Then personally appeared the above-named Joseph F. Mazzella who
acknowledged the foregoing instrument to be his free act and deed.
before me.
/s/ Sheila M. McCarty
---------------------------------
Notary Public
My commission expires: May 31, 1996
20
A M E N D M E N T
Dated: May 18, 1992
To Be Effective: May 18, 1992
TO
TCW//DW NORTH AMERICAN GOVERNMENT BOND TRUST
DECLARATION OF TRUST
DATED FEBRUARY 19, 1992
Amendment dated May 18, 1992
to the Declaration of Trust
(the "Delacration") of TCW/DW
North American Government Bond
Trust dated February 19, 1992
WHEREAS, the Trust was established by the Declaration on the date hereinabove
set forth under the laws of the Commonwealth of Massachusetts; and
WHEREAS, the Trustees of the Trust have deemed it advisable to change the name
of the Trust to "TCW/DW North American Government Income Trust," to be
effective on May 18, 1992:
1. Section 1.1 of Article I of the Declaration is hereby amended so
that the Section shall read in its entirety as follows:
"Section 1.1. Name. The name of the Trust created hereby is the "TCW/DW
North American Government Income Trust," and so far as may be
practicable the Trustees shall conduct the Trust's activities,
execute all documents and sue or be sued under that name, which name,
(and the word "Trust" whenever herein used) shall refer to the Trustees
as Trustees, and not as individuals, or personally, and shall not refer
to the officers, agents, employees or Shareholders of the Trust. Should
the Trustees determine that the use of such name is not advisable, they
may use such other name for the Trust as they deem proper and the Trust
may hold its property and conduct its activities under such other
name."
2. Subsection 1.2 Definitions.....
"(o) "Trust" means the TCW/DW North American Government Income Trust."
3. The Trustees of the Trust hereby reaffirm the Declaration, as
amended, in all respects.
Amendment Dated May 18, 1992 to
Declaration of Trust
TCW/DW North American Government Income Trust
The undersigned hereby certifies that he is the Secretary of TCW/DW
North American Government Income Trust (the "Trust"), an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts by
Trust dated February 19, 1992, that annexed hereto is an Amendment to the
Declaration of Trust of the Trust adopted by a majority of Trustees of the
Trust as a meeting on May 18, 1992, as provided in Section 9.3 of the said
Declaration, said Amendment to take effect immediately, and I do hereby further
certify that such Amendment has not been amended and is on the date hereof in
full force and effect.
Dated this 18th day of May, 1992.
/s/ Sheldon Curtis
--------------------------------
Sheldon Curtis
Secretary
STATE OF NEW YORK}
: ss.:
COUNTY OF NEW YORK}
On this 18th day of May, 1992, SHELDON CURTIS, known to me to be the
individual described in and who executed the foregoing instrument, personally
appeared before me and he severally acknowledged the foregoing instrument to be
his free act and deed.
/s/ Barry Fink
-------------------------------
Notary Public
My commission expires:
<PAGE>
BY-LAWS
OF
TCW/DW NORTH AMERICAN GOVERNMENT 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 TCW/DW North
American Government Income Trust dated February 19, 1992.
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, otherwise
required by Section 16(c) of the 1940 Act and to the extent required by the
corporate or, 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.
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
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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 Chairman and shall
be called by the Chairman 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 Chairman 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 Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
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. (a) The Chairman shall be the chief executive
officer of the Trust; he shall preside at all meetings of the Shareholders
and of the Trustees; 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 the President or to one or more Vice Presidents
such of his powers and duties at such times and in such manner as he may deem
advisable; he 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.
(b) In the absence of the Chairman, the Board shall determine who shall
preside at all meetings of the shareholders and the Board of Trustees.
SECTION 6.7. The President. The President shall perform such duties as the
Board of Trustees and the Chairman 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 Chairman, 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
Chairman 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 Chairman.
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
Chairman, 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 Chairman, 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
Chairman 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 Chairman, 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 Chairman, 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 Chairman, 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 Chairman, 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 the
Trust by the Chairman, the President, or a Vice President, and countersigned
by the Secretary or an Assistant
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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.
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,
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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 TCW/DW North American Government
Income Trust, dated February 19, 1992, a copy of which is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that
the name TCW/DW North American Government 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 TCW/DW
North American Government 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 TCW/DW North American Government Income Trust, but the Trust
Estate only shall be liable.
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INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 2nd day of June, 1992, and amended as of May 1,
1994, by and between TCW/DW North American Government Income Trust, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter called the "Fund"), and TCW Funds Management,
Inc., a California corporation (hereinafter called the "Investment Adviser"):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, The Investment Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940 (the "Advisers Act"), and engages
in the business of acting as investment adviser; and
WHEREAS, The Fund desires to retain the Investment Adviser to render
investment advisory services in the manner and on the terms and conditions
hereinafter set forth; and
WHEREAS, The Investment Adviser desires to be retained to perform services
on said terms and conditions;
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Adviser agree as follows:
1. The Fund hereby retains the Investment Adviser to act as investment
adviser of the Fund and, subject to the supervision of the Trustees of the
Fund (the "Trustees"), to invest the Fund's assets as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Adviser
shall obtain and evaluate such information and advice relating to the
economy, securities and commodities markets and securities and commodities as
it deems necessary or useful to discharge its duties hereunder; shall
continuously invest the assets of the Fund in a manner consistent with the
investment objectives and policies of the Fund; shall determine the
securities and commodities to be purchased, sold or otherwise disposed of by
the Fund and the timing of such purchases, sales and dispositions; and shall
take such further action, including the placing of purchase and sale orders
on behalf of the Fund, as the Investment Adviser shall deem necessary or
appropriate. The Investment Adviser shall also furnish to or place at the
disposal of the Fund such of the information, evaluations, analyses and
opinions formulated or obtained by the Investment Adviser in the discharge of
its duties as the Fund may, from time to time, reasonably request.
2. The Investment Adviser shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Investment
Adviser shall be deemed to include persons employed or otherwise retained by
the Investment Adviser 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 Adviser may desire. The Investment Adviser shall
provide the Fund's manager with such records and information as may
reasonably be required by the Fund's manager pursuant to its obligations
under its management agreement with the Fund to maintain the Fund's books and
records.
3. The Fund will, from time to time, furnish or otherwise make available
to the Investment Adviser such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the
Investment Adviser may reasonably require in order to discharge its duties
and obligations hereunder.
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4. The Investment Adviser 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 its directors, officers and
employees, if any, who are also Trustees or officers of the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses
of the Fund (except expenses borne by the Fund's manager pursuant to a
management agreement with the Fund), including without limitation: fees
pursuant to any management agreement into which the Fund may enter; fees
pursuant to any plan of distribution that the Fund may adopt; the charges and
expenses of any registrar, any custodian or depository appointed by the Fund
for the safekeeping of its cash, portfolio securities or commodities and
other property, and any stock transfer or dividend agent or agents appointed
by the Fund; brokers' commissions chargeable to the Fund in connection with
portfolio transactions to which the Fund is a party; all taxes, including
securities or commodities issuance and transfer taxes, and fees payable by
the Fund to federal, state or other governmental agencies; the cost and
expense of engraving or printing of certificates representing shares of the
Fund; all costs and expenses in connection with the registration and
maintenance of registration of the Fund and its shares with the Securities
and Exchange Commission and various states and other jurisdictions (including
filing fees and legal fees and disbursements of counsel and the costs and
expenses of preparation, printing (including typesetting) and distributing
prospectuses and statements of additional information for such purposes); 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 Adviser or the Fund's manager or any
corporate affiliate of either of them; all expenses incident to the payment
of any dividend or distribution program; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Trustees of the Fund who are not interested
persons (as defined in the Act) of the Fund or the Investment Adviser or the
Fund's manager, and of independent accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and Trustees) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims
and liabilities and litigation costs and any indemnification related
thereto); and all other charges and costs of the Fund's operation unless
otherwise explicitly provided herein.
6. For the services to be rendered by the Investment Adviser, the Fund
shall pay to the Investment Adviser monthly compensation determined by
applying the following annual rates to the Fund's average daily net assets:
0.26% of daily net assets up to $3 billion; and 0.24% of daily net assets
over $3 billion. Such calculation shall be made by applying 1/365th of the
annual rates to the Fund's net assets each day determined as of the close of
business on that day or the last previous business day. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fees as set forth above.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Adviser pursuant to paragraph 6 hereof, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund imposed by state securities laws
or regulations thereunder, as such limitations may be raised or lowered from
time to time, the Investment Adviser shall reduce its advisory fee to the
extent of 40% of such excess and, if and to the extent required by law,
pursuant to any such laws or regulations, will reimburse the Fund for 40% of
annual operating expenses in excess of any expense limitation that may be
applicable; provided, however, there shall be excluded from such expenses the
amount of any interest, taxes, distribution fees, brokerage commissions and
extraordinary expenses (including but not limited to legal claims and
liabilities and litigations costs and any indemnification related thereto)
paid or payable by the Fund. Such reduction, if any, shall be computed and
accrued weekly, 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 full week of the month, that expense
limitation which results in the largest reduction in the Investment Adviser's
fee shall be applicable.
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For purposes of this provision, should any applicable expense limitation
be based upon the gross income of the Fund, such gross income shall include,
but not be limited to, interest on debt securities in the Fund's portfolio
accrued to and including the last day of the Fund's fiscal year, and
dividends declared on equity securities in the Fund's portfolio, the record
dates for which fall on or prior to the last day of such fiscal year, but
shall not include gains from the sale of securities.
