<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1994
REGISTRATION NO.: 33-48189
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- -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
[ ]
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 3
[X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
[ ]
AMENDMENT NO. 3
[X]
DEAN WITTER HEALTH SCIENCES TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
X immediately upon filing pursuant to paragraph (b)
----- on , pursuant to paragraph (b)
----- 60 days after filing pursuant to paragraph (a)
----- on (date) pursuant to paragraph (a) of rule 485.
The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Section (a)(1) of Rule 24f-2 under the
Investment Company Act of 1940. The Registrant filed the Rule 24f-2 Notice
for its fiscal year ended July 31, 1994, with the Securities and Exchange
Commission August 31, 1994.
Amending the Prospectus and updating financial statements
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<PAGE>
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A PART
A
ITEM CAPTION PROSPECTUS
- -------------- -------------------------------------------------------
<S> <C> <C>
1. .... Cover Page
2. .... Summary of Fund Expenses; Prospectus Summary
3. .... Financial Highlights;
4. .... Investment Objective and Policies; The Fund and its
Management; Cover Page; Investment Restrictions;
Prospectus Summary
5. .... The Fund and Its Management; Back Cover;
Investment Objective and Policies
6. .... Dividends, Distributions and Taxes; Additional
Information
7. .... Underwriting; Purchase of Fund Shares; Shareholder
Services
8. .... Repurchases and Redemptions; Shareholder Services
9. .... Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B
ITEM STATEMENT OF ADDITIONAL INFORMATION
- -------------- ------------------------------------------------------
<S> <C> <C>
10. .... Cover Page
11. .... Table of Contents
12. .... The Fund and Its Management
13. .... Investment Practices and Policies; Investment
Restrictions; Portfolio Transactions and Brokerage
14. .... The Fund and Its Management; Trustees and
Officers
15. .... Trustees and Officers
16. .... The Fund and Its Management; Purchase of
Fund Shares; Custodian and Transfer
Agent; Independent Accountants
17. .... Portfolio Transactions and Brokerage
18. .... Description of Shares; Validity of
Shares of Beneficial Interest
19. .... Redemptions and Repurchases;
Statement of Assets and Liabilities;
Shareholder Services
20. .... Dividends, Distributions and Taxes
21. .... Not applicable
22. .... Dividends, Distributions and Taxes
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>
<PAGE>
DEAN WITTER
HEALTH SCIENCES TRUST
PROSPECTUS-SEPTEMBER 28, 1994
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DEAN WITTER HEALTH SCIENCES TRUST (THE "FUND") IS AN OPEN-END NON-DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY WHOSE INVESTMENT OBJECTIVE IS CAPITAL
APPRECIATION. THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING IN
SECURITIES OF COMPANIES IN THE HEALTH SCIENCES INDUSTRY THROUGHOUT THE WORLD.
(SEE "INVESTMENT OBJECTIVE AND POLICIES.")
Shares of the Fund are continuously offered at net asset value. However,
redemptions and/or repurchases are subject in most cases to a contingent
deferred sales charge, scaled down from 5% to 1% of the amount redeemed, if
made within six years of purchase, which charge will be paid to the Fund's
Distributor, Dean Witter Distributors Inc. See "Redemptions and
Repurchases--Contingent Deferred Sales Charge." In addition, the Fund pays
the Distributor a distribution fee pursuant to a Plan of Distribution at the
annual rate of 1% of the lesser of the (i) average daily aggregate net sales
or (ii) average daily net assets of the Fund. See "Purchase of Fund
Shares--Plan of Distribution."
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated September 28, 1994, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone number listed below. The
Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 5
Risk Considerations ................................................... 9
Investment Restrictions ............................................... 11
Purchase of Fund Shares ............................................... 12
Shareholder Services .................................................. 13
Redemptions and Repurchases ........................................... 16
Dividends, Distributions and Taxes .................................... 17
Performance Information ............................................... 18
Additional Information ................................................ 19
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.
DEAN WITTER
HEALTH SCIENCES TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR (800) 526-3143
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>
<PAGE>
PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------
The Fund
The Fund is organized as a Massachusetts business trust, and is an open-end
non-diversified management investment company which invests in securities of
companies in the health sciences industry throughout the world.
- -----------------------------------------------------------------------------
Shares Offered
At net asset value next determined following receipt of an order (see page
12). Shares redeemed within six years of purchase are subject to a contingent
deferred sales charge under most circumstances (see page 16).
- -----------------------------------------------------------------------------
Minimum
Purchase
Minimum initial investment, $1,000; minimum subsequent investment, $100 (see
page 12).
- -----------------------------------------------------------------------------
Investment
Objective
The investment objective of the Fund is capital appreciation.
- -----------------------------------------------------------------------------
Investment
Policies
The Fund will seek to achieve its investment objective by investing at least
65% of its total assets in the equity securities of health science companies
throughout the world. The Fund's portfolio will primarily consist of common
stocks, preferred stocks, convertible preferred stocks, securities
convertible into common stocks and warrants. The Fund may also invest in
investment grade debt securities when the Investment Manager believes that
such securities present a favorable opportunity for capital appreciation and
in various other financial instruments, such as options, futures and options
on futures, to hedge against adverse price movements in the securities held
in its portfolio, as well as in the securities it might wish to purchase, and
the currencies in which they are denominated (see pages 5-11).
- -----------------------------------------------------------------------------
Investment
Manager
Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the
Fund, and its wholly-owned subsidiary, Dean Witter Services Company Inc.,
serve in various investment management, advisory, management and
administrative capacities to eighty-eight investment companies and other
portfolios with assets of approximately $71.3 billion at July 31, 1994
(see page 5).
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Management
Fee
The Investment Manager receives a monthly fee at the annual rate of 1.0% of
daily net assets (see page 5).
- -----------------------------------------------------------------------------
<PAGE>
Dividends and
Capital Gains
Distributions
Dividends from net investment income and distributions from net capital gains
are paid at least once a year. Long-term capital gains may be retained for
reinvestment by the Fund. Dividends and capital gains distributions are
automatically invested in additional shares at net asset value unless the
shareholder elects to receive cash (see page 17).
- -----------------------------------------------------------------------------
Distributor and
Distribution
Fee
For its services as Distributor, which include payment of sales commissions
to account executives and various other promotional and sales related
expenses, Dean Witter Distributors Inc. (the "Distributor") receives from the
Fund a distribution fee accrued daily and payable monthly at the rate of 1.0%
per annum of the lesser of (i) the Fund's average daily aggregate net sales
or (ii) the Fund's average daily net assets. This fee compensates the
Distributor for the services provided in distributing shares of the Fund and
for sales related expenses (see page 12). The Distributor also receives the
proceeds of any contingent deferred sales charges (see page 16).
- -----------------------------------------------------------------------------
Redemption--
Contingent
Deferred
Sales Charge
At net asset value; redeemable involuntarily if total value of the account is
less than $100. Although no commission or sales load is imposed upon the
purchase of shares, a contingent deferred sales charge (scaled down from 5.0%
to 1.0%) is imposed on any redemption of shares if after such redemption the
aggregate current value of an account with the Fund falls below the aggregate
amount of the investor's purchase payments made during the six years
preceding the redemption. However, there is no charge imposed on redemption
of shares purchased through reinvestment of dividends or distributions (see
page 16).
- -----------------------------------------------------------------------------
Risks
The value of the Fund's portfolio securities, and therefore the net asset
value of the Fund's shares, will fluctuate with changes in the market value
of its portfolio securities. Unlike more widely diversified mutual funds, the
Fund is subject to industry risk, i.e., the possibility that a particular
group of related stocks will decline in price. In addition, the health
sciences industry generally is subject to substantial government regulation;
accordingly, changes in government policies or regulation could have a
material effect on the demand for products and services offered by health
science companies and, therefore, could affect the performance of the Fund.
It should be recognized that the foreign securities and markets in which the
Fund invests pose different and greater risks than those customarily
associated with domestic securities and their markets. Furthermore, investors
should consider other risks associated with a portfolio which contains
international securities, including fluctuations in foreign currency exchange
rates (i.e., if a substantial portion of the Fund's assets are denominated in
foreign currencies which decrease in value with respect to the U.S. dollar,
the value of the investor's shares and the distributions made on those shares
will, likewise, decrease in value), foreign securities exchange controls and
foreign tax rates, as well as investments in forward currency contracts,
options and futures contracts (see pages 9-11).
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
2
<PAGE>
<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 ending July 31, 1994.
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES ..............................................................
Maximum Sales Charge Imposed on Purchases ..................................................... None
Maximum Sales Charge Imposed on Reinvested Dividends .......................................... None
Deferred Sales Charge (as a percentage of the lesser of original purchase price or redemption
proceeds) .................................................................................... 5.0%
A contingent deferred sales charge is imposed at the following declining rates:
</TABLE>
<TABLE>
<CAPTION>
Year Since Purchase Payment
Made Percentage
- ------------------------------ --------------
<S> <C>
First ..................... 5.0%
Second .................... 4.0%
Third ..................... 3.0%
Fourth .................... 2.0%
Fifth ..................... 2.0%
Sixth ..................... 1.0%
Seventh and thereafter ... None
Redemption Fees ................None
Exchange Fee .................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees .............................. 1.00%
12b-1 Fees* .................................. 1.00%
Other Expenses ............................... 0.30%
Total Fund Operating Expenses ................ 2.30%
</TABLE>
- ----------
* 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 the
National Association of Securities Dealers, Inc. ("NASD") guidelines.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period: ......... $73 $102 $143 $264
You would pay the following expenses on the same investment assuming no
redemption: $23 $ 72 $123 $264
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Repurchases and
Redemptions."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
<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 financial highlights should be read in
conjunction with the financial statements and 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 OCTOBER 30, 1992*
ENDED JULY 31, THROUGH JULY 31,
1994 1993
--------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE: ...................
Net asset value, beginning of period ................. $ 9.22 $10.00
------------- --------
Net investment loss .................................. (0.22) (0.08)
Net realized and unrealized gain (loss) on
investments ......................................... 0.32 (0.70)
------------ ---------
Total from investment operations .................... 0.10 (0.78)
------------ ----------
Net asset value, end of period ....................... $ 9.32 $ 9.22
============= ==========
TOTAL INVESTMENT RETURN+ ............................. 1.08% (7.80)%(1)
RATIOS/SUPPLEMENTAL DATA: Net assets, end of period
(in thousands)........................................ $228,573 $231,646
Ratio of expenses to average net assets .............. 2.30% 2.38% (2)
Ratio of net investment loss to average net assets .. (2.06)% (1.38)%(2)
Portfolio turnover rate .............................. 106 % 55 %
<FN>
- ----------
* Commencement of Operations.