8. The Investment Adviser will use its best efforts in its investment of
the Fund's assets, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations hereunder, the
Investment Adviser shall not be liable to the Fund or any of its investors
for any error of judgment or mistake of law or for any act or omission by the
Investment Adviser or for any losses sustained by the Fund or its investors.
The Adviser shall be indemnified by the Fund as an agent of the Fund in
accordance with the terms of Section 4.8 of the Fund's By-Laws.
9. Nothing contained in this Agreement shall prevent the Investment
Adviser or any affiliated person of the Investment Adviser from acting as
investment adviser or manager for any other person, firm or corporation
(including any other investment company), whether or not the investment
objectives or policies of any such other person, firm or corporation are
similar to those of the Fund, and shall not in any way bind or restrict the
Investment Adviser or any such affiliated person from buying, selling or
trading any securities or commodities for their own accounts or for the
account of others for whom the Investment Adviser or any such affiliated
person may be acting. Nothing in this Agreement shall limit or restrict the
right of any Trustee, officer or employee of the Investment Adviser to engage
in any other business or to devote his time and attention in part to the
management or other aspects of any other business whether of a similar or
dissimilar nature.
10. This Agreement shall remain in effect until April 30, 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 Board of 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 Adviser, either by
majority vote of the Trustees of the Fund or by the vote of a majority of the
outstanding voting securities of the Fund; (b) this Agreement shall
immediately terminate in the event of its assignment (to the extent required
by the Act and the rules thereunder) unless such automatic terminations shall
be prevented by an exemptive order of the Securities and Exchange Commission;
and (c) the Investment Adviser may terminate this Agreement without payment
of penalty on thirty days' written notice to the Fund. Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed
post-paid, to the other party at the principal office of such party.
11. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Agreement to the
requirements of applicable federal laws or regulations, but neither the Fund
nor the Investment Adviser shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the Advisers Act or any
rules, regulations or orders of the Securities and Exchange Commission, the
latter shall control.
13. The Fund acknowledges that Trust Company of the West, an affiliate of
the Investment Adviser, owns its own name, initials and logo. The Fund agrees
to change its name at the request of the Investment Adviser if this Agreement
is terminated for any reason.
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14. The Declaration of Trust establishing TCW/DW North American Government
Income Trust, dated February 19, 1992, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name TCW/DW
North American Government 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 TCW/DW North
American Government 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
TCW/DW North American Government Income Trust, but the Trust Estate only
shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as amended, on May 1, 1994, in New York, New York.
TCW/DW NORTH AMERICAN GOVERNMENT
INCOME TRUST
By
................................
Attest:
......................................
TCW FUNDS MANAGEMENT, INC.
By
.................................
By
.................................
Attest:
......................................
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TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 30th day of June, 1993, between TCW/DW North
American Government Income Trust, an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts (the "Fund" or "Trust"),
and Dean Witter Distributors Inc., a Delaware corporation (the
"Distributor");
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a non-diversified open-end investment company
and it is in the interest of the Fund to offer its shares for sale
continuously, and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's transferable
shares of beneficial interest, of $.01 par value ("Shares"), in order to
promote the growth of the Fund and facilitate the distribution of its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Distributor. (a) The Fund hereby appoints
the Distributor as the principal underwriter of the Fund to sell Shares to
the public on the terms set forth in this Agreement and the Fund's Prospectus
and the Distributor hereby accepts such appointment and agrees to act
hereunder. The Fund, during the term of this Agreement, shall sell Shares to
the Distributor upon the terms and conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from the Fund and to sell Shares as principal to investors, and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate
of the Distributor, upon the terms described herein and in the Fund's
prospectus (the "Prospectus") and statement of additional information
included in the Fund's registration statement (the "Registration Statement")
most recently filed from time to time with the Securities and Exchange
Commission (the "SEC") and effective under the Securities Act of 1933, as
amended (the "1933 Act"), and 1940 Act or as said Prospectus may be otherwise
amended or supplemented and filed with the SEC pursuant to Rule 497 under the
1933 Act.
SECTION 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive principal underwriter and distributor of the Trust, except that the
exclusive rights granted to the Distributor to sell the Shares shall not
apply to Shares issued by the Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company
with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company
by the Fund; or (ii) pursuant to reinvestment of dividends or capital gains
distributions; or (iii) pursuant to the reinstatement privilege afforded
redeeming shareholders.
SECTION 3. Purchase of Shares from the Trust. (a) The Distributor shall
have the right to buy from the Trust the Shares needed, but not more than the
Shares needed (except for clerical errors in transmission), to fill
unconditional orders for Shares placed with the Distributor by investors and
securities dealers. The price which the Distributor shall pay for the Shares
so purchased from the Fund shall be the net asset value, determined as set
forth in the Prospectus.
(b) The shares are to be resold by the Distributor at the net asset value
per share, as set forth in the Prospectus to investors, or to securities
dealers of its choice, including DWR, who have entered into selected dealer
agreements with the Distributor pursuant to Section 7 ("Selected Dealers").
(c) The Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(d) hereof. The Fund shall also have the right to suspend the sale
of the Shares if trading on the New York Stock Exchange shall have been
suspended, if a banking moratorium shall have been declared by federal or New
York authorities, or if there shall have been some other extraordinary event
which, in the judgment of the Fund, makes it impracticable to sell the
Shares.
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(d) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept
orders for the purchase of Shares. The Distributor will confirm orders upon
their receipt, and the Fund (or its agent) upon receipt of payment therefor
and instructions will deliver share certificates for such Shares or a
statement confirming the issuance of Shares. Payment shall be made to the
Fund in New York Clearing House funds. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the Fund (or its
agent).
With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Trust's transfer agent to receive instructions
directly from the Selected Dealer on behalf of the Distributor as to
registration of Shares in the names of investors and to confirm issuance of
the Shares to such investors. The Distributor is also authorized to instruct
the transfer agent to receive payment directly from the Selected Dealer on
behalf of the Distributor, for prompt transmittal to the Trust's custodian,
of the purchase price of the Shares. In such event the Distributor shall
obtain from the Selected Dealer and maintain a record of such registration
instructions and payments.
SECTION 4. Repurchase or Redemption of Shares. (a) Any of the outstanding
Shares may be tendered for redemption at any time, and the Fund agrees to
redeem the Shares so tendered in accordance with the applicable provisions
set forth in the Prospectus. The price to be paid to redeem the Shares shall
be equal to the net asset value determined as set forth in the Prospectus.
All payments by the Fund hereunder shall be made in the manner set forth
below.
Upon any redemption of Shares the Fund shall pay the total amount of the
redemption price in accordance with applicable provisions of the Prospectus
in New York Clearing House funds, or in porfolio securities in event of
redemptions in kind, on or before the seventh day subsequent to its having
received the notice of redemption in proper form.
(b) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office
of the Distributor in accordance with applicable provisions set forth in the
Prospectus. The Distributor shall promptly transmit to the transfer agent of
the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
(c) The Distributor is authorized, as agent for the Fund, to repurchase
Shares held in a shareholder's account with the Fund for which no share
certificate has been issued, upon the telephonic or telegraphic request of
the shareholder, or at the discretion of the Distributor. The Distributor
shall promptly transmit to the transfer agent of the Fund, for redemption,
all such orders for repurchase of shares. Payment for shares repurchased may
be made by the Fund to the Distributor for the account of the shareholder.
The Distributor shall be responsible for the accuracy of instructions
transmitted to the Fund's transfer agent in connection with all such
repurchases.
(d) Redemption of Shares or payment by the Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by 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 during any other period when the Securities and Exchange
Commission, by order, so permits.
With respect to Shares tendered for redemption or repuchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of the Trust to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and
to instruct the Trust to transmit payments for such redemptions and
repurchases directly to the Selected Dealer on behalf of the Distributor for
the account of the shareholder. The Distributor shall obtain from the
Selected Dealer and maintain a record of such orders. The Distributor is
further authorized to obtain from the Trust; and shall maintain, a record of
payments made directly to the Selected Dealer on behalf of the Distributor.
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SECTION 5. Duties of the Fund. (a) The Fund shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use in connection with the
distribution of the Shares, including one certified copy, upon request by the
Distributor, of all financial statements prepared by the Fund and examined by
independent accountants. The Fund shall, at the expense of the Distributor,
make available to the Distributor such number of copies of the Prospectus as
the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Shares for sale under the
securities laws of such states as the Distributor and the Fund may approve.
Any such qualification may be withheld, terminated or withdrawn by the Fund
at any time in its discretion. As provided in Section 8(c) hereof, the
expense of qualification and maintenance of qualification shall be borne by
the Fund. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Fund in
connection with such qualification.
(d) The Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of annual and
interim reports of the Fund.
SECTION 6. Duties of the Distributor. (a) The Distributor shall sell
shares of the Trust through DWR and may sell shares through other securities
dealers and its own Account Executives, if any, and shall devote reasonable
time and effort to promote sales of the Shares, but shall not be obligated to
sell any specific number of Shares. The services of the Distributor hereunder
are not exclusive and it is understood that the Distributor may act as
principal underwriter for other registered investment companies. It is also
understood that Selected Dealers, including DWR, may also sell shares for
other registered investment companies.
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the Fund.
(c) The Distributor agrees that it will comply with the terms and
limitations of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. ("NASD").
SECTION 7. Selected Dealers Agreements. (a) The Distributor shall have the
right to enter into selected dealers agreements with Selected Dealers for the
sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Fund. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public
offering price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell Shares
only to such Selected Dealers as are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by the
Fund, for the confirmation of sales of Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers
on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD, as such requirements
may from time to time exist.
SECTION 8. Payment of Expenses. (a) The Distributor shall bear all
expenses incurred by it in connection with its duties and activities under
this Agreement including the payment to Selected Dealers of any sales
commissions service fees, and other expenses for sales of the Trust's shares
(except such expenses as are specifically undertaken herein by the Trust)
incurred or paid by Selected Dealers, including DWR.
(b) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Trustees of the
Fund who are not interested persons (as defined in the
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1940 Act) of the Fund or the Distributor, and independent accountants, in
connection with the preparation and filing of any required Registration
Statements and Prospectuses and all amendments and supplements thereto, and
the expense of preparing, printing, mailing and otherwise distributing
prospectuses and statements of additional information, annual or interim
reports or proxy materials to shareholders.
(c) The Fund shall bear the cost and expenses of qualification of the
Shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Fund as a broker or dealer, in such states of the United
States or other jurisdictions as shall be selected by the Fund and the
Distributor pursuant to Section 5(c) hereof and the cost and expenses payable
to each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5(c) hereof.
SECTION 9. Indemnification. (a) The Fund shall indemnify and hold harmless
the Distributor and each person, if any, who controls the Distributor against
any loss, liability, claim, damage or expense (including the reasonable cost
of investigating or defending any alleged loss, liability, claim, damage or
expense and reasonable counsel fees incurred in connection therewith) arising
by reason of any person acquiring any Shares, which may be based upon the
1933 Act, or on any other statute or at common law, on the ground that the
Registration Statement or related Prospectus and Statements of Additional
Information, as from time to time amended and supplemented, or the annual or
interim reports to shareholders of the Fund, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading,
unless such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Fund in connection therewith by
or on behalf of the Distributor; provided, however, that in no case (i) is
the indemnity of the Fund in favor of the Distributor and any such
controlling persons to be deemed to protect the Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless
disregard of its obligations and duties under this Agreement; or (ii) is the
Fund to be liable under its indemnity agreement contained in this paragraph
with respect to any claim made against the Distributor or any such
controlling persons, unless the Distributor or any such controlling persons,
as the case may be, shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve it from any liability which it may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Fund will be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the defense, of
any suit brought to enforce any such liability, but if the Fund elects to
assume the defense, such defense shall be conducted by counsel chosen by it
and satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume
the defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them, but,
in case the Fund does not elect to assume the defense of any such suit, it
will reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses of
any counsel retained by them. The Fund shall promptly notify the Distributor
of the commencement of any litigation or proceedings against it or any of its
officers or trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless the Fund and
each of its Trustees and officers and each person, if any, who controls the
Fund against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in
conformity with, information furnished to the Fund in writing by or on behalf
of the Distributor for use in connection with the Registration Statement or
related Prospectus and Statement of Additional Information, as from time to
time amended, or the annual or interim reports to shareholders.
4
<PAGE>
(ii) The Distributor shall indemnify and hold harmless the Trust and the
Trust's transfer agent, individually and in its capacity as the Trust's
transfer agent, from and against any claims, damages and liabilities which
arise as a result of actions taken pursuant to instructions from, or on
behalf of, the Distributor to: (1) redeem all or a part of shareholder
accounts in the Trust pursuant to subsection 4(c) hereof and pay the proceeds
to, or as directed by, the Distributor for the account of each shareholder
whose Shares are so redeemed; and (2) register Shares in the names of
investors, confirm the issuance thereof and receive payment therefor pursuant
to subsection 3(d).
(iii) In case any action shall be brought against the Fund or any person
so indemnified by this subsection 9(b) in respect of which indemnity may be
sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall
have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages, liabilities or expenses
(or actions in respect thereof) referred to herein, then each indemnifiying
party shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Fund on the one hand and the
Distributor on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Fund on the one hand and the Distributor on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Fund on the one hand and the Distributor on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Fund or the Distributor and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Fund and the Distributor agree that
it would not be just and equitable if contribution were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to above. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to above
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
claim. Notwithstanding the provisions of this subsection (c), the Distributor
shall not be required to contribute any amount in excess of the amount by
which the total price at which the Shares distributed by it to the public
were offered to the public exceeds the amount of any damages which it has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 10. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until April 30, 1994, and thereafter, but only so long as such
continuance is specifically approved at least annually by (i) the Board of
Trustees of the Fund, or by the vote of a majority of the outstanding voting
securities of the Fund, cast in person or by proxy, and (ii) a majority of
those Trustees who are not parties to this Agreement or interested persons of
any such party and who have no direct or indirect financial interest in this
Agreement or in the operation of the Fund's Rule 12b-1 Plan or in any
agreement related thereto, cast in person at a meeting called for the purpose
of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Trustees of the Fund, by a majority of the Trustees of the
Fund who are not interested persons of the Fund and
5
<PAGE>
who have no direct or indirect financial interest in this Agreement, or by
vote of a majority of the outstanding voting securities of the Fund, or by
the Distributor, on sixty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Trustees of the Fund, or by the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Trustees of the Fund who
are not parties to this Agreement or interested persons of any such party and
who have no direct or indirect financial interest in this Agreement or in any
Agreement related to the Fund's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act, cast in person at a meeting called for the purpose of
voting on such approval.
SECTION 12. Governing Law. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the
1940 Act. To the extent the applicable law of the State of New York, or any
of the provisions herein, conflict with the applicable provisions of the 1940
Act, the latter shall control.
SECTION 13. Personal Liability. The Declaration of the Trust establishing
TCW/DW North American Government Income Trust, dated February 19, 1992, a
copy of which, together with all amendments thereto (the "Declaration"), is
on file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name TCW/DW North American Government 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 TCW/DW North American Government 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 TCW/DW North American Government 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 written in New York, New York.
TCW/DW NORTH AMERICAN GOVERNMENT
INCOME TRUST
By:
.................................
DEAN WITTER DISTRIBUTORS INC.
By:
.................................
6
<PAGE>
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
SELECTED DEALERS AGREEMENT
Gentlemen:
Dean Witter Distributors Inc. (the "Distributor") has a distribution
agreement (the "Distribution Agreement") with TCW/DW North American
Government 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 you, as a Selected Dealer, upon the following terms and
conditions:
1. In all sales of Shares to the public you shall act as dealer for your
own account, and in no transaction shall you have any authority to act as
agent for the Fund, for us or for any other Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order, as set forth in the
current Prospectus. The procedure relating to the handling of orders shall be
subject to instructions which we or the Fund shall forward from time to time
to you. All orders are subject to acceptance or rejection by the Distributor
or the Fund in the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable net asset values
and subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and
offers to sell Shares you will furnish to each person to whom any such sale
or offer is made a copy of the Prospectus (as then amended or supplemented)
and will not furnish to any person any information relating to the Shares,
which is inconsistent in any respect with the information contained in the
Prospectus (as then amended or supplemented) or cause any advertisement to be
published by radio or television or in any newspaper or posted in any public
place or use any sales promotional material without our consent and the
consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund and
personal services to Fund shareholders by paying you a sales charge and/or
other commissions, which may be in the form of a gross sales credit and/or an
annual residual commission and/or service fee, under the terms and in the
percentage amounts as may be in effect from time to time by the Distributor.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding; e.g., by a change in
the "net asset value" from that used in determining the offering price to
your customers.
6. If any Shares sold to you under the terms of this Agreement are
repurchased by us for the account of the Fund or are tendered for redemption
within seven business days after the date of the confirmation of the original
purchase by you, it is agreed that you shall forfeit your right to, and
refund to us, any commission received by you with respect to such Shares.
7. No person is authorized to make any representations concerning the
Shares or the Fund except those contained in the current Prospectus and in
such printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus. In purchasing Shares through us you shall
rely solely on the representations contained in the Prospectus and
supplemental information above mentioned. Any printed information which we
furnish you other than the Prospectus and the Fund's periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no
liability or responsibility to you in these respects unless expressly assumed
in connection therewith.
1
<PAGE>
8. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus at or prior to the time 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.
9. You are hereby authorized (i) to place orders directly with the Fund or
its agent for shares of the Fund to be sold by us to you subject to the
applicable terms and conditions governing the placement of orders 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.
10. 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.
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.
DW DISTRIBUTORS INC.
By
................................
(Authorized Signature)
Please return one signed copy
of this agreement to:
DW Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name: ....................................................................
By: ...........................................................................
Address: ......................................................................
...............................................................................
Date: .........................................................................
2
CUSTODY AGREEMENT
Agreement made as of this day of , 1992,
between TCW/DW North American Government 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.
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 Offic-
ers. 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 let-
ter 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, cur-
rency, 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 identi-
fied 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. com-
modities exchange or board of trade at a specified future time
at an agreed upon price.
11. "Futures Contract" shall mean a Financial Futures
Contract and/or Index Futures Contracts.
- 2 -
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 commis-
sion merchant or a Clearing Member (a "Margin Account Agree-
ment"), 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 effect-
ing 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 Corpora-
tion, a clearing agency registered under Section 17A of the
- 3 -
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 Op-
tion, 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 Securi-
ties, to sell such instruments, currency, or Securities to the
writer thereof for the exercise price.
23. "Reverse Repurchase Agreement" shall mean an agree-
ment 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 Op-
tions, 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 -
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 recorda-
tion or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically al-
located 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 inter-
est 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 suc-
cessors 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 Agree-
ment between The Bank of New York and the Transfer Agent.
31. "Written Instructions" shall mean written communica-
tions 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 -
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 as-
sets 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 previ-
ously 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, ap-
proving, 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 certi-
fied resolution of the Board of Trustees of the Fund,
substantially in the form of Exhibit B hereto, approving,
- 6 -
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 con-
nection 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 ac-
counts 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 ac-
cordance 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 Securi-
ties 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 As-
sistant Secretary of the Fund setting forth the name and ad-
dress 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
- 7 -
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.