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
</TABLE>
See Notes to Financial Statements
4
<PAGE>
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
Dean Witter Health Sciences 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 The Commonwealth of Massachusetts on May 26, 1992.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC"), a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to eighty-eight investment companies (the "Dean
Witter Funds"), thirty of which are listed on the New York Stock Exchange,
with combined assets of approximately $69.3 billion at August 31, 1994. The
Investment Manager also manages portfolios of pension plans, other
institutions and individuals which aggregated approximately $2 billion at
such date.
The Fund has retained the Investment Manager, pursuant to an Investment
Management Agreement, to provide administrative services, manage its business
affairs and manage the investment of the Fund's assets, including the placing
of orders for the purchase and sale of portfolio securities. The Fund's Board
of Trustees reviews the various services provided by the Investment Manager
to ensure that the Fund's general investment policies and programs are being
properly carried out and that administrative services are being provided to
the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 1.0% to the Fund's net assets determined as of the close of
each business day. For the fiscal year ended July 31, 1994, the Fund accrued
total compensation to the Investment Manager amounting to 1.0% of the Fund's
average daily net assets and the Fund's total expenses amounted to 2.30% of
the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
The investment objective of the Fund is capital appreciation. The
investment objective of the Fund is a fundamental policy and may not be
changed without the approval of the holders of a majority of the Fund's
shares. There is no assurance that the Fund's investment objective will be
achieved.
The Fund will seek to achieve its investment objective by investing at
least 65% of its total assets in the equity securities of health science
companies throughout the world. A health science company is defined as a
company which is principally engaged in the health sciences industry. A
company is deemed to be "principally engaged" if it has at least 50% of its
earnings or revenues derived from health sciences activities, as defined
below, or at least 50% of its assets is devoted to such activities, based
upon the financial statements of the company's most recently reported fiscal
year.
In addition, the Investment Manager may invest in companies other than
health science companies if it considers that such companies have potential
for capital appreciation primarily as a result of particular products,
technology, patents or other market advantages in the health sciences
industry. The Fund does not anticipate that companies not principally engaged
in the health sciences industry will represent more than 20% of the Fund's
investments.
Health sciences activities are defined as activities which consist of the
research, development, production or distribution of products and services by
health science companies which include, but are not limited to, companies
such as: pharmaceutical companies; companies involved in the ownership and/or
operation or delivery of health care services such as hospitals, clinical
test laboratories, convalescent and mental health care facilities,
rehabilitation centers, and
5
<PAGE>
<PAGE>
products and services for home care; companies involved in biotechnology,
medical diagnostics, and biochemical, and nuclear research and development;
and companies that produce and manufacture medical, dental and optical
supplies and equipment.
The Fund's portfolio will primarily consist of common stocks. The Fund may
also invest up to 35% of its total assets in preferred stock and in
investment grade domestic and foreign debt securities of any type of issuer
(such as foreign and domestic corporations and foreign and domestic
governments and their political subdivisions), including bonds, notes,
debentures and debt securities convertible into equity if the Investment
Manager believes that such securities present a favorable opportunity for
capital appreciation. The term investment grade consists of debt instruments
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 Investment Manager. 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 debt instrument held by the Fund is rated BBB or
Baa and is subsequently downgraded by a rating agency, the Fund will retain
such security in its portfolio until the Investment Manager 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 Investment Manager will
sell immediately sufficient securities to reduce the total to below 5%. The
Fund may invest in various other financial instruments such as warrants and
forward foreign currency exchange contracts, futures and options, including
stock index futures contracts and related options in an attempt to hedge its
portfolio
(see below).
While the Fund expects that, from time to time, a significant portion of
its investments will be in securities of U.S. companies, the Fund's
Investment Manager believes that a portfolio comprised only of U.S.
securities does not provide the greatest potential for capital appreciation
from an investment in the health sciences industry. It believes that a
worldwide focus is necessary if the Fund is to take advantage of the
increasing opportunities presented by health science companies headquartered
throughout the world. The Fund may invest substantially in securities
denominated in one or more currencies. The Investment Manager believes that
by investing worldwide, the Fund can better position itself to take advantage
of available health sciences investment opportunities (see "Special Risk
Considerations").
The Fund may also invest in securities of foreign issuers in the form of
American Depository Receipts (ADRs), European Depository Receipts (EDRs) or
other similar securities convertible into securities of foreign issuers.
These securities may not necessarily be denominated in the same currency as
the securities into which they may be converted. ADRs are receipts typically
issued by a United States bank or trust company evidencing ownership of the
underlying securities. EDRs are European receipts evidencing a similar
arrangement. Generally, ADRs, in registered form, are designed for use in the
United States securities markets and EDRs, in bearer form, are designed for
use in European securities markets.
The Fund may invest up to 5% of its total assets in securities that are
subject to restrictions on resale (referred to as private placements or
restricted securities) because they have not been registered under the
Securities Act of 1933, as amended, or which are otherwise not readily
marketable. (Securities eligible for resale pursuant to Rule 144A of the
Securities Act, and determined to be liquid pursuant to the procedures
adopted by the Board of Trustees, are not subject to the foregoing
restriction.) If a restricted security is determined to be "liquid", such
security will not be included within the category "illiquid securities",
which is limited by the Fund's investment policies to 15% of the Fund's net
assets. Generally, OTC options and the assets used as "cover" for written OTC
options are illiquid securities. However, the Fund is permitted to treat the
securities it uses as cover for written OTC options as liquid provided it
follows a procedure whereby it will sell OTC options only to qualified
dealers who agree that the Fund may repurchase such options at a maximum
price to be calculated pursuant to a predetermined formula set forth in the
option agreement. See "Investment Practices and Policies" in the Statement of
Additional Information.
There may be periods during which 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
6
<PAGE>
<PAGE>
in cash (U.S. dollars, foreign currencies or multinational currency units)
and/or invest any portion of its assets in high quality debt securities or
money market instruments of U.S. or foreign issuers. Under such
circumstances, the money market instruments in which the Fund may invest are
securities issued or guaranteed by U.S. or foreign governments; American bank
obligations; Eurodollar certificates of deposit; obligations of American
savings institutions; fully insured certificates of deposit; and commercial
paper of American issuers rated within the two highest grades by Moody's or
S&P or, if not rated, are issued by a company having an outstanding debt
issue rated at least AA by S&P or Aa by Moody's.
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, 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 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
securities 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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
A forward foreign currency exchange contract ("forward contract") involves an
obligation to purchase or sell a currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. The Fund may enter into
forward contracts as a hedge against fluctuations in future foreign exchange
rates.
The Fund will enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in"
the price of the security in U.S. dollars or some other foreign currency
which the Fund is temporarily holding in its portfolio. At other times, when,
for example, it is believed that the currency of a particular foreign country
may suffer a substantial decline against the U.S. dollar or some other
foreign currency, the Fund may enter into a forward contract to sell, for a
fixed amount of dollars or other currency, the amount of foreign currency
approximating the value of some or all of the Fund's portfolio securities (or
securities which the Fund has purchased for its portfolio) denominated in
such foreign currency. Under identical circumstances, the Fund may enter into
a forward contract to sell, for a fixed amount of U.S. dollars or other
currency, an amount of foreign currency other than the currency in which the
securities to be hedged are denominated approximating the value of some or
all of the portfolio securities to be hedged. This method of hedging, called
"cross-hedging," will be selected when it is determined that the foreign
currency in which the portfolio securities are denominated has insufficient
liquidity or is trading at a discount as compared with some other foreign
currency with which it tends to move in tandem.
In addition, when the Fund anticipates purchasing securities at some time
in the future, and wishes to lock in the current exchange rate of the
currency in which those securities are denominated against the U.S. dollar or
some other foreign currency, it may enter into a forward contract to purchase
an amount of currency equal to some or all of the value of the anticipated
purchase, for a fixed amount of U.S. dollars or other currency. Lastly, the
Fund is permitted to enter into forward contracts with respect to currencies
in which certain of its portfolio securities are denominated and on which
options have been written (see "Options and Futures Transactions").
OPTIONS AND FUTURES TRANSACTIONS
Call and put options on U.S. Treasury notes, bonds and bills, on various
foreign currencies and on equity securities 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
7
<PAGE>
<PAGE>
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.
FUTURES CONTRACTS. The Fund may purchase and sell futures contracts that are
currently traded, or may in the future be traded, on U.S. and foreign
commodity exchanges on common stocks, such underlying fixed-income securities
as U.S. Treasury bonds, notes, and bills and/or any foreign government
fixed-income security ("interest rate" futures), on various currencies
("currency" futures) and on such indexes of U.S. or foreign equity and
fixed-income securities as may exist or come into being, such as the Standard
& Poor's 500 Index or the Financial Times Equity Index ("index" futures). As
a futures contract purchaser, the Fund incurs an obligation to take delivery
of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, the Fund incurs an obligation to deliver the specified amount of
the underlying obligation at a specified time in return for an agreed upon
price.
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.
OTHER INVESTMENT POLICIES
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities, from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying
security at a specified price and at a fixed time in the future, usually not
more than seven days from the date of purchase.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery
and payment can take place a month or more after the date of the commitment.
There is no overall limit on the percentage of the Fund's assets which may be
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis may increase the volatility of the Fund's net asset
value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. There is no overall limit on
the percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage
of the Fund's assets committed to the purchase of securities on a "when, as
and if issued" basis may increase the volatility of its net asset value.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are callable at
any time by the Fund (subject to certain notice provisions described in the
Statement of Additional Information), and are at all times secured by cash or
cash equivalents, which are maintained in a segregated account pursuant to
applicable regulations and that are at least equal to the market value,
determined daily, of the loaned securities.
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Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of the Fund and, as
such, may be changed without shareholder approval.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, the views of
Trustees of the Fund and others regarding economic developments and interest
rate trends, and the Investment Manager's own analysis of factors they deem
relevant. The Fund's portfolio is managed within InterCapital's Small
Capitalization Equity Group, which manages five funds and fund portfolios,
with approximately $2.2 billion in assets as of August 31, 1994. Ronald
Worobel, Senior Vice President of InterCapital and a member of InterCapital's
Small Capitalization Equity Group, has been the primary portfolio manager
since the Fund's inception and has been a portfolio manager at InterCapital
since June, 1992. He was the Managing Director at MacKay Schields Financial
Corp. before coming to InterCapital.
Personnel of the Investment Manager have substantial experience in the use
of the investment techniques described above under the heading "Options and
Futures Transactions," which techniques require skills different from those
needed to select the portfolio securities underlying various options and
futures contracts.
Orders for transactions in portfolio securities and commodities may be
placed for the Fund with a number of brokers and dealers, including Dean Witter
Reynolds Inc. ("DWR"). Pursuant to an order of the Securities and Exchange
Commission, the Fund may effect principal transactions in certain money market
instruments with DWR, a broker-dealer affiliate of InterCapital. In addition,
the Fund may incur brokerage commissions on transactions conducted through DWR.
It is not anticipated that the Fund's portfolio turnover rate will exceed
100% in any one year. Short-term gains and losses taxable at ordinary income
rates may result from such portfolio transactions. See "Dividends,
Distributions and Taxes" for a full discussion of the tax implications of the
Fund's trading policy. A more extensive discussion of the Fund's portfolio
brokerage policies is set forth in the Statement of Additional Information.
The expenses of the Fund relating to its portfolio management are likely
to be greater than those incurred by other investment companies investing
primarily in securities issued by domestic issuers as custodial costs,
brokerage commissions and other transaction charges related to investing on
foreign markets are generally higher than in the United States.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in the
market value of its portfolio securities. Dividends payable by the Fund will
vary in relation to the amount of income earned on portfolio securities.
HEALTH SCIENCES INDUSTRY. Investors should consider that the assets of the
Fund are subject to "industry risk" because investments will be concentrated
in a particular group of related stocks. The concentration of investments in
the health sciences industry may cause the value of the Fund's shares to
fluctuate more widely than those funds investing in a greater variety of
industries. The Investment Manager believes, however, that the Fund's
concentration of investments in the health sciences industry also may provide
it with the potential to achieve greater long-term performance than
investments in a variety of industries. In addition, the health sciences
industry generally is subject to substantial government regulation;
accordingly, changes in government policies or regulation could have a
material effect on the demand for products and services offered by health
science companies, thereby affecting the performance of the Fund. In
addition, the products and services offered by such companies may be subject
to rapid obsolescence caused by technological and scientific advances.
While the Fund's portfolio normally will include securities of established
suppliers of traditional products and services, the Fund may invest in
smaller companies which can benefit from the development of new products and
services. These smaller companies may present greater opportunities for
capital appreciation, but may also involve greater risks, than large,
established issuers. Such smaller companies may have limited product lines,
markets or financial resources, and their securities may trade less
frequently and in more limited volume than the
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securities of larger, more established companies. As a result, the prices of
the securities of such smaller companies may fluctuate to a greater degree
than the prices of the securities of other issuers.
FOREIGN SECURITIES. Investors should carefully consider the risks of the
Fund's investing in securities of foreign issuers and securities denominated
in non-U.S. currencies. Fluctuations in the relative rates of exchange
between the currencies of different nations will affect the value of the
Fund's investments. Changes in foreign currency exchange rates relative to
the U.S. dollar will affect the U.S. dollar value of the Fund's assets
denominated in that currency and may thereby adversely 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. The foreign currency
transactions of the Fund will be conducted on a spot basis or through forward
contracts or futures contracts (see below). The Fund may incur certain costs
in connection with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. Political and economic developments in Europe, especially as
they relate to changes in the structure of the European Economic Community
and the anticipated development of a unified common market, may have profound
effects upon the value of a large segment of the Fund's portfolio. Continued
progress in the evolution of, for example, a united European common market
may be slowed by unanticipated political or social events and may, therefore,
adversely affect the value of certain of the securities held in the Fund's
portfolio. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, are subject to different risks relating to claims and
litigation. Regulation of the health sciences industry in foreign countries
is different from that in the U.S. and there are differences in environmental
and securities regulation. There is less publicly available information about
foreign companies as well. Moreover, foreign companies are not subject to
uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to
U.S. companies.
The price changes of securities of foreign issuers may be more volatile
than comparable securities of U.S. issuers. Furthermore, foreign exchanges
and broker-dealers are generally subject to less government and exchange
scrutiny and regulation than their American counterparts. Brokerage
commissions, dealer concessions and other transaction costs may be higher on
foreign markets than in the U.S. In addition, differences in clearance and
settlement procedures on foreign markets may occasion delays in settlements
of Fund trades effected in such markets. Inability to dispose of portfolio
securities due to settlement delays could result in losses to the Fund due to
subsequent declines in value of such securities and the inability of the Fund
to make intended security purchases due to settlement problems could result
in a failure of the Fund to make potentially advantageous investments.
To hedge against adverse price movements in the securities held in its
portfolio and the currencies in which they are denominated (as well as in the
securities it might wish to purchase and their denominated currencies) the
Fund may engage in transactions in forward foreign currency contracts,
options on securities and currencies, and futures contracts and options on
futures contracts on securities, currencies and indexes. The Fund may also
purchase options on securities to facilitate its participation in the
potential appreciation of the value of the underlying securities. A
discussion of these transactions follows and is supplemented by further
disclosure in the Statement of Additional Information.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. If the currency in which the
Fund's portfolio securities (or anticipated portfolio securities) are
denominated rises in value with respect to the currency which is being
purchased (or sold), then the Fund will have realized fewer gains than had
the Fund not entered into the forward contracts. Moreover, the precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible, since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it
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matures. The Fund is not required to enter into such transactions with regard
to its foreign currency-denominated securities and will not do so unless
deemed appropriate by the Investment Manager.
OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its position as
writer of an option, or as a buyer or seller of a futures contract, only if a
liquid secondary market exists for options or futures contracts of that
series. There is no assurance that such a market will exist, particularly in
the case of OTC options, as such options will generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer.
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk is that the Fund's management could be incorrect
in its expectations as to the direction or extent of various interest rate or
price movements or the time span within which the movements take place. For
example, if the Fund sold futures contracts for the sale of securities in
anticipation of an increase in interest rates, and then interest rates went
down instead, causing bond prices to rise, the Fund would lose money on
the sale.
Another risk which may arise in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities, currencies and indices subject to futures contracts (and thereby
the futures contract prices) may correlate imperfectly with the behavior of
the U.S. dollar cash prices of the Fund's portfolio securities and their
denominated currencies. Another such risk is that prices of interest rate
futures contracts may not move in tandem with the changes in prevailing
interest rates against which the Fund seeks a hedge. A correlation may also
be distorted by the fact that the futures market is dominated by short-term
traders seeking to profit from the difference between a contract or security
price objective and their cost of borrowed funds. Such distortions are
generally minor and would diminish as the contract approached maturity.
For additional risk disclosure, please refer to the "Investment Objective
and Policies" section of the Prospectus and to the "Investment Practices and
Policies" in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
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The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities
of the Fund, as defined in the Act. For purposes of the following
limitations: (i) all percentage limitations apply immediately after a
purchase or initial investment, and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry, except the Fund will invest at least 25% of the
value of its total assets in the health sciences industry.
2. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years
of continuous operation. This restriction shall not apply to any obligation
issued or guaranteed by the United States Government, its agencies or
instrumentalities.
3. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or write interest rate, currency and stock and bond index
futures contracts and related options thereon.
4. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. (For the purpose of this restriction, collateral
arrangements with respect to the writing of options and collateral
arrangements with re-spect to initial or variation margin for futures are not
deemed to be pledges of assets.)
5. Purchase securities on margin (but the Fund may obtain short-term
loans as are necessary for the clearance of transactions). The deposit or
payment by the Fund of initial or variation margin in connection with futures
contracts or related options thereon is not considered the purchase of a
security on margin.
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PURCHASE OF FUND SHARES
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The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers which have entered into Selected Dealers Agreements
with the Distributor ("Selected Broker-Dealers"). The principal executive
office of the Distributor is located at Two World Trade Center, New York, New
York 10048.
The minimum initial purchase is $1,000. Minimum subsequent purchases of
$100 or more may be made by sending a check, payable to Dean Witter Health
Sciences Trust, directly to Dean Witter Trust Company (the "Transfer Agent")
at P.O. Box 1040, Jersey City, N.J. 07303 or by contacting an account
executive of DWR or of another Selected Broker-Dealer. In the case of
investments made 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).
Shares of the Fund are sold through the Distributor on a normal five
business day settlement basis; that is, payment is due on the fifth business
day (settlement date) after the order is placed with the Distributor. Since
DWR and other Selected Broker-Dealers forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is
made prior thereto. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment. Investors will be entitled to receive
income 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
dividends and distributions. While no sales charge is imposed at the time
shares are purchased, a contingent deferred sales charge may be imposed at
the time of redemption
(see "Redemptions and Repurchases"). Sales personnel are compensated for
selling shares of the Fund at the time of their sale by the Distributor
and/or Selected Broker-Dealer. In addition, some sales personnel of the
Selected Broker-Dealer will receive non-cash compensation in the form of
trips to educational and/or business seminars and merchandise as special
sales incentives. The Fund and the Distributor reserve the right to reject
any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 1.0% of the lesser
of: (a) the average daily aggregate gross sales of the Fund's shares since
the inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net asset
value of the Fund's shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived; or (b) the
Fund's average daily net assets. This fee is treated by the Fund as an
expense in the year it is accrued. Amounts paid under the Plan are paid to
the Distributor for the services provided and the expenses borne by the
Distributor and others in the distribution of the Fund's shares, including
the payment of commissions for sales of the Fund's shares and incentive
compensation to and expenses of DWR's account executives and others who
engage in or support distribution of shares or who service shareholder
accounts, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering
of the Fund's shares to other than current shareholders; and preparation,
printing and distribution of sales literature and advertising materials. In
addition, the Distributor may utilize fees paid pursuant to the Plan to
compensate DWR and other Selected Broker-Dealers for their opportunity costs
in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses incurred.
For the fiscal year ended July 31, 1994, the Fund accrued payments under
the Plan amounting to $2,603,442 which amount is equal to 1.0% of the Fund's
average daily net assets for the fiscal year. These payments accrued under
the Plan were calculated pursuant to clause (a) of the compensation formula
under the Plan. Of the amount accrued under the Plan,
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0.25% of the Fund's average daily net assets is characterized as a service
fee within the meaning of NASD guidelines.