- 8 -
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, prox-
ies, 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.
- 9 -
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 author-
ity 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 connec-
tion with the reorganization, refinancing, merger, consolida-
tion, 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 posses-
sion 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, clos-
ing 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 -
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 Writ-
ten 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
- 11 -
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 Securi-
ties 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 specify-
ing 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 Clear-
ing 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
- 12 -
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 pay-
able 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 Clear-
ing 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 specify-
ing 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 specify-
ing 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
- 13 -
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 Op-
tion 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 specify-
ing 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 Op-
tions 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 is-
suer and the title and number of shares subject to the Covered
Call Option; (c) the Clearing Member to whom the underlying
- 14 -
Securities are to be delivered; and (d) the total amount pay-
able 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 specify-
ing 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 Securi-
ties, 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 Securi-
ties 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 specify-
ing: (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 al-
located 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 Ac-
count. 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
- 15 -
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 specify-
ing 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 Securi-
ties, if any, specifically allocated to such Series to be
deposited in a Margin Account, and the name in which such ac-
count 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.
- 16 -
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 Ac-
count 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,
- 17 -
(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 commis-
sion 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 ac-
cordance 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 commis-
sion, 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 Agree-
ment.
(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
- 18 -
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 ac-
cordance 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 al-
located 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
- 19 -
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 Op-
tion 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 Securi-
ties 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.
- 20 -
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 al-
located; (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 commis-
sion 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 previ-
ously 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
- 21 -
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 Op-
tion 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 withdraw-
als 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 ac-
cordance 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
- 22 -
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 is-
suer 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 pay-
able 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 withdraw-
als 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
- 23 -
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 Agree-
ment 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 termina-
tion; (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 Securi-
ties 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 Agree-
ment 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 col-
lateral and the premium, if any, separately identified, and
(f) the name of the broker, dealer, or financial institution
- 24 -
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 pay-
ment in connection with a delivery otherwise than through the
Book-Entry System or a Depository only in the form of a certi-
fied 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 Securi-
ties: (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 Ac-
count 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 Ac-
count, 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.
- 25 -
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 state-
ment. 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,
- 26 -
the Fund shall promptly specify in a Certificate the ad-
ditional cash and/or Securities to be deposited in such Col-
lateral 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 Instruc-
tions, or a Certificate setting forth the date of the declara-
tion 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
- 27 -
(b) The amount of money to be received by the
Custodian for the sale of such Shares and specifically al-
located 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
- 28 -
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 effec-
tive 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 borrow-
ing, 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 borrow-
ing, 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
- 29 -
borrowing date specified in a Certificate the specified col-
lateral 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 Agree-
ment, 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 li-
able for:
- 30 -
(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 Securi-
ties, 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 sub-
paragraph shall not excuse any liability the Custodian may
have for failing to act in accordance with Article X hereof or
any Certificate, Oral Instructions, or Written Instructions
given in accordance with this Agreement. The Custodian
specifically, but not by way of limitation, shall not be under
any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for
the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obliga-
tion 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 termina-
tion 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
- 31 -
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 inter-
est 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 col-
lection or late crediting by a Depository of any amount pay-
able 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 obliga-
tion 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.
- 32 -
6. The Custodian shall not be under any duty or obliga-
tion 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 obliga-
tion (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
- 33 -
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 li-
ability to the Fund in acting upon Oral Instructions or Writ-
ten 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 ac-
cordance 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
- 34 -
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 regula-
tions. 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 reason-
able 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 account-
ing 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 invest-
ment 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 Agree-
ment, 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 prevail-
ing from time to time among brokers or dealers in such Securi-
ties 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 Agree-
ment, and no covenant or obligation shall be implied in this
Agreement against the Custodian.
- 35 -
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 Agree-
ment.
3. Notwithstanding the foregoing, the Fund may
terminate this Agreement upon the date specified in a written
- 36 -
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 -
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 writ-
ten 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 sup-
pliers 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 -
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 -
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 Of-
ficers 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 -
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 li-
abilities 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 -
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.
TCW/DW North American Government Income Trust
______________________________________________
[SEAL] By:
_______________________
Attest:
_______________________
THE BANK OF NEW YORK
[SEAL] By:
_______________________
Attest:
__________________________
- 42 -
APPENDIX A
I, , President and I,
, of TCW/DW North
American Government Income Trust, 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 Instruc-
tions 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
_________________ ________________ _________________
APPENDIX B
I, , President and I,
, of TCW/DW North American Government
Income Trust, 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 posi-
tions with the Fund and each has been duly elected or ap-
pointed 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
____________________ ___________________ _________________
APPENDIX C
The undersigned, hereby
certifies that he or she is the duly elected and acting
of TCW/DW North American Government Income Trust
(the "Fund"), further certifies that the following resolutions
were adopted by the Board of Trustees of the Fund at a meeting
duly held on , 1992, 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 , 1992 (the "Custody Agree-
ment") is authorized and instructed on a continuous and ongo-
ing basis to act in accordance with, and to rely on instruc-
tions 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 deliver-
ing 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
TCW/DW North American Government Income Trust, as of the
day of , 1992.
APPENDIX D
I, Octavio Cabrera, an Assistant Treasurer 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
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:
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies
that he or she is the duly elected and acting of
TCW/DW North American Government Income Trust, 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 , 1992, 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 , 1992, (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 securi-
ties 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 TCW/DW North American Income Trust, as of the day
of , 1992.
________________________________
[SEAL]
EXHIBIT B
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of TCW/DW North American Government Income Trust, 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 , 1992, 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 , 1992, (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 Agree-
ment, 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 TCW/DW North American Government Income Trust, as of the
day of , 1992.
________________________________
[SEAL]
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of TCW/DW North American Government Income Trust,
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 , 1992, 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 , 1992 (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 Agree-
ment, 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 limita-
tion, 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 TCW/DW North American Government Income Trust, as of
the day of , 1992.
___________________________________
[SEAL]
EXHIBIT C
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of TCW/DW North American Government Income Trust, 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 , 1992, 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 , 1992, (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 Agree-
ment, 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 TCW/DW North American Government Income Trust, as of
the day of , 1992.
______________________________________
[SEAL]
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
DEAN WITTER TRUST COMPANY
TCW/DW
[open-end]
TABLE OF CONTENTS
Page
Article 1 Terms of Appointment; Duties of DWTC . . . 2
Article 2 Fees and Expenses. . . . . . . . . . . . . 6
Article 3 Representations and Warranties of DWTC . . 7
Article 4 Representations and Warranties of the
Fund . . . . . . . . . . . . . . . . . . . 8
Article 5 Duty of Care and Indemnification . . . . . 9
Article 6 Documents and Covenants of the Fund and
DWTC . . . . . . . . . . . . . . . . . . . 12
Article 7 Duration and Termination of Agreement. . . 16
Article 8 Assignment . . . . . . . . . . . . . . . . 16
Article 9 Affiliations . . . . . . . . . . . . . . . 17
Article 10 Amendment. . . . . . . . . . . . . . . . . 18
Article 11 Applicable Law . . . . . . . . . . . . . . 18
Article 12 Miscellaneous. . . . . . . . . . . . . . . 18
Article 13 Merger of Agreement. . . . . . . . . . . . 20
Article 14 Personal Liability . . . . . . . . . . . . 21
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 1st
day of August, 1993 by and between each of the TCW/DW Funds
listed on the signature pages hereof, each of such Funds
acting severally on its own behalf and not jointly with any of
such other Funds (each such Fund hereinafter referred to as
the "Fund"), each such Fund having its principal office and
place of business at Two World Trade Center, New York, New
York, 10048, and DEAN WITTER TRUST COMPANY, a trust company
organized under the laws of New Jersey, having its principal
office and place of business at Harborside Financial Center,
Plaza Two, Jersey City, New Jersey 07311 ("DWTC").
WHEREAS, the Fund desires to appoint DWTC as its
transfer agent, dividend disbursing agent and shareholder
servicing agent and DWTC desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual
covenants herein contained, the parties hereto agree as
follows:
Article 1 Terms of Appointment; Duties of DWTC
1.1 Subject to the terms and conditions set
forth in this Agreement, the Fund hereby employs and appoints
DWTC to act as, and DWTC agrees to act as, the transfer agent
for each series and class of shares of the Fund, whether now
or hereafter authorized or issued ("Shares"), dividend
disbursing agent and shareholder servicing agent in connection
with any accumulation, open-account or similar plans provided
to the holders of such Shares ("Shareholders") and set out in
the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without
limitation any periodic investment plan or periodic withdrawal
program.
1.2 DWTC agrees that it will perform the fol-
lowing services:
(a) In accordance with procedures established
from time to time by agreement between the Fund and DWTC, DWTC
shall:
(i) Receive for acceptance, orders for the
purchase of Shares, and promptly deliver payment and
appropriate documentation therefor to the custodian of the
assets of the Fund (the "Custodian");
2
(ii) Pursuant to purchase orders, issue the
appropriate number of Shares and issue certificates therefor
or hold such Shares in book form in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption
requests and redemption directions and deliver the appropriate
documentation therefor to the Custodian;
(iv) At the appropriate time as and when it
receives monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in the
appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) Effect transfers of Shares by the
registered owners thereof upon receipt of appropriate
instructions;
(vi) Prepare and transmit payments for divi-
dends and distributions declared by the Fund;
(vii) Calculate any sales charges payable by
a Shareholder on purchases and/or redemptions of Shares of the
Fund as such charges may be reflected in the prospectus;
(viii) Maintain records of account for and
advise the Fund and its Shareholders as to the foregoing; and
3
(ix) Record the issuance of Shares of the Fund
and maintain pursuant to Rule 17Ad-10(e) under the Securities
Exchange Act of 1934 ("1934 Act") a record of the total number
of Shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. DWTC
shall also provide to the Fund on a regular basis the total
number of Shares which are authorized, issued and outstanding
and shall notify the Fund in case any proposed issue of Shares
by the Fund would result in an overissue. In case any issue
of Shares would result in an overissue, DWTC shall refuse to
issue such Shares and shall not countersign and issue any
certificates requested for such Shares. When recording the
issuance of Shares, DWTC shall have no obligation to take
cognizance of any Blue Sky laws relating to the issue of sale
of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the
services set forth in the above paragraph (a), DWTC shall: (i)
perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder ser-
vicing agent in connection with dividend reinvestment,
accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal
program), including but not limited to, maintaining all
Shareholder accounts, preparing Shareholder meeting lists,
4
mailing proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses to current Shareholders,
withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing appropriate forms required with
respect to dividends and distributions by federal tax
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other confirm-
able transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders and providing
Shareholder account information; (ii) open any and all bank
accounts which may be necessary or appropriate in order to
provide the foregoing services; and (iii) provide a system
which will enable the Fund to monitor the total number of
Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall (i) identify
to DWTC in writing those transactions and assets to be treated
as exempt from Blue Sky reporting for each State and (ii)
verify the establishment of transactions for each State on the
system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of DWTC for the
Fund's registration status under the Blue Sky or securities
laws of any State or other jurisdiction is solely limited to
the initial establishment of transactions subject to Blue Sky
compliance by the Fund and the reporting of such transactions
5
to the Fund as provided above and as agreed from time to time
by the Fund and DWTC.
(d) DWTC shall provide such additional
services and functions not specifically described herein as
may be mutually agreed between DWTC and the Fund. Procedures
applicable to such services may be established from time to
time by agreement between the Fund and DWTC.
Article 2 Fees and Expenses
2.1 For performance by DWTC pursuant to this
Agreement, each Fund agrees to pay DWTC an annual maintenance
fee for each Shareholder account and certain transactional
fees, if applicable, as set out in the respective fee schedule
attached hereto as Schedule A. Such fees and out-of-pocket
expenses and advances identified under Section 2.2 below may
be changed from time to time subject to mutual written
agreement between the Fund and DWTC.
2.2 In addition to the fees paid under Section
2.1 above, the Fund agrees to reimburse DWTC in connection
with the services rendered by DWTC hereunder. In addition,
any other expenses incurred by DWTC at the request or with the
consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and
reimbursable expenses within a reasonable period of time
6
following the mailing of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and
other mailings to all Shareholder accounts shall be advanced
to DWTC by the Fund upon request prior to the mailing date of
such materials.
Article 3 Representations and Warranties of DWTC
DWTC represents and warrants to the Fund that:
3.1 It is a trust company duly organized and
existing and in good standing under the laws of New Jersey and
it is duly qualified to carry on its business in New Jersey.
3.2 It is and will remain registered with the
U.S. Securities and Exchange Commission ("SEC") as a Transfer
Agent pursuant to the requirements of Section 17A of the 1934
Act.
3.3 It is empowered under applicable laws and
by its charter and By-Laws to enter into and perform this
Agreement.
3.4 All requisite corporate proceedings have
been taken to authorize it to enter into and perform this
Agreement.
3.5 It has and will continue to have access to
the necessary facilities, equipment and personnel to perform
its duties and obligations under this Agreement.
7
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to DWTC that:
4.1 It is a corporation duly organized and
existing and in good standing under the laws of Delaware or
Maryland or a trust duly organized and existing and in good
standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and
by its Articles of Incorporation or Declaration of Trust, as
the case may be, and under its By-Laws to enter into and
perform this Agreement.
4.3 All corporate proceedings necessary to
authorize it to enter into and perform this Agreement have
been taken.
4.4 It is an investment company registered
with the SEC under the Investment Company Act of 1940, as
amended (the "1940 Act").
4.5 A registration statement under the
Securities Act of 1933 (the "1933 Act") is currently effective
and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
Article 5 Duty of Care and Indemnification
8
5.1 DWTC shall not be responsible for, and the
Fund shall indemnify and hold DWTC harmless from and against,
any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTC or its agents or
subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in good faith
and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with
the terms of this Agreement, or which arise out of the Fund's
lack of good faith, negligence or willful misconduct or which
arise out of breach of any representation or warranty of the
Fund hereunder.
(c) The reliance on or use by DWTC or its agents or
subcontractors of information, records and documents which (i)
are received by DWTC or its agents or subcontractors and
furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTC or
its agents or subcontractors of, any instructions or requests
of the Fund.
9
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations
or the securities or Blue Sky laws of any State or other
jurisdiction that such Shares be registered in such State or
other jurisdiction or in violation of any stop order or other
determination or ruling by any federal agency or any State or
other jurisdiction with respect to the offer or sale of such
Shares in such State or other jurisdiction.
5.2 DWTC shall indemnify and hold the Fund
harmless from or against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability
arising out of or attributable to any action or failure or
omission to act by DWTC as a result of the lack of good faith,
negligence or willful misconduct of DWTC, its officers,
employees or agents.
5.3 At any time, DWTC may apply to any officer
of the Fund for instructions, and may consult with legal
counsel to the Fund, with respect to any matter arising in
connection with the services to be performed by DWTC under
this Agreement, and DWTC and its agents or subcontractors
shall not be liable and shall be indemnified by the Fund for
any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. DWTC, its
agents and subcontractors shall be protected and indemnified
10
in acting upon any paper or document furnished by or on behalf
of the Fund, reasonably believed to be genuine and to have
been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided
to DWTC or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any
change of authority of any person, until receipt of written
notice thereof from the Fund. DWTC, its agents and
subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed
to bear the proper manual or facsimile signature of the
officers of the Fund, and the proper countersignature of any
former transfer agent or registrar, or of a co-transfer agent
or co-registrar.
5.4 In the event either party is unable to
perform its obligations under the terms of this Agreement
because of acts of God, strikes, equipment or transmission
failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be
liable for damages to the other for any damages resulting from
such failure to perform or otherwise from such causes.
11
5.5 Neither party to this Agreement shall be
liable to the other party for consequential damages under any
provision of this Agreement or for any act or failure to act
hereunder.
5.6 In order that the indemnification
provisions contained in this Article 5 shall apply, upon the
assertion of a claim for which either party may be required to
indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall
keep the other party advised with respect to all developments
concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party
seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any
claim or make any compromise in any case in which the other
party may be required to indemnify it except with the other
party's prior written consent.
Article 6 Documents and Covenants of the Fund and DWTC
6.1 The Fund shall promptly furnish to DWTC
the following:
(a) If a corporation:
(i) A certified copy of the resolution of the Board
of Directors of the Fund authorizing the appointment of DWTC
and the execution and delivery of this Agreement;
12
(ii) A certified copy of the Articles of
Incorporation and By-Laws of the Fund and all amendments
thereto;
(iii) Certified copies of each vote of the Board
of Directors designating persons authorized to give
instructions on behalf of the Fund and signature cards bearing
the signature of any officer of the Fund or any other person
authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the
Fund in the form approved by the Board of Directors, with a
certificate of the Secretary of the Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board
of Trustees of the Fund authorizing the appointment of DWTC
and the execution and delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust
and By-laws of the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board
of Trustees designating persons authorized to give
instructions on behalf of the Fund and signature cards bearing
the signature of any officer of the Fund or any other person
authorized to sign written instructions on behalf of the Fund;
13
(iv) A specimen of the certificate for Shares of the
Fund in the form approved by the Board of Trustees, with a
certificate of the Secretary of the Fund as to such approval;
(c) The current registration statements and any
amendments and supplements thereto filed with the SEC pursuant
to the requirements of the 1933 Act or the 1940 Act;
(d) All account application forms or other
documents relating to Shareholder accounts and/or relating to
any plan, program or service offered or to be offered by the
Fund; and
(e) Such other certificates, documents or opinions
as DWTC deems to be appropriate or necessary for the proper
performance of its duties.
6.2 DWTC hereby agrees to establish and
maintain facilities and procedures reasonably acceptable to
the Fund for safekeeping of Share certificates, check forms
and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such
certificates, forms and devices.
6.3 DWTC shall prepare and keep records
relating to the services to be performed hereunder, in the
form and manner as it may deem advisable and as required by
applicable laws and regulations. To the extent required by
14
Section 31 of the 1940 Act, and the rules and regulations
thereunder, DWTC agrees that all such records prepared or
maintained by DWTC relating to the services performed by DWTC
hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section
31 of the 1940 Act, and the rules and regulations thereunder,
and will be surrendered promptly to the Fund on and in
accordance with its request.
6.4 DWTC and the Fund agree that all books,
records, information and data pertaining to the business of
the other party which are exchanged or received pursuant to
the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to
any other person except as may be required by law or with the
prior consent of DWTC and the Fund.
6.5 In case of any request or demands for the
inspection of the Shareholder records of the Fund, DWTC will
endeavor to notify the Fund and to secure instructions from an
authorized officer of the Fund as to such inspection. DWTC
reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the
Shareholder records to such person.
15
Article 7 Duration and Termination of Agreement
7.1 This Agreement shall remain in full force
and effect until July 31, 1996 and from year-to-year
thereafter unless terminated by either party as provided in
Section 7.2 hereof.
7.2 This Agreement may be terminated by the
Fund on 60 days written notice, and by DWTC on 90 days written
notice, to the other party without payment of any penalty.