At any given time, the expenses in distributing shares of the Fund may be
in excess of the total of (i) the payments made by the Fund pursuant to the
Plan, and (ii) the proceeds of contingent deferred sales charges paid by
investors upon the redemption of shares (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). For example, if the
Distributor incurred $1 million in expenses in distributing shares of the
Fund and $750,000 had been received by the Distributor as described in (i)
and (ii) above, the excess expense would amount to $250,000. The Distributor
has advised the Fund that such excess amounts, including the carrying charge
described above, totalled $11,243,199 at July 31, 1994, which was equal to
4.92% of the Fund's net assets on such date. Because there is no requirement
under the Plan that the Distributor be reimbursed for all its expenses or any
requirement that the Plan be continued from year to year, this excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made
to the Distributor under the Plan and the proceeds of contingent deferred
sales charges paid by investors upon redemption of shares, if for any reason
the Plan is terminated, the Trustees will consider at that time the manner in
which to treat such expenses. Any cumulative expenses incurred, but not yet
recovered through distribution fees or contingent deferred sales charges, may
or may not be recovered through future distribution fees or contingent
deferred sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time on each day that the New York Stock Exchange is open by
taking the value of all assets of the Fund, subtracting all its liabilities,
dividing by the number of shares outstanding and adjusting to the nearest
cent. The net asset value per share will not be determined on Good Friday and
on such other federal and non-federal holidays as are observed by the New
York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued; if there were no sales
that day, the security is valued at the latest bid price (in cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated as the primary market by the Trustees); and (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest available bid price prior to the
time of valuation. When market quotations are not readily available,
including circumstances under which it is determined by the Investment
Manager that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision
of the Fund's Trustees. For valuation purposes, quotations of foreign
portfolio securities, other assets and liabilities and forward contracts
stated in foreign currency are translated into U.S. dollar equivalents at the
prevailing market rates as of the morning of valuation. Dividends receivable
are accrued as of the ex-dividend date or as of the time that the relevant
ex-dividend date and amounts become known.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations, in determining
what it believes is the fair valuation of the portfolio securities valued by
such pricing service.
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 investment company for which InterCapital
serves as investment manager (collectively, with the Fund, the "Dean Witter
Funds")), unless the shareholder requests that they be paid in cash. Shares
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so acquired are not subject to the imposition of a contingent deferred sales
charge upon their redemption (see "Redemptions and Repurchases").
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value
next determined after receipt by the Transfer Agent by returning the check or
the proceeds to the Transfer Agent within 30 days after the payment date.
Shares so acquired are not subject to the imposition of a contingent deferred
sales charge upon their redemption (see "Redemptions and Repurchases").
EASYINVEST(SM). Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Fund's Transfer Agent for
investment in shares of the Fund.
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the current net asset value. The
Withdrawal Plan provides for monthly or quarterly (March, June, September,
December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on shares redeemed under the
Withdrawal Plan (see "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). Therefore, any shareholder participating in the Withdrawal Plan
will have sufficient shares redeemed from his or her account so that the
proceeds (net of any applicable contingent deferred sales charge) to the
shareholder will be the designated monthly or quarterly amount.
Shareholders should contact their DWR or other Selected Broker-Dealer
Account Executive or the Transfer Agent for further information about any of
the above services.
TAX SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected
Broker-Dealer account executive or the Transfer Agent.
EXCHANGE PRIVILEGE. The Fund makes available to its shareholders an "Exchange
Privilege" allowing the exchange of shares of the Fund for shares of other
Dean Witter Funds sold with a contingent deferred sales charge ("CDSC funds")
and for shares of Dean Witter Short-Term U.S. Treasury Trust, Dean Witter
Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund and five Dean
Witter Funds which are money market funds (the foregoing eight non-CDSC funds
are hereinafter collectively referred to in this section as the "Exchange
Funds"). Exchanges may be made after the shares of the Fund acquired by
purchase (not by exchange or dividend reinvestment) have been held for 30
days. There is no waiting period for exchanges of shares acquired by exchange
or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share
of each fund after the exchange order is received. When exchanging into a
money market fund from the Fund, shares of the Fund are redeemed out of the
Fund at their next calculated net asset value and the proceeds of the
redemption are used to purchase shares of the money market fund at their net
asset value determined the following business day. Subsequent exchanges
between any of the money market funds and any of the CDSC funds can be
effected on the same basis. No contingent deferred sales charge ("CDSC") is
imposed at the time of any exchange, although any applicable CDSC will be
imposed upon ultimate redemption. Shares of the Fund acquired in exchange for
shares of another CDSC fund having a different CDSC schedule than that of
this Fund will be subject to the CDSC schedule of this Fund, even if such
shares are subsequently re-exchanged for shares of the CDSC fund originally
purchased. During the period of time the shareholder remains in the Exchange
Fund (calculated from the last day of the month in which the Exchange Fund
shares were acquired), the holding period (for the purpose of determining the
rate of the CDSC) is frozen. If those shares are subsequently reexchanged for
shares of a CDSC fund, the holding period previously frozen when the first
exchange was made resumes on the last day of the month in which shares of a
CDSC fund are reacquired. Thus, the CDSC is based upon the time (calculated
as described above) the shareholder was invested in a CDSC fund (see
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"Redemptions and Repurchases--Contingent Deferred Sales Charge"). However, in
the case of shares of the Fund exchanged into an Exchange Fund, upon a
redemption of shares which results in a CDSC being imposed, a credit (not to
exeed the amount of the CDSC) will be given in an amount equal to the
Exchange Fund 12b-1 distribution fees incurred on or after that date which
are attributable to those shares. (Exchange Fund 12b-1 distribution fees are
described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds") but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for
shares of other Dean Witter Funds for which shares of a front-end sales
charge fund have been exchanged) are not subject to any CDSC upon
their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the
best interests of the Fund and its other shareholders, investors should be
aware that the Fund and each of the other Dean Witter Funds may in their
discretion limit or otherwise restrict the number of times this Exchange
Privilege may be exercised by any investor. Any such restriction will be made
by the Fund on a prospective basis only, upon notice to the shareholder not
later than ten days following such shareholder's most recent exchange. Also,
the Exchange Privilege may be terminated or revised at any time by the Fund
and/or any of such Dean Witter Funds for which shares of the Fund may be
exchanged, upon such notice as may be required by applicable regulatory
agencies. Shareholders maintaining margin accounts with DWR or another
Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated
for federal income tax purposes the same as a repurchase or redemption of
shares, on which the shareholder may realize a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in
situations where there is an exchange of shares within ninety days after the
shares are purchased. The Exchange Privilege is only available in states
where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean
Witter Funds (for which the Exchange Privilege is available) pursuant to this
Exchange Privilege by contacting their account executive (no Exchange
Privilege Authorization Form is required). Other shareholders (and those
shareholders who are clients of DWR or other Selected Broker-Dealers but who
wish to make exchanges directly by writing or telephoning the Transfer Agent)
must complete and forward to the Transfer Agent an Exchange Privilege
Authorization Form, copies of which may be obtained from the Transfer Agent,
to initiate an exchange. If the Authorization Form is used, exchanges may be
made in writing or by contacting the Transfer Agent at (800) 526-3143 (toll
free). The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions may also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 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
15
<PAGE>
<PAGE>
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 of the Dean Witter Funds in
the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds
will be reduced by the amount of any applicable contingent deferred sales
charges (see below). If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, N.J. 07303 is required. If certificates
are held by the shareholder, the shares may be redeemed by surrendering the
certificates with a written request for redemption along with any additional
documentation required by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for
six years or more after purchase (calculated from the last day of the month
in which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than six years after purchase may,
however, be subject to a charge upon redemption. This charge is called a
"contingent deferred sales charge" ("CDSC"), and it will be a percentage of
the dollar amount of shares redeemed and will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The size of this percentage will depend upon how long the shares
have been held, as set forth in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
YEAR SINCE PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE REDEEMED
- -------------------------- -----------------------
<S> <C>
First .................................... 5.0%
Second ................................... 4.0%
Third .................................... 3.0%
Fourth ................................... 2.0%
Fifth .................................... 2.0%
Sixth .................................... 1.0%
Seventh and thereafter .................. NONE
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption;
(ii) the current net asset value of shares purchased more than six years
prior to the redemption; and (iii) the current net asset value of shares
purchased through reinvestment of dividends or distributions and/or shares
acquired in exchange for shares of Dean Witter Funds sold with a front-end
sales charge or of other Dean Witter Funds acquired in exchange for such
shares. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order)
are redeemed first. The Distributor has informed the Fund that the total
amount of CDSC paid to it for the fiscal year ended July 31, 1994 was
$877,000.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of (i) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship, or (b) held in
a qualified corporate or self-employed retirement plan, Individual Retirement
Account or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one
year of the death or initial determination of disability, and (ii)
redemptions in connection with the following retirement plan distributions:
(a) lump-sum or other distributions from a qualified corporate or
self-employed retirement plan following retirement (or in the case of a "key
employee" of a "top heavy" plan, following attainment of age 59 1/2 ); (b)
distributions from an Individual Retirement Account or Custodial Account
under Section 403(b)(7) of the Internal Revenue Code following attainment of
age 59 1/2 ; and (c) a tax-free return of an excess contribution to an IRA.
For the purpose of determining disability, the Distributor utilizes the
definition of disability contained in Section 72(m)(7) of the Internal
Revenue Code, which relates to the inability to engage in gainful employment.
All waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
16
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<PAGE>
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic or telegraphic request of the shareholder. The repurchase
price is the net asset value next computed (see "Purchase of Fund Shares")
after such repurchase order is received by DWR or other Selected
Broker-Dealer, reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund, the
Distributor, DWR or other Selected Broker-Dealers. The offer by DWR and other
Selected Broker-Dealers to repurchase shares may be suspended without notice
by them at any time. In that event, shareholders may redeem their shares
through the Fund's Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended under unusual circumstances. 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 their margin accounts.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within 30 days after the date of the redemption or repurchase, reinstate
any portion or all of the proceeds of such redemption or repurchase in shares
of the Fund at net asset value next determined after a reinstatement request,
together with the proceeds, is received by the Transfer Agent and receive a
pro rata credit for any CDSC paid in connection with such redemption or
repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem at their net asset value the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Internal Revenue Code) whose shares have a value of
less than $100 as a result of redemptions or repurchases, or such lesser
amount as may be fixed by the Board of Trustees. No CDSC will be imposed on
any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to distribute all of its net
investment income and net 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.
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 any net short-term and long-term capital gains to shareholders and
to otherwise qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code, it is not expected that the Fund will be required
to pay any federal income tax on such income and capital gains.
Gains or losses on the Fund's transactions in certain listed options and
on futures and options on futures generally are treated as 60% long-term gain
or loss and 40% short-term gain or loss. When the Fund engages in options and
futures transactions, various tax regulations applicable to the Fund may have
the effect of causing the Fund to recognize a gain or loss for tax purposes
before that gain or loss is realized, or to defer recognition of a realized
loss for tax purposes. Recognition, for tax purposes, of an unrealized loss
may result in a lesser amount of the Fund's net realized 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
17
<PAGE>
<PAGE>
requirement may limit the Fund's ability to engage in options and futures
transactions.
Shareholders who are required to pay taxes on their income will normally
have to pay federal income taxes, and any applicable state and/or local
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from
net investment income and net short-term capital gains, are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. Any dividends
declared in the last quarter of any calendar year which are paid in the
following year prior to February 1 will be deemed, for tax purposes, to have
been received by the shareholder in the prior year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. It is anticipated that only a small
portion, if any, of the Fund's distributions may be eligible for the
dividends received deduction to corporate shareholders.
After the end of the calendar year, shareholders will receive full
information on their dividends and capital gains distributions for tax
purposes, including information as to the portion taxable as ordinary income
and the portion taxable as long-term capital gains.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished
and certified as to their accuracy.
Dividends, interest and 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 deduct their pro rata portion of such taxes
from their taxable income or claim United States foreign tax credits with
respect to such taxes. In the absence of such an election, the Fund would
deduct foreign tax in computing the amount of its distributable income.
The foregoing discussion relates solely to the federal income tax
consequences of an investment in the Fund. Distributions may also be subject
to state and local taxes; therefore, each shareholder is advised to consult
his or her own tax adviser.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements and
sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average
annual total return" of the Fund refers to a figure reflecting the average
annualized percentage increase (or decrease) in the value of an initial
investment in the Fund of $1,000 over a period of one year, as well as the
life of the Fund. Average annual total return reflects all income earned by
the Fund, any appreciation or depreciation of the Fund's assets, all expenses
incurred by the Fund and all sales charges which would be incurred by
redeeming shareholders, for the stated periods. It also assumes reinvestment
of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, and year-by-year or
other types of total return figures. The Fund may also advertise a growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. Such calculations may or may not reflect the deduction of the
contingent deferred sales charge which, if reflected, would reduce the
performance quoted. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indices compiled by
independent organizations (such as mutual fund performance rankings of Lipper
Analytical Services, Inc.).
18
<PAGE>
<PAGE>
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.
In accordance with the Fund's Declaration of Trust, the Trustees of the
Fund will be elected by a majority shareholder vote at the first meeting of
shareholders held following the initial offering of the shares of the Fund.
The Trustees themselves have the power to alter the number and the terms of
office of the Trustees (as provided for in the Declaration of Trust), and
they may at any time lengthen or shorten their own terms or make their terms
of unlimited duration and appoint their own successors, provided that always
at least a majority of the Trustees has been elected by the shareholders of
the Fund. Under certain circumstances the Trustees may be removed by action
of the Trustees. The shareholders also have the right under certain
circumstances to remove the Trustees. The voting rights of shareholders are
not cumulative, so that holders of more than 50 percent of the shares voting
can, if they choose, elect all Trustees being elected, while the holders of
the remaining shares would be unable to elect any Trustees. The Fund is not
required to hold Annual Meetings of Shareholders and in ordinary
circumstances the Fund does not intend to hold such meetings. The Trustees
may call Special Meetings of Shareholders for action by shareholder vote as
may be required by the Act or the Declaration of Trust.
Under Massachusetts law, shareholders of a business trust may, under
certain limited 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
for indemnification out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability,
and the nature of the Fund's assets and operations, the possibility of the
Fund being unable to meet its obligations is remote and, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
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.
19
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<PAGE>
DEAN WITTER
HEALTH SCIENCES TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Ronald Worobel
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
<PAGE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 28, 1994
DEAN WITTER
HEALTH
SCIENCES
TRUST
- -----------------------------------------------------------------------------
Dean Witter Health Sciences Trust (the "Fund") is an open-end,
non-diversified management investment company whose investment objective is
capital appreciation. The Fund seeks to achieve its investment objective by
investing in securities of companies in the health sciences industry
throughout the world.
A Prospectus for the Fund dated September 28, 1994, which provides the
basic information you should know before investing in the Fund, may be
obtained without charge from the Fund at the address or telephone number
listed below or from the Fund's Distributor, Dean Witter Distributors Inc.,
or from Dean Witter Reynolds Inc. at any of its branch offices. This
Statement of Additional Information is not a Prospectus. It contains
information in addition to and more detailed than that set forth in the
Prospectus. It is intended to provide additional information regarding the
activities and operations of the Fund, and should be read in conjunction with
the Prospectus.
Dean Witter
Health Sciences Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550
<PAGE>
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
The Fund and its Management................................................ 3
Trustees and Officers ..................................................... 6
Investment Practices and Policies.......................................... 9
Investment Restrictions ................................................... 22
Portfolio Transactions and Brokerage ...................................... 23
Purchase of Fund Shares ................................................... 25
Shareholder Services....................................................... 28
Redemptions and Repurchases................................................ 32
Dividends, Distributions and Taxes ........................................ 35
Performance Information ................................................... 36
Description of Shares of the Fund.......................................... 37
Custodian and Transfer Agent............................................... 38
Independent Accountants ................................................... 38
Reports to Shareholders ................................................... 38
Legal Counsel ............................................................. 38
Experts.................................................................... 38
Registration Statement .................................................... 38
Financial Statements--July 31, 1994 ....................................... 39
Report of Independent Accountants.......................................... 46
2
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<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 May 26, 1992.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or
"InterCapital"), whose address is Two World Trade Center, New York, New York
10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware corporation.
In an internal reorganization which took place in January, 1993, InterCapital
assumed the investment advisory, administrative and management activities
previously performed by the InterCapital Division of Dean Witter Reynolds
Inc. ("DWR"), a broker-dealer affiliate of InterCapital. (As hereinafter used
in this Statement of Additional Information, the terms "InterCapital" and
"Investment Manager" refer to DWR's InterCapital Division prior to the
internal reorganization and to Dean Witter InterCapital Inc. thereafter.) The
daily management of the Fund and research relating to the Fund's portfolio
are conducted by or under the direction of officers of the Fund and of the
Investment Manager, subject to review by the Fund's Board of Trustees. In
addition, Trustees of the Fund provide guidance on economic factors and
interest rate trends. Information as to these Trustees and Officers is
contained under the caption "Trustees and Officers".
InterCapital is also the investment manager or investment adviser of the
following management investment companies: Dean Witter Liquid Asset Fund Inc.,
InterCapital Income Securities Inc., InterCapital Insured Municipal Bond
Trust, InterCapital Quality Municipal Investment Trust, InterCapital Insured
Municipal Trust, Dean Witter High Yield Securities Inc., Dean Witter Tax-Free
Daily Income Trust, Dean Witter Developing Growth Securities Trust, Dean
Witter Tax-Exempt Securities Trust, Dean Witter Natural Resource Development
Securities Inc., Dean Witter Dividend Growth Securities Inc., Dean Witter
American Value Fund, Dean Witter U.S. Government Money Market Trust, Dean
Witter Variable Investment Series, Dean Witter World Wide Investment Trust,
Dean Witter Select Municipal Reinvestment Fund, Dean Witter U.S. Government
Securities Trust, Dean Witter California Tax-Free Income Fund, Dean Witter New
York Tax-Free Income Fund, Dean Witter Convertible Securities Trust, Dean
Witter Federal Securities Trust, Dean Witter Value-Added Market Series, High
Income Advantage Trust, High Income Advantage Trust II, High Income Advantage
Trust III, Dean Witter Government Income Trust, Dean Witter Utilities Fund,
Dean Witter California Tax-Free Daily Income Trust, Dean Witter Strategist
Fund, Dean Witter Managed Assets Trust, Dean Witter World Wide Income Trust,
Dean Witter Intermediate Income Securities, Dean Witter New York Municipal
Money Market Trust, Dean Witter Capital Growth Securities, Dean Witter European
Growth Fund Inc., Dean Witter Precious Metals and Minerals Trust, Dean Witter
Global Short-Term Income Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean
Witter Multi-State Municipal Series Trust, Dean Witter Premier Income Trust,
Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund, Dean Witter Global Utilities Fund,
Dean Witter National Municipal Trust, Dean Witter High Income Securities, Dean
Witter International SmallCap Fund, Dean Witter Mid-Cap Growth Fund,
InterCapital Insured Municipal Trust, InterCapital Quality Municipal Income
Trust, Dean Witter Diversified Income Trust, Dean Witter Retirement Series,
InterCapital Insured Municipal Income Trust, InterCapital California Insured
Municipal Income Trust, InterCapital Quality Municipal Securities, InterCapital
California Quality Municipal Securities, InterCapital New York Quality
Municipal Securities, InterCapital Insured Municipal Securities, InterCapital
Insured California Municipal Securities, Active Assets Money Trust, Active
Assets Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, Municipal Income Trust, Municipal Income Trust
II, Municipal Income Trust III, Municipal Income Opportunities Trust,
Municipal Income Opportunities Trust II, Municipal Income Opportunities Trust
III, Prime Income Trust and Municipal Premium Income Trust. The foregoing
investment companies, together with the Fund, are collectively referred to as
the Dean Witter Funds. In addition, Dean Witter Services Company Inc.
("DWSC"), a wholly-owned subsidiary of InterCapital serves as manager for the
following investment companies for which TCW Funds Management, Inc. is the
investment adviser: TCW/DW Core Equity Trust, TCW/DW North American
Government Income Trust, TCW/DW Latin American Growth Fund, TCW/DW Income and
Growth Fund, TCW/DW Small Cap
3
<PAGE>
<PAGE>
Growth Fund, TCW/DW Total Return Trust, TCW/DW Balanced
Fund, TCW/DW North American Intermediate Income Trust, TCW/DW Global
Convertible Trust, TCW/DW Emerging Markets Opportunities Trust, TCW/DW Term
Trust 2000, TCW/DW Term Trust 2002 and TCW/DW Term Trust 2003 (the "TCW/DW
Funds"). InterCapital also serves as: (i) sub-adviser to Templeton Global
Opportunities Trust, an open-end investment company; (ii) administrator of
The BlackRock Strategic Term Trust Inc., a closed-end investment company; and
(iii) sub-administrator of MassMutual Participation Investors and Templeton
Global Governments Income Trust, closed-end investment companies.
The Investment Manager also serves as an investment adviser for Dean
Witter World Wide Investment Fund, an investment company organized under the
laws of Luxembourg, shares of which are not available for purchase in the
United States or by American citizens outside the United States.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage
the investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund
may reasonably require in the conduct of its business, including the
preparation of prospectuses, proxy statements and reports required to be
filed with Federal and state securities commissions (except insofar as the
participation or assistance of independent accountants and attorneys is, in
the opinion of the Investment Manager, necessary or desirable). In addition,
the Investment Manager pays the salaries of all personnel, including officers
of the Fund, who are employees of the Investment Manager. The Investment
Manager also bears the cost of telephone service, heat, light, power and
other utilities provided to the Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to
the Fund which were previously performed directly by InterCapital. The
foregoing internal reorganization did not result in any change in the nature
or scope of the administrative services being provided to the Fund or any of
the fees being paid by the Fund for the overall services being performed
under the terms of the existing Agreement.