7.3 Should the Fund exercise its right to
terminate, all out-of-pocket expenses associated with the
movement of records and other materials will be borne by the
Fund. Additionally, DWTC reserves the right to charge for any
other reasonable fees and expenses associated with such
termination.
Article 8 Assignment
8.1 Except as provided in Section 8.3 below,
neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the written consent of
the other party.
8.2 This Agreement shall inure to the benefit
of and be binding upon the parties and their respective
permitted successors and assigns.
16
8.3 DWTC may, in its sole discretion and
without further consent by the Fund, subcontract, in whole or
in part, for the performance of its obligations and duties
hereunder with any person or entity including but not limited
to companies which are affiliated with DWTC; provided,
however, that such person or entity has and maintains the
qualifications, if any, required to perform such obligations
and duties, and that DWTC shall be as fully responsible to the
Fund for the acts and omissions of any agent or subcontractor
as it is for its own acts or omissions under this Agreement.
Article 9 Affiliations
9.1 DWTC may now or hereafter, without the
consent of or notice to the Fund, function as transfer agent
and/or shareholder servicing agent for any other investment
company registered with the SEC under the 1940 Act and for any
other issuer, including without limitation any investment
company whose adviser, administrator, sponsor or principal
underwriter is or may become affiliated with Dean Witter,
Discover & Co. or any of its direct or indirect subsidiaries
or affiliates.
9.2 It is understood and agreed that the
Directors or Trustees (as the case may be), officers,
employees, agents and shareholders of the Fund, and the
directors, officers, employees, agents and shareholders of the
17
Fund's investment adviser and/or distributor, are or may be
interested in DWTC as directors, officers, employees, agents
and shareholders or otherwise, and that the directors,
officers, employees, agents and shareholders of DWTC may be
interested in the Fund as Directors or Trustees (as the case
may be), officers, employees, agents and shareholders or
otherwise, or in the investment adviser and/or distributor as
directors, officers, employees, agents, shareholders or
otherwise.
Article 10 Amendment
10.1 This Agreement may be amended or modified
by a written agreement executed by both parties and authorized
or approved by a resolution of the Board of Directors or the
Board of Trustees (as the case may be) of the Fund.
Article 11 Applicable Law
11.1 This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with
the laws of the State of New York.
Article 12 Miscellaneous
12.1 In the event that one or more additional
investment companies managed or administered by Dean Witter
InterCapital Inc. or any of its affiliates ("Additional TCW/DW
Funds") desires to retain DWTC to act as transfer agent,
dividend disbursing agent and/or shareholder servicing agent,
18
and DWTC desires to render such services, such services shall
be provided pursuant to a letter agreement, substantially in
the form of Exhibit A hereto, between DWTC and each Additional
TCW/DW Fund.
12.2 In the event of an alleged loss or
destruction of any Share certificate, no new certificate shall
be issued in lieu thereof, unless there shall first be
furnished to DWTC an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been
lost or destroyed, supported by an appropriate bond
satisfactory to DWTC and the Fund issued by a surety company
satisfactory to DWTC, except that DWTC may accept an affidavit
of loss and indemnity agreement executed by the registered
holder (or legal representative) without surety in such form
as DWTC deems appropriate indemnifying DWTC and the Fund for
the issuance of a replacement certificate, in cases where the
alleged loss is in the amount of $1000 or less.
12.3 In the event that any check or other order for
payment of money on the account of any Shareholder or new
investor is returned unpaid for any reason, DWTC will (a) give
prompt notification to the Fund's distributor ("Distributor")
(or to the Fund if the Fund acts as its own distributor) of
such non-payment; and (b) take such other action, including
imposition of a reasonable processing or handling fee, as DWTC
19
may, in its sole discretion, deem appropriate or as the Fund
and, if applicable, the Distributor may instruct DWTC.
12.4 Any notice or other instrument authorized or
required by this Agreement to be given in writing to the Fund
or to DWTC shall be sufficiently given if addressed to that
party and received by it at its office set forth below or at
such other place as it may from time to time designate in
writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTC:
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 Merger of Agreement
13.1 This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior
agreement with respect to the subject matter hereof whether
oral or written.
20
Article 14 Personal Liability
14.1 In the case of a Fund organized as a
Massachusetts business trust, a copy of the Declaration of
Trust of the Fund is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees
of the Fund as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the
Trustees or shareholders individually but are binding only
upon the assets and property of the Fund; provided, however,
that the Declaration of Trust of the Fund provides that the
assets of a particular Series of the Fund shall under no
circumstances be charged with liabilities attributable to any
other Series of the Fund and that all persons extending credit
to, or contracting with or having any claim against, a
particular Series of the Fund shall look only to the assets of
that particular Series for payment of such credit, contract or
claim.
21
IN WITNESS WHEREOF, the parties hereto have caused
this Amended and Restated Agreement to be executed in their
names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
(1) 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
By: /s/ Sheldon Curtis
----------------------------------
Sheldon Curtis
Vice President and General Counsel
ATTEST:
/s/ Barry Fink
- ------------------------
Barry Fink
Assistant Secretary
DEAN WITTER TRUST COMPANY
By: /s/ Charles A. Fiumefreddo
-----------------------------------
Charles A. Fiumefreddo
Chairman
ATTEST:
/s/ David A. Hughey
- ------------------------
David A. Hughey
Executive Vice President
22
Exhibit A
---------
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, NAME OF FUND, a (Massachusetts
business trust/Maryland Corporation) (the "Fund"), desires to
employ and appoint Dean Witter Trust Company ("DWTC") to act
as transfer agent for each series and class of shares of the
Fund, whether now or hereafter authorized or issued
("Shares"), dividend disbursing agent and shareholder
servicing agent, registrar and agent in connection with any
accumulation, open-account or similar plan provided to the
holders of Shares, including without limitation any periodic
investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for
the payment by the Fund to DWTC of fees as set out in the fee
schedule attached hereto as Schedule A, DWTC shall provide
such services to the Fund pursuant to the terms and conditions
set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
23
Please indicate DWTC's acceptance of employment and
appointment by the Fund in the capacities set forth above by
so indicating in the space provided below.
Very truly yours,
[NAME OF FUND]
By:__________________________________
Sheldon Curtis
Vice President and General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST COMPANY
By:_______________________
Its:______________________
Date:_____________________
24
SCHEDULE A
Fund: TCW/DW North American Government Income Trust
Fees: (1) Annual maintenance fee of $11.50 per shareholder account, payable
monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement shall
be as negotiated between the parties.
<PAGE>
MANAGEMENT AGREEMENT
AGREEMENT made as of the 17th day of April, 1995 by and between TCW/DW
North American Government Income Trust, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter
called the "Fund"), and Dean Witter Services Company Inc., a Delaware
corporation (hereinafter called the "Manager"):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, The Fund desires to retain the Manager to render services in the
manner and on the terms and conditions hereinafter set forth; and
WHEREAS, The Manager desires to be retained to perform services on said
terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Manager agree as follows:
1. The Fund hereby retains the Manager to act as manager of the Fund and,
subject to the supervision of the Trustees, to supervise the business affairs
of the Fund as hereinafter set forth. Without limiting the generality of the
foregoing, the Manager shall (i) manage 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 Act, the notification to
the Fund's investment adviser of available funds for investment, the
reconciliation of account information and balances among the Fund's
custodian, transfer agent and dividend disbursing agent and the Fund's
investment adviser, 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; and (vi) oversee the
preparation and the printing of the periodic updating of the Fund's
registration statement and prospectus and statement of additional
information, tax returns, proxy statements, and reports to its shareholders
and the Securities and Exchange Commission.
2. The Manager shall, at its own expense, maintain such staff and employ
or retain such personnel and consult with such other persons as it shall from
time to time determine to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Manager shall be deemed to include
persons employed or otherwise retained by the Manager to furnish services,
statistical and other factual data, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Manager may desire. The Manager shall, as agent for the Fund, maintain
the Fund's records and books of account (other than those maintained by the
Fund's transfer agent, registrar, custodian and other agencies). All such
books and records so maintained shall be the property of the Fund and, upon
request therefor, the Manager shall surrender to the Fund such of the books
and records so requested.
3. The Fund will, from time to time, furnish or otherwise make available
to the Manager such financial reports, proxy statements and other information
relating to the business and affairs of the Fund as the Manager may
reasonably require in order to discharge its duties and obligations
hereunder.
4. The Manager 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 Trustees, officers and employees, if
any, of the Fund who are also directors, officers or employees of the
Manager, and provide
1
<PAGE>
such office space, facilities and equipment and such clerical help and
bookkeeping services as the Fund shall reasonably require in the conduct of
its business. The Manager shall also bear the cost of telephone service,
heat, light, power and other utilities provided to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses
of the Fund (except expenses borne by the Fund's investment adviser pursuant
to an investment advisory agreement with the Fund), including without
limitation: fees pursuant to any investment advisory agreement into which the
Fund may enter; fees pursuant to any plan of distribution that the Fund may
adopt; the charges and expenses of any registrar, any custodian or depository
appointed by the Fund for the safekeeping of its cash, portfolio securities
or commodities and other property, and any stock transfer or dividend agent
or agents appointed by the Fund; brokers' commissions chargeable to the Fund
in connection with portfolio transactions to which the Fund is a party; all
taxes, including securities or commodities issuance and transfer taxes, and
fees payable by the Fund to federal, state or other governmental agencies;
the cost and expense of engraving or printing of certificates representing
shares of the Fund; all costs and expenses in connection with the
registration and maintenance of registration of the Fund and its shares with
the Securities and Exchange Commission and various states and other
jurisdictions (including filing fees and legal fees and disbursements of
counsel and the costs and expenses of preparing, printing, including
typesetting, and distributing prospectuses and statements of additional
information for such purposes); 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 Manager or the
Fund's investment adviser or any corporate affiliate of either of them; all
expenses incident to the payment of any dividend or distribution program;
charges and expenses of any outside service used for pricing of the Fund's
shares; charges and expenses of legal counsel, including counsel to the
Trustees of the Fund who are not interested persons (as defined in the Act)
of the Fund or the Manager or the Fund's investment adviser, 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 Manager, the Fund shall pay to the Manager monthly
compensation determined by applying the following annual rates to the Fund's
average daily net assets: 0.39% of daily net assets up to $3 billion; and
0.36% of daily net assets over $3 billion. Such calculation shall be made by
applying 1/365th of the annual rates to the Fund's net assets each day
determined as of the close of business on that day or the last previous
business day. If this Agreement becomes effective subsequent to the first day
of a month or shall terminate before the last day of a month, compensation
for that part of the month this Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees as set forth above.