Expenses not expressly assumed by the Investment Manager under the
Agreement (see "The Fund and its Management" in the Prospectus), or by the
Distributor of the Fund's shares, Dean Witter Distributors Inc.
("Distributors" or the "Distributor") (see "Purchase of Fund Shares" in the
Prospectus) will be paid by the Fund. The expenses borne by the Fund include,
but are not limited to: charges and expenses of any registrar, custodian,
stock transfer and dividend disbursing agent; brokerage commissions; taxes;
engraving and printing 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 proxy statements and reports to shareholders;
fees and travel expenses of Trustees or members of any advisory board or
committee who are not employees of the Investment Manager or any corporate
affiliate of the Investment Manager; all expenses incident to any dividend,
withdrawal or redemption options; charges and expenses of any outside service
used for pricing of the Fund's shares; fees and expenses of legal counsel,
including counsel to the Trustees who are not interested persons of the Fund
or of the Investment Manager (not including compensation or expenses of
attorneys who are employees of the Investment Manager) and independent
accountants; membership dues of industry associations; interest on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Trustees) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification relating thereto); and all other
costs of the Fund's operation. As full compensation for the services and
facilities furnished to the Fund and expenses of the Fund assumed by the
Investment Manager, the Fund pays the
4
<PAGE>
<PAGE>
Investment Manager monthly compensation calculated daily by applying the
annual rate of 1.0% to the net assets of the Fund, determined as of the close
of each business day. For the fiscal year ended July 31, 1994, and for the
period October 30, 1992 (commencement of operations) through July 31, 1993
(fiscal year-end), the Fund accrued to the Investment Manager total
compensation of $2,603,442 and $1,516,920, respectively.
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 applicable limitations as the same may be amended from time to
time. Presently, the most restrictive limitation to which the Fund is subject
is as follows: if, in any fiscal year, the Fund's total operating expenses,
exclusive of taxes, interest, brokerage fees, distribution fees and
extraordinary expenses (to the extent permitted by applicable state
securities laws and regulations), exceed 2 1/2 % of the first $30,000,000 of
average daily net assets, 2% of the next $70,000,000 and 1 1/2 % of any
excess over $100,000,000, the Investment Manager will reimburse the Fund for
the amount of such excess. Such amount, if any, will be calculated daily and
credited on a monthly basis. During fiscal year July 31, 1994 and for the
period October 30, 1992 (commencement of operations) through July 31, 1993
(fiscal year-end), the Fund's expenses did not exceed the expense limitation.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
The Agreement was initially approved by the Board of Trustees on July 29,
1992, and by DWR, the then sole shareholder of the Fund on July 31, 1992. At
their meeting held on October 30, 1992, the Trustees of the Fund, including
all the Trustees of the Fund who are not parties to the Investment Management
Agreement or "interested persons" (as defined in the Investment Company Act
of 1940 (the "Act")) of any such party (the "Independent Trustees"), approved
the assumption by InterCapital of DWR's rights and duties under the
Investment Management Agreement, which assumption took place upon the
reorganization described above. The Trustees of the Fund, including all of
the Independent Trustees, also approved a new investment management agreement
between the Fund and InterCapital, which took effect on June 30, 1993 upon
the spin-off by Sears, Roebuck & Co. of its remaining shares of DWDC. The
terms of the new Agreement are substantially identical in all material
respects to those of the initial Agreement. The Agreement may be terminated
at any time, without penalty, on thirty days' notice by the Board of Trustees
of the Fund, by the holders of a majority, as defined in the Investment
Company Act of 1940, as amended (the "Act"), of the outstanding shares of the
Fund, or by the Investment Manager. The Agreement will automatically
terminate in the event of its assignment (as defined in the Act).
Under its terms, the Agreement had an initial term ending April 30, 1994
and provides that it will continue in effect from year to year thereafter,
provided such 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 Board of Trustees of the Fund;
provided that in either event such continuance is approved annually by the
vote of a majority of the Trustees of the Fund who are not parties to the
Agreement or "interested persons" (as defined in the Act) of any such party,
which vote must be cast in person at a meeting called for the purpose of
voting on such approval. At their meeting held on April 8, 1994, the Fund's
Board of Trustees, including all of the Independent Trustees approved
continuation of the Agreement until April 30, 1995.
The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use or, at any
time, permit others to use, the name "Dean Witter". The Fund has also agreed
that in the event the investment management contract between InterCapital and
the Fund is terminated, or if the affiliation between the Investment Manager
and its parent Company is terminated, the Fund will eliminate the name "Dean
Witter" from its name if DWR or its parent Company shall so request.
5
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TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the Dean Witter Funds and the TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ----------------------------------------- ---------------------------------------------------------
<S> <C>
Jack F. Bennett Trustee 141 Taconic Road Retired; Director or Trustee of the Dean Witter Funds; formerly
Greenwich, Connecticut Senior Vice President and Director of Exxon Corporation
(1975-January, 1989) and Under Secretary of the U.S. Treasury
for Monetary Affairs (1974-1975); director of Philips
Electronics N.V., Tandem Computers Inc. and Massachusetts Mutual
Life Insurance Co.; director or trustee of various not-for-profit
and business organizations.
Michael Bozic Trustee c/o Hills Stores, President and Chief Executive Officer of Hills Department Stores
Inc. 15 Dan Road Canton, Massachusetts (since May, 1991); formerly Chairman and Chief Executive Officer
(January, 1987-August, 1990) and President and Chief Operating
Officer (August, 1990-February, 1991) of the Sears Merchandise
Group of Sears, Roebuck and Co.; Director or Trustee of the
Dean Witter Funds; Director of Harley Davidson Credit Inc.,
the United Negro College Fund and Domain Inc. (home decor
retailer).
Charles A. Fiumefreddo* Trustee, Chairman Chairman, Chief Executive Officer and Director of InterCapital,
of the Board, President and Chief Distributors and DWSC; Director and Executive Vice President
Executive Officer Two World Trade Center of DWR; Chairman, Director or Trustee, President and Chief
New York, New York Executive Officer of the Dean Witter Funds; Chairman, Chief
Executive Officer and Trustee of the TCW/DW Funds; Chairman
and Director of Dean Witter Trust Company ("DWTC"); Director
and/or officer of various DWDC subsidiaries and affiliates;
formerly Executive Vice President and Director of DWDC (until
February, 1993).
Edwin J. Garn Trustee 2000 Eagle Gate Director or Trustee of the Dean Witter Funds; formerly United
Tower Salt Lake City, Utah States Senator (R-Utah) (1974-1992) and Chairman, Senate Banking
Committee (1980-1986); formerly Mayor of Salt Lake City, Utah
(1971-1974); formerly Astronaut, Space Shuttle Discovery (April
12-19, 1985); Vice Chairman, Huntsman Chemical Corporation
(since January, 1993); Member of the board of various civic
and charitable organizations.
6
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<PAGE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ----------------------------------------- ---------------------------------------------------------
<S> <C>
John R. Haire Trustee 439 East 51st Chairman of the Audit Committee and Chairman of the Committee
Street New York, New York of the Independent Directors or Trustees and Director or Trustee
of the Dean Witter Funds; Trustee of the TCW/DW Funds; formerly
President, Council for Aid to Education (1978-October, 1989),
and Chairman and Chief Executive Officer of Anchor Corporation,
an Investment Adviser (1964-1978); Director of Washington
National Corporation (insurance) and Bowne & Co., Inc.
(printing).
Dr. John E. Jeuck Trustee 70 East Cedar Retired; Director or Trustee of the Dean Witter Funds; formerly
Street Chicago, Illinois Robert Law Professor of Business Administration, Graduate School
of Business, University of Chicago (until July, 1989); Business
consultant.
Dr. Manuel H. Johnson Trustee 7521 Old Senior Partner, Johnson Smick International, Inc., a consulting
Dominion Dr. MacLean, Virginia firm (since June, 1985); Koch Professor of International
Economics and Director of the Center for Global Market Studies
at George Mason University (since September, 1990); Co-Chairman
and a founder of the Group of Seven Council (G7C), an international
economic commission (since September, 1990); Director or Trustee
of the Dean Witter Funds; Trustee of the TCW/DW Funds; Director
of Greenwich Capital Markets Inc. (broker-dealer); formerly
Vice Chairman of the Board of Governors of the Federal Reserve
System (February, 1986-August, 1990) and Assistant Secretary
of the U.S. Treasury (1982-1986).
Paul Kolton Trustee 9 Hunting Ridge Road Director or Trustee of the Dean Witter Funds; Chairman of the
Stamford, Connecticut Audit Committee and Committee of the Independent Trustees and
Trustee of the TCW/DW Funds; formerly Chairman of the Financial
Accounting Standards Advisory Council and Chairman and Chief
Executive Officer of the American Stock Exchange; Director
of UCC Investors Holding Inc. (Uniroyal Chemical Company Inc.);
director or trustee of various not-for-profit organizations.
Michael E. Nugent Trustee 237 Park Avenue General Partner, Triumph Capital, L.P., a private partnership
New York, New York (since April, 1988); Director or Trustee of the Dean Witter
Funds; Trustee of the TCW/DW Funds; formerly Vice President,
Bankers Trust Company and BT Capital Corporation (September,
1984-March, 1988); Director of various business organizations.
7
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<PAGE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ----------------------------------------- ---------------------------------------------------------
<S> <C>
Philip J. Purcell* Trustee Two World Chairman of the Board of Directors and Chief Executive Officer
Trade Center New York, New York of DWDC, DWR and Novus Credit Services Inc.; Director of
InterCapital, DWSC and Distributors; Director or Trustee of
the Dean Witter Funds; Director and/or officer of various DWDC
subsidiaries.
John L. Schroeder Trustee Northgate 3A Executive Vice President and Chief Investment Officer of the
Alger Court Bronxville, New York Home Insurance Company (since August, 1991); Director or Trustee
of the Dean Witter Funds; Director of Citizens Utilities Company;
formerly Chairman and Chief Investment Officer of Axe-Houghton
Management and the Axe-Houghton Funds (April, 1983-June, 1991)
and President of USF&G Financial Services, Inc. (June, 1990-June,
1991).
Edward R. Telling* Trustee Sears Tower Retired; Director or Trustee of the Dean Witter Funds; formerly
Chicago, Illinois Chairman of the Board of Directors and Chief Executive Officer
(until December, 1985) and President (from January, 1981-March,
1982 and from February, 1984-August, 1984) of Sears, Roebuck
and Co.; formerly Director of Sears, Roebuck and Co.
Sheldon Curtis Vice President, Secretary Senior Vice President, Secretary and General Counsel of
and General Counsel Two World Trade InterCapital and DWSC; Senior Vice President and Secretary
Center New York, New York of DWTC; Senior Vice President, Assistant Secretary and Assistant
General Counsel of Distributors and DWSC; Assistant Secretary
of DWDC and DWR; Vice President, Secretary and General Counsel
of the Dean Witter Funds and the TCW/DW Funds.
Ronald Worobel Vice President Two World Senior Vice President, previously Vice President of InterCapital
Trade Center New York, New York (since June 29, 1992); formerly Managing Director at MacKay
Schields Financial Corp.
Thomas F. Caloia Treasurer Two World First Vice President (since May, 1991) and Assistant Treasurer
Trade Center New York, New York (since April, 1988) of InterCapital; First Vice President and
Assistant Treasurer of DWSC; and Treasurer of the Dean Witter
Funds and TCW/DW Funds; previously 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
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and
Director of DWTC, Edmund C. Puckhaber, Executive Vice President of
InterCapital, and Jonathan R. Page, Senior Vice President of InterCapital,
are Vice Presidents of the Fund and Marilyn K. Cranney and Barry Fink, First
Vice Presidents and Assistant General Counsels of InterCapital and DWSC,
Lawrence S. Lafer, Lou Anne D. McInnis and Ruth Rossi, Vice Presidents and
Assistant General Counsels of InterCapital and DWSC are Assistant Secretaries
of the Fund.
8
<PAGE>
<PAGE>
The Fund pays each Trustee who is not an employee or retired employee of
the Investment Manager or an affiliated company an annual fee of $1,200
($1,600 prior to December 31, 1993) plus $50 for each meeting of the Board of
Trustees or of any committee of the Board of Trustees attended by the Trustee
in person (the Fund pays the Chairman of the Audit Committee an additional
annual fee of $1,000 ($1,200 prior to December 31, 1993) and pays the
Chairman of the Committee of the Independent Trustees an annual fee of
$2,400, in each case inclusive of the Committee meeting fees). The Fund also
reimburses such Trustees for travel and other out-of-pocket expenses incurred
by them in connection with attending such meetings. Trustees and officers of
the Fund who are employed by the Investment Manager or an affiliated company
receive no compensation or expense reimbursement from the Fund. The Fund has
adopted a retirement program under which an Independent Trustee who retires
after a minimum required period of service would be entitled to retirement
payments upon reaching the eligible retirement date (normally after attaining
age 72) based upon length of service and computed as a percentage of
one-fifth of the total compensation earned by such Trustee for service to the
Fund in the five-year period prior to the date of the Trustee's retirement.
No Independent Trustee has retired since the adoption of the program and no
payments by the Fund have been made under the program to any Trustee. For the
fiscal year ended July 31, 1994, the Fund accrued a total of $25,188 of which
$7,000 was for benefits under the retirement program, for Trustees' fees and
expenses. As of the date of this Statement of Additional Information, the
aggregate shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
As stated in the Prospectus, the Fund currently anticipates investing over
65% of its total assets in securities of companies in the health sciences
industry. The Fund's prospectus contains disclosure discussing the risks of
investing in a single industry.
Private Placements/Illiquid Investments. Under a non-fundamental policy,
which may be changed by the Trustees of the Fund, the Fund may invest up to
15% of its net assets in illiquid securities.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act of 1933, which permits the Fund to sell restricted securities
to qualified institutional buyers without limitation. The Trustees of the
Fund have adopted procedures for the Investment Manager to utilize in
determining the liquidity of securities which may be sold pursuant to Rule
144A. In addition, the Trustees have determined that, where such securities
are determined to be liquid under these procedures, investment in such
securities by the Fund shall not be subject to the 15% limitation referred to
above.
The Investment Manager will monitor the liquidity of restricted securities
in the Fund's portfolio under the supervision of the Board of Trustees. In
reaching liquidity decisions, the Investment Manager will consider, among
others, the following factors: (1) the frequency of trades and quotes for the
security; (2) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (3) dealer undertakings to make
a market in the security; and (4) the nature of the security and the nature
of the marketplace trades (e.g., the time needed to dispose of the security,
the method of soliciting offers and the mechanics of the transfer).
Convertible Securities. The Fund may invest in fixed-income securities
which are convertible into common stock. Convertible securities rank senior
to common stocks in a corporation's capital structure and, therefore, entail
less risk than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if it did not
have a conversion privilege), and its "conversion value" (the security's
worth if it were to be exchanged for the underlying security, at market
value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security
(the credit standing of the issuer and other factors may also have an effect
on the convertible security's value). If the conversion value exceeds the
investment value, the price of the convertible security will rise above
9
<PAGE>
<PAGE>
its investment value and, in addition, will sell at some premium over its
conversion value. (This premium represents the price investors are willing to
pay for the privilege of purchasing a fixed-income security with a
possibility of capital appreciation due to the conversion privilege.) At such
times the price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security. Convertible securities may
be purchased by the Fund at varying price levels above their investment
values and/or their conversion values in keeping with the Fund's objectives.
Warrants. The Fund may acquire warrants, including warrants which are
attached to fixed-income securities purchased for its portfolio, and hold
such warrants until the Investment Manager determines it is prudent to sell.
Warrants are, in effect, an option to purchase equity securities at a
specific price, generally valid for a specific period of time, and have no
voting rights, pay no dividends and have no rights with respect to the
corporations issuing them.
U.S. Government Securities. Securities issued by the U.S. Government, its
agencies or instrumentalities in which the Fund may invest include:
(1) U.S. Treasury bills (maturities of one year of less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations of
the U.S. Government and, as such, are backed by the "full faith and credit"
of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations are
the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months to
30 years.
Neither the value nor the yield of the U.S. Government securities which
may be invested in by the Fund are guaranteed by the U.S. Government. Such
values and yield will fluctuate with changes in prevailing interest rates and
other factors. Generally, as prevailing interest rates rise, the value of any
U.S. Government securities held by the Fund will fall. Such securities with
longer maturities generally tend to produce higher yields and are subject to
greater market fluctuation as a result of changes in interest rates than debt
securities with shorter maturities.
Zero Coupon Treasury Securities. A portion of the U.S. Government
securities purchased by the Fund may be "zero coupon" Treasury securities.
These are U.S. Treasury bills, notes and bonds which have been stripped of
their unmatured interest coupons and receipts or which are certificates
representing interests in such stripped debt obligations and coupons. Such
securities are purchased at a discount from their face amount, giving the
purchaser the right to receive their full value at maturity. A zero coupon
security pays no interest to its holder during its life. Its value to an
investor consists of the difference between its face value at the time of
maturity and the price for which it was acquired, which is generally an
amount significantly less than its face value (sometimes referred to as a
"deep discount" price). The Fund intends to invest in such zero coupon
treasury securities as STRIPS, Treasury Receipts, Physical Coupons, and
Proprietary Receipts. However, the Fund does not intend, during the coming
year, to invest in such securities in amounts totalling more than 5% of its
total assets.
The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant
rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received if prevailing interest rates rise. For this reason, zero
coupon securities are subject to substantially greater market price
fluctuations during periods of changing prevailing interest rates than are
comparable debt securities which make current distributions of interest.
Current federal tax law requires that a holder (such as the Fund) of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the Fund receives no interest
payments in cash on the security during the year.
10
<PAGE>
<PAGE>
Currently the only U.S. Treasury security issued without coupons is the
Treasury bill. However, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of the U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in custodial or
trust account).
As stated in the Prospectus, the money market instruments which the Fund
may purchase include U.S. and foreign government securities, bank
obligations, Eurodollar certificates of deposit, obligations of savings
institutions, fully insured certificates of deposit and commercial paper.
Such securities are limited to:
U.S. and Foreign 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), or by a foreign government, including U.S.
and foreign Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit and
bankers' acceptances) of banks subject to regulation by the U.S. Government
and having total assets of $1,000,000,000 or more, and instruments secured by
such obligations, not including obligations of foreign branches of domestic
banks except to the extent below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of
$1,000,000,000 or more;
Obligations of Savings Institutions. Certificates of deposit of savings
and loan associations, having total assets of $1,000,000,000 or more;
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1,000,000,000, if
the principal amount of the obligation is insured by the Federal Deposit
Insurance Corporation, limited to $100,000 principal amount per certificate
and to 10% 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
S&P or by Moody's or, if not rated, issued by a company having an outstanding
debt issue rated at least AA by S&P or Aa by Moody's.
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 banks) and their
customers. Such forward contracts will only be entered into with United
States banks and their foreign branches or foreign banks whose assets total
$1 billion or more. A forward contract generally has no deposit requirement,
and no commissions are charged at any stage for trades.
When the Investment Manager of the Fund believes that the currency of a
particular foreign country may suffer a substantial movement against the U.S.
dollar, it may enter into a forward contract to purchase or sell, for a fixed
amount of dollars or other currency, the amount of foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. The Fund will also not enter into such
forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. Under normal circumstances,
consideration of the prospect for currency parities will be
11
<PAGE>
<PAGE>
incorporated into the longer term investment decisions made with regard to
overall diversification strategies. However, the management of the Fund
believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of the Fund will
be served. The Fund's custodian bank will place cash, U.S. Government
securities or other appropriate liquid high grade debt securities in a
segregated account of the Fund in an amount equal to the value of the Fund's
total assets committed to the consummation of forward contracts entered into
under the circumstances set forth above. If the value of the securities
placed in the segregated account declines, additional cash or securities will
be placed in the account on a daily basis so that the value of the account
will equal the amount of the Fund's commitments with respect to such
contracts.
Where, for example, the Fund is hedging a portfolio position consisting of
foreign fixed-income securities denominated in a foreign currency against
adverse exchange rate moves vis-a-vis the U.S. dollar, at the maturity of the
forward contract for delivery by the Fund of a foreign currency, the Fund may
either sell the portfolio security and make delivery of the foreign currency,
or it may retain the security and terminate its contractual obligation to
deliver the foreign currency by purchasing an "offsetting" contract with the
same currency trader obligating it to purchase, on the same maturity date,
the same amount of the foreign currency. It is impossible to forecast the
market value of portfolio securities at the expiration of the contract.