7. In the event the operating expenses of the Fund, including amounts
payable to the Manager pursuant to paragraph 6 hereof, for any fiscal year
ending on a date on which this Agreement is in effect, exceed the expense
limitations applicable to the Fund imposed by state securities laws or
regulations thereunder, as such limitations may be raised or lowered from
time to time, the Manager shall reduce its management fee to the extent of
60% of such excess and, if and to the extent required by law, pursuant to any
such laws or regulations, will reimburse the Fund for 60% of annual operating
expenses in excess of any expense limitation that may be applicable;
provided, however, there shall be excluded from such expenses the amount of
any interest, taxes, distribution fees, brokerage commissions 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 weekly, 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 full week of the month, that expense
limitation which results in the largest reduction in the Manager's fee shall
be applicable.
2
<PAGE>
For purposes of this provision, should any applicable expense limitation
be based upon the gross income of the Fund, such gross income shall include,
but not be limited to, interest on debt securities in the Fund's portfolio
accrued to and including the last day of the Fund's fiscal year, and
dividends declared on equity securities in the Fund's portfolio, the record
dates for which fall on or prior to the last day of such fiscal year, but
shall not include gains from the sale of securities.
8. The Manager will use its best efforts in the management of the Fund,
but in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations hereunder, the Manager shall not be
liable to the Fund or any of its investors for any error of judgment or
mistake of law or for any act or omission by the Manager or for any losses
sustained by the Fund or its investors. The Manager shall be indemnified by
the Fund as an agent of the Fund in accordance with the terms of Section 4.8
of the Fund's By-laws.
9. Nothing contained in this Agreement shall prevent the Manager or any
affiliated person of the Manager from acting as manager for any other person,
firm or corporation. Nothing in this Agreement shall limit or restrict the
right of any Trustee, officer or employee of the Manager to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any other business whether of a similar or
dissimilar nature.
10. This Agreement shall remain in effect until April 30, 1995 and from
year to year thereafter provided such continuance is approved at least
annually by the Board of Trustees of the Fund; provided that such continuance
is also approved annually by a 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; provided, however, that the Fund, acting by
majority vote of the Trustees, or the Manager may, at any time and without
the payment of any penalty, terminate this Agreement upon thirty days'
written notice to the other party. Any notice under this Agreement shall be
given in writing, addressed and delivered, or mailed post-paid, to the other
party at the principal office of such party.
11. This Agreement may be amended or modified by the parties by a written
agreement executed by both parties and authorized or approved by a resolution
of the Board of Trustees of the Fund.
12. This Agreement may be assigned by either party with the written
consent of the other party.
13. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall
control.
14. The Fund acknowledges that the Manager owns its own name, initials and
logo. The Fund agrees to change its name at the request of the Manager if
this Agreement is terminated for any reason.
15. The Declaration of Trust establishing TCW/DW North American Government
Income Trust, dated February 19, 1992, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name TCW/DW
North American Government 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 TCW/DW North
American Government 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
TCW/DW North American Government Income Trust, but the Trust Estate only
shall be liable.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
TCW/DW NORTH AMERICAN GOVERNMENT
INCOME TRUST
By .......................
Attest:
............................................
DEAN WITTER SERVICES COMPANY INC.
By .......................
Attest:
............................................
4
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 4 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
December 14,1995, relating to the financial statements and financial highlights
of TCW/DW North American Government 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 reference to us under the heading "Financial
Highlights" in such Prospectus and to the references to us under the headings
"Independent Accountants" and "Experts" in such Statement of Additional
Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 22, 1996
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
WHEREAS, TCW/DW North American Government Income Trust (the "Fund") is
engaged in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, on June 2, 1992, the Fund and Dean Witter Reynolds Inc. ("DWR")
entered into a separate Distribution Agreement, pursuant to which the Fund
employed DWR as distributor of the Fund's shares; and
WHEREAS, on June 2, 1992, the Fund adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Act, and the Trustees then determined that there was a
reasonable likelihood that the Plan of Distribution would benefit the Fund and
its shareholders; and
WHEREAS, the Trustees believe that continuation of said Plan of Distribution,
as amended and restated herein, is reasonably likely to continue to benefit the
Fund and its shareholders; and
WHEREAS, on January 4, 1993, the Fund and DWR substituted Dean Witter
Distributors Inc. (the "Distributor") in the place of DWR as distributor of the
Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will continue to
promote the sale of Fund shares and provide personal services to Fund
shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor have entered into a separate
Distribution Agreement dated as of January 4, 1993, pursuant to which the Fund
has employed the Distributor in such capacity during the continuous offering of
shares of the Fund.
NOW, THEREFORE, the Fund hereby amends the Plan of Distribution previously
adopted and amended and restated, and the Distributor hereby agrees to the
terms of said Plan of Distribution (the "Plan"), as amended herein, in
accordance with Rule 12b-1 under the Act on the following terms and conditions:
1. The Fund is hereby authorized to utilize its assets to finance certain
activities in connection with the distribution of its shares.
2. Subject to the supervision of the Board of Trustees and the terms of the
Distribution Agreement, the Distributor is authorized to promote the
distribution of the Fund's shares and to provide related services through DWR,
its affiliates or other broker-dealers it may select, and its own Registered
Representatives. The Distributor, DWR, its affiliates and said broker-dealers
shall be reimbursed, directly or through the Distributor, as it may direct, as
provided in paragraph 4 hereof for their services and expenses, which may
include one or more of the following: (1) compensation to, and expenses of,
account executives and other employees, including overhead and telephone
expenses; (2) sales incentives and bonuses to sales representatives of the
Distributor, DWR, its affiliates and other broker-dealers, and to marketing
personnel in connection with promoting sales of shares of the Fund; (3)
expenses incurred in connection with promoting sales of shares of the Fund; (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.
3. The Distributor hereby undertakes to directly bear all costs of rendering
the services to be performed by it under this Plan and under the Distribution
Agreement, except for those specific expenses that the Board of Trustees
determines to reimburse as hereinafter set forth.
4. The Fund is hereby authorized to reimburse the Distributor, DWR, its
affiliates and other broker-dealers for distribution expenses incurred by them
specifically on bahalf of the Fund. Reimbursement will be made through payments
at the end of each month in such amounts determined at the beginning of each
fiscal quarter by the Fund's Board of Trustees, including a majority of the
Trustees who are not "interested persons" of the Fund, as defined in the Act.
The amount of each monthly payment may in no event exceed an amount equal to a
payment at the annual rate of 0.75 of 1% of the Fund's average net assets
during the month. In making quarterly determinations of the amounts that may be
expended by the Fund, the Distributor shall provide, and the Trustees shall
1
review, a quarterly budget of projected distribution expenses to be incurred by
the Distributor, DWR, its affiliates or other broker-dealers on behalf of the
Fund, together with a report explaining the purposes and anticipated benefits
of incurring such expenses. The Board of Trustees shall determine the
particular expenses, and the portion thereof, that may be borne by the Fund,
and in making such determination shall consider the scope of the Distributor's
commitment to promoting the distribution of the shares of the Fund directly or
through DWR, its affiliates or other broker-dealers. All payments made
hereunder pursuant to the Plan shall be in accordance with the terms and
limitations of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
5. The Distributor may direct that all or any part of the amounts receivable
by it under this Plan be paid directly to DWR, its affiliates or other broker-
dealers.
6. If, as of the end of any fiscal year, the actual expenses incurred by the
Distributor, DWR, its affiliates and other broker-dealers on behalf of the Fund
(including accrued expenses and amounts reserved for incentive compensation and
bonuses) are less than the amount of payments made by the Fund pursuant to this
Plan, the Distributor shall promptly make appropriate reimbursement to the
Fund. If, however, as of the end of any fiscal year, the actual expenses of the
Distributor, DWR, its affiliates and other broker-dealers are greater than the
amount of payments made by the Fund pursuant to this Plan, the Fund will not
reimburse the Distributor, DWR, its affiliates or other broker-dealers for such
expenses through payments accrued pursuant to this Plan in the subsequent
fiscal year.
7. The Distributor shall provide the Fund for review by the Board of
Trustees, and the Board of Trustees shall review, promptly after the end of
each fiscal quarter a written report regarding the distribution expenses
incurred by the Distributor, DWR, its affiliates or other broker-dealers on
behalf of the Fund during such fiscal quarter, which report shall include: (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.
8. This Plan, as amended and restated, shall become effective upon approval
by a vote of the Board of Trustees of the Fund, and of the Trustees who are not
"interested persons" of the Fund, as defined in the Act, and who have no direct
or indirect financial interest in the operation of this Plan, cast in person at
a meeting called for the purpose of voting on this Plan.
9. This Plan shall continue in effect until April 30, 1993, and from year to
year thereafter, provided such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 8
hereof. This Plan may not be amended to increase materially the amount to be
spent for the services described herein unless such amendment is approved by a
vote of at least a majority of the outstanding voting securities of the Fund,
as defined in the Act, and no material amendment to this Plan shall be made
unless approved in the manner provided for approval in paragraph 8 hereof.
10. This Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Trustees who are not "interested persons"
of the Fund, as defined in the Act, and who have no direct or indirect
financial interest in the operation of this Plan or by a vote of a majority of
the outstanding voting securities of the Fund, as defined in the Act, on no
more than 30 days' written notice to any other party to this Plan.
11. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons of the Fund shall be committed to the discretion
of the Trustees who are not interested persons.
12. The Fund shall preserve copies of this Plan and all reports made pursuant
to paragraph 7 hereof, for a period of not less than six years from the date of
this Plan, as amended and restated herein, or any such report, as the case may
be, the first two years in an easily accessible place.
13. This Plan shall be construed in accordance with the laws of the State of
New York and the applicable provisions of the Act. To the extent the applicable
law of the State of New York, or any of the provisions herein, conflict with
the applicable provisions of the Act, the latter shall control.
14. The Declaration of Trust establishing TCW/DW North American Government
Income Trust, dated February 19, 1992, a copy of which, together with all
amendments thereto (the "Declaration"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name TCW/DW
North American Government Income Trust refers to the Trustees under the
Declaration collectively as Trustees, but not as
2
individuals or personally; and no Trustee, shareholder, officer, employee or
agent of TCW/DW North American Government 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 TCW/DW North American Government Income Trust, but the Trust
Estate only shall be liable.
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
amended and restated Plan of Distribution, as amended, as of the day and year
set forth below in New York, New York.
Date: June 2, 1992 TCW/DW NORTH AMERICAN GOVERNMENT
As amended on January 4, 1993 INCOME TRUST
and April 28, 1993
By: .............................
Attest:
.............................
DEAN WITTER DISTRIBUTORS INC.
By: .............................
Attest:
.............................
DEAN WITTER REYNOLDS INC.
By: .............................
Attest:
.............................
3
TWC/DW NORTH AMERICAN GOVERNMENT 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{[ ((4,709,371.63 - 889,283.44)/81,006,172.407 x 8.307390) +1] -1}
= 6.91%
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW NORTH AMERICAN GOVERNMENT INCOME TRUST
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
<TABLE>
<CAPTION>
(B) (A)
$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 $1,016.10 1.61% 1.00 1.61%
31-Jul-92 $1,068.40 6.84% 3.25 2.06%
</TABLE>
(C) GROWTH OF $10,000
(D) GROWTH OF $50,000
(E) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (C) GROWTH OF (D) GROWTH OF (E) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ ------------ ---------------------- ----------------------- ------------------------
<S> <C> <C> <C> <C>
31-Jul-92 6.84 $10,684 $53,420 $106,840
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 690,771,257
<INVESTMENTS-AT-VALUE> 666,983,804
<RECEIVABLES> 5,127,302
<ASSETS-OTHER> 309,807
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 672,420,913
<PAYABLE-FOR-SECURITIES> 9,840,206
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,273,369
<TOTAL-LIABILITIES> 14,113,575
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 896,132,002
<SHARES-COMMON-STOCK> 79,073,584
<SHARES-COMMON-PRIOR> 152,910,113
<ACCUMULATED-NII-CURRENT> (391,745)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (213,645,466)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (23,787,453)
<NET-ASSETS> 658,307,338
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 80,194,529
<OTHER-INCOME> 0
<EXPENSES-NET> 12,935,333
<NET-INVESTMENT-INCOME> 67,259,196
<REALIZED-GAINS-CURRENT> (256,423,219)
<APPREC-INCREASE-CURRENT> 162,024,285
<NET-CHANGE-FROM-OPS> 27,139,738
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (64,021,457)
<NUMBER-OF-SHARES-SOLD> 11,625,629
<NUMBER-OF-SHARES-REDEEMED> (91,392,898)
<SHARES-REINVESTED> 5,930,740
<NET-CHANGE-IN-ASSETS> (701,303,977)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (53,118,405)
<OVERDISTRIB-NII-PRIOR> (1,308,948)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,110,779
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,935,333
<AVERAGE-NET-ASSETS> 811,838,112
<PER-SHARE-NAV-BEGIN> 8.89
<PER-SHARE-NII> .69
<PER-SHARE-GAIN-APPREC> (.59)
<PER-SHARE-DIVIDEND> (.66)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.33
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that MARC I. STERN whose signature
appears below, constitutes and appoints Sheldon Curtis, Marilyn K. Cranney and
Barry Fink, or any of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution among himself and each of the persons appointed
herein, for him and in his name, place and stead, in any and all capacities, to
sign any amendments to any registration statement of ANY OF THE TCW/DW FUNDS SET
FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may lawfully do or cause to be done by virtue
hereof.
Dated: April 20, 1995
/s/ Marc I. Stern
- -----------------
Marc I. Stern
SCHEDULE A
TCW/DW FUNDS
Open-End Funds
1. TCW/DW Core Equity Trust
2. TCW/DW North American Government Income Trust
3. TCW/DW Latin American Growth Fund
4. TCW/DW Income and Growth Fund
5. TCW/DW Small Cap Growth Fund
6. TCW/DW Balanced Fund
7. TCW/DW North American Intermediate Income Trust
8. TCW/DW Total Return Trust
9. TCW/DW Global Convertible Trust
Closed-End Funds
10. TCW/DW Term Trust 2000
11. TCW/DW Term Trust 2002
12. TCW/DW Term Trust 2003
13. TCW/DW Emerging Markets Opportunities Trust
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that JOHN L. SCHROEDER whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald Feiman and
Stuart Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of ANY OF THE
TCW/DW FUNDS SET FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
Dated April 20, 1995
/s/ John L. Schroeder
- ----------------------
John L. Schroeder
SCHEDULE A
TCW/DW FUNDS
Open-End Funds
1. TCW/DW Core Equity Trust
2. TCW/DW North American Government Income Trust
3. TCW/DW Latin American Growth Fund
4. TCW/DW Income and Growth Fund
5. TCW/DW Small Cap Growth Fund
6. TCW/DW Balanced Fund
7. TCW/DW North American Intermediate Income Trust
8. TCW/DW Total Return Trust
9. TCW/DW Global Convertible Trust
Closed-End Funds
10. TCW/DW Term Trust 2000
11. TCW/DW Term Trust 2002
12. TCW/DW Term Trust 2003
13. TCW/DW Emerging Markets Opportunities Trust
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of JOHN C. ARGUE, JOHN R.
HAIRE, MANUEL H. JOHNSON, PAUL KOLTON, MICHAEL E. NUGENT and DAVID S. TAPPAN,
JR., whose signatures appear below, constitutes and appoints David M. Butowsky,
Ronald Feiman and Stuart Strauss, or any of them, his true and lawful attorneys-
in-fact and agents, with full power of substitution among himself and each of
the persons appointed herein, for him and in his name, place and stead, in any
and all capacities, to sign any amendments to any registration statement of any
of THE TCW/DW FUNDS SET FORTH ON SCHEDULE A ATTACHED HERETO, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may lawfully do or cause
to be done by virtue hereof.
Dated: May 10, 1994
/s/ John C. Argue /s/ John R. Haire
- --------------------- -----------------
John C. Argue John R. Haire
/s/ Manuel H. Johnson /s/ Paul Kolton
- ---------------------- -----------------
Manuel H. Johnson Paul Kolton
/s/ Michael E. Nugent /s/ David S. Tappan, Jr.
- ---------------------- ------------------------
Michael E. Nugent David S. Tappan, Jr.
SCHEDULE A
TCW/DW FUNDS
Open-End Funds
1. TCW/DW Core Equity Trust
2. TCW/DW North American Government Income Trust
3. TCW/DW Latin American Growth Fund
4. TCW/DW Income and Growth Fund
5. TCW/DW Small Cap Growth Fund
6. TCW/DW Balanced Fund
7. TCW/DW North American Intermediate Income Trust
Closed-End Funds
8. TCW/DW Term Trust 2000
9. TCW/DW Term Trust 2002
10. TCW/DW Term Trust 2003
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of ROBERT A. DAY, RICHARD M.
DEMARTINI, CHARLES A. FIUMEFREDDO and THOMAS E. LARKIN, JR., whose signatures
appear below, constitutes and appoints Sheldon Curtis, Marilyn K. Cranney and
Barry Fink, or any of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution among himself and each of the persons appointed
herein, for him and in his name, place and stead, in any and all capacities, to
sign any amendments to any registration statement of any of THE TCW/DW FUNDS SET
FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may lawfully do or cause to be done by virtue
hereof.
Dated: May 10, 1994
/s/ Robert A. Day
- -------------------------
Robert A. Day
/s/ Richard M. DeMartini
- --------------------------
Richard M. DeMartini
/s/ Charles A. Fiumefreddo
- ----------------------------
Charles A. Fiumefreddo
/s/ Thomas E. Larkin, Jr.
- ----------------------------
Thomas E. Larkin, Jr.
SCHEDULE A
TCW/DW FUNDS
Open-End Funds
1. TCW/DW Core Equity Trust
2. TCW/DW North American Government Income Trust
3. TCW/DW Latin American Growth Fund
4. TCW/DW Income and Growth Fund
5. TCW/DW Small Cap Growth Fund
6. TCW/DW Balanced Fund
7. TCW/DW North American Intermediate Income Trust
Closed-End Funds
8. TCW/DW Term Trust 2000
9. TCW/DW Term Trust 2002
10. TCW/DW Term Trust 2003