Accordingly, it may be necessary for the Fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency the
Fund is obligated to deliver and if a decision is made to sell the security
and make delivery of the foreign currency. Conversely, it may be necessary to
sell on the spot market some of the foreign currency received upon the sale
of the portfolio securities if its market value exceeds the amount of foreign
currency the Fund is obligated to deliver.
If the Fund retains the portfolio securities and engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been movement in spot or forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase
of the foreign currency, the Fund will realize a gain to the extent the price
of the currency it has agreed to sell exceeds the price of the currency it
has agreed to purchase. Should forward prices increase, the Fund will suffer
a loss to the extent the price of the currency it has agreed to purchase
exceeds the price of the currency it has agreed to sell.
If the Fund purchases a fixed-income security which is denominated in U.S.
dollars but which will pay out its principal based upon a formula tied to the
exchange rate between the U.S. dollar and a foreign currency, it may hedge
against a decline in the principal value of the security by entering into a
forward contract to sell 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 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 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 and high grade debt obligations in a segregated account
equal in value to all forward contract obligations and option contract
obligations entered into in hedge situations such as this.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will, however, do so from time to time, and
investors should be aware of the costs of currency conversion. Although
foreign exchange dealers do not charge a fee for conversion, they do realize
a profit based on the spread between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
12
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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 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.
Options on Foreign Currencies. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Fund may purchase put options on an
amount of such foreign currency equivalent to the current value of the
portfolio securities involved. As a result, the Fund would be enabled to sell
the foreign currency for a fixed amount of U.S. dollars, thereby "locking in"
the dollar value of the portfolio securities (less the amount of the premiums
paid for the options). Conversely, the Fund may purchase call options on
foreign currencies in which securities it anticipates purchasing are
denominated to secure a set U.S. dollar price for such securities and protect
against a decline in the value of the U.S. dollar against such foreign
currency. The Fund may also purchase call and put options to close out
written option positions.
The Fund may also write call options on foreign currency to protect
against potential declines in its portfolio securities which are denominated
in foreign currencies. If the U.S. dollar value of the portfolio securities
falls as a result of a decline in the exchange rate between the foreign
currency in which it is denominated and the U.S. dollar, then a loss to the
Fund occasioned by such value decline would be ameliorated by receipt of the
premium on the option sold. At the same time, however, the Fund gives up the
benefit of any rise in value of the relevant portfolio securities above the
exercise price of the option and, in fact, only receives a benefit from the
writing of the option to the extent that the value of the portfolio
securities falls below the price of the premium received. The Fund may also
write options to close out long call option positions.
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
management of the Fund, 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.
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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, without limit, in order to aid in achieving its
investment objectives. Generally, a call option is "covered" if the Fund
owns, or has the right to acquire, without additional cash consideration (or
for additional cash consideration held for the Fund by its Custodian in a
segregated account) the underlying security (currency) subject to the option
except that in the case of call options on U.S. Treasury Bills, the Fund
might own U.S. Treasury Bills of a different series from those underlying the
call option, but with a principal amount and value corresponding to the
exercise price and a maturity date no later than that of the security
(currency) deliverable under the call option. A call option is also covered
if the Fund holds a call on the same security as the underlying security
(currency) of the written option, where the exercise price of the call used
for coverage is equal to or less than the exercise price of the call written
or greater than the exercise price of the call written if the mark to market
difference is maintained by the Fund in cash, U.S. Government securities or
other high grade debt obligations which the Fund holds in a segregated
account maintained with its Custodian.
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. 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 over-the-counter ("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 for 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" below.
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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 insitution which purchased the call written by the Fund.
The Fund may purchase put options on securities (currencies) which it
holds in its portfolio only to protect itself against a decline in the value
of the security. If the value of the underlying security (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 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.
As discussed in the Prospectus, the Fund's ability to close out its
position as a writer of an option is dependent upon the existence of a liquid
secondary market on Option Exchanges. There is no assurance that such a
market will exist, particularly in the case of OTC options, as such options
will generally only be closed out by entering into a closing purchase
transaction with the purchasing dealer. However, the Fund may be able to
purchase an offsetting option which does not close out its position as a
writer but constitutes an asset of equal value to the obligation under the
option written. If the Fund is not able to either enter into a closing
purchase transaction or purchase an offsetting position, it will be required
to maintain the securities subject to the call, or the collateral underlying
the put, even though it might not be advantageous to do so, until a closing
transaction can be entered into (or the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes
or series of options or underlying securities; (iv) interruption of the
normal operations on an Exchange; (v) inadequacy of the facilities of an
Exchange or the Options Clearing Corporation ("OCC") to handle current
trading volume; or (vi) a decision by one or more Exchanges to discontinue
the trading of options
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(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 Investment Manager.
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.
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).
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.
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 con-tracts it has entered into, provided,
however, that in the case of an option that is in-the-money (the exercise
price of the call (put) option is less (more) than the market price of the
underlying security) at the time of purchase, the in-the-money amount may be
excluded in calculating the 5%. However, there is no overall limitation on
the percentage of the Fund's assets which may be subject to a hedge position.
In addition, in accordance with the regulations of the Commodity Futures
Trading Commission ("CFTC") under which the Fund is exempted from
registration as a commodity pool operator, the Fund may only enter into
futures contracts and options on futures contracts transactions for purposes
of hedging a part or all of its portfolio. If the CFTC changes its
regulations so that the Fund would be permitted to write
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options on futures contracts for purposes other than hedging the Fund's
investments without CFTC registration, the Fund may engage in such
transactions for those purposes. Except as described above, there are no
other limitations on the use of futures and options thereon by the Fund.
Interest Rate Futures Contracts. When the Fund enters into an interest
rate futures contract, it is initially required to deposit with the Fund's
Custodian, in a segregated account in the name of the broker performing the
transaction, an "initial margin" of cash or U.S. Government securities or
other high grade short-term obligations equal to approximately 3% of the
contract amount. Initial margin requirements are established by the Exchanges
on which futures contracts trade and may, from time to time, change. In
addition, brokers may establish margin deposit requirements in excess of
those required by the Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a brokers' client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper
termination of the futures contract. The margin deposits made are marked to
market daily and the Fund may be required to make subsequent deposits of cash
or U.S. Government securities called "variation margin", with the Fund's
futures contract clearing broker, which are reflective of price fluctuations
in the futures contract. Currently, interest rate futures contracts can be
purchased on debt securities such as U.S. Treasury Bills and Bonds, U.S.
Treasury Notes with Maturities between 6 1/2 and 10 years, GNMA Certificates
and Bank Certificates of Deposit.
Currency Futures. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the exercise date, for
a set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and
under the same circumstances as forward foreign currency exchange contracts.
The Investment Manager will assess such factors as cost spreads, liquidity
and transaction costs in determining whether to utilize futures contracts or
forward contracts in its foreign currency transactions and hedging strategy.
Currently, currency futures exist for, among other foreign currencies, the
Japanese yen, German marks, Canadian dollars, British pound, Swiss franc and
European currency unit.
Purchasers and sellers of foreign currency futures contracts are subject
to the same risks that apply to the buying and selling of futures generally.
In addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those associated with
options on foreign currencies described above. Further, settlement of a
foreign currency futures contract must occur within the country issuing the
underlying currency. Thus, the Fund must accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign
restrictions or regulation regarding the maintenance of foreign banking
arrangements by U.S. residents and may be required to pay any fees, taxes or
charges associated with such delivery which are assessed in the issuing
country.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market. To reduce
this risk, the Fund will not purchase or write options on foreign currency
futures contracts unless and until, in the Investment Manager's opinion, the
market for such options has developed sufficiently that the risks in
connection with such options are not greater than the risks in connection
with transactions in the underlying foreign currency futures contracts.
Index Futures Contracts. As discussed in the Prospectus, the Fund may
invest in index futures contracts. An index futures contract sale creates an
obligation by the Fund, as seller, to deliver cash at a specified future
time. An index futures contract purchase would create an obligation by the
Fund, as purchaser, to take delivery of cash at a specified future time.
Futures contracts on indexes do not require the physical delivery of
securities, but provide for a final cash settlement on the expiration date
which reflects accumulated profits and losses credited or debited to each
party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently,
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the initial margin requirements range from 3% to 10% of the contract amount
for index futures. In addition, due to current industry practice, daily
variations in gains and losses on open contracts are required to be reflected
in cash in the form of variation margin payments. The Fund may be required to
make additional margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will operate
to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required
to be paid by or released to the Fund and the Fund realizes a loss or gain.
Options on Futures Contracts. The 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.
In order to assure that the Fund is entering into transactions in futures
contracts for hedging purposes as such is defined by the Commodity Futures
Trading Commission either: 1) a substantial majority (i.e., approximately
75%) of all anticipatory hedge transactions (transactions in which the Fund
does not own at the time of the transaction, but expects to acquire, the
securities underlying the relevant futures contract) involving the purchase
of futures contracts will be completed by the purchase of securities which
are the subject of the hedge or 2) the underlying value of all long positions
in futures contracts will not exceed the total value of a) all short-term
debt obligations held by the Fund; b) cash held by the Fund; c) cash proceeds
due to the Fund on investments within thirty days; d) the margin deposited on
the contracts; and e) any unrealized appreciation in the value of the
contracts.
If the Fund has sold a call option in a futures contract, it will cover
this position by holding, in a segregated account maintained at its
Custodian, cash, U.S. Government securities or other high grade debt
obligations equal in value (when added to any initial or variation margin on
deposit) to the market value of the securities (currencies) underlying the
futures contract or the exercise price of the option. Such a position may
also be covered by owning the securities (currencies) underlying the futures
contract, or by holding a call option permitting the Fund to purchase the
same contract at a price no higher than the price at which the short position
was established.
In addition, if the Fund holds a long position in a futures contract it
will hold cash, U.S. Government securities or other high grade debt
obligations equal to the purchase price of the contract (less the amount of
initial or variation margin on deposit) in a segregated account maintained
for the Fund by its Custodian. Alternatively, the Fund could cover its long
position by purchasing a put option on the same futures contract with an
exercise price as high or higher than the price of the contract held by the
Fund.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin
on open futures positions. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily
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variation margin requirements at a time when it may be disadvantageous to do
so. In addition, the Fund may be required to take or make delivery of the
instruments underlying interest rate futures contracts it holds at a time
when it is disadvantageous to do so. The inability to close out options and
futures positions could also have an adverse impact on the Fund's ability to
effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on
foreign commodities exchanges may have greater price volatility than their
U.S. counterparts. Furthermore, foreign commodities exchanges may be less
regulated and under less governmental scrutiny than U.S. exchanges. Brokerage
commissions, clearing costs and other transaction costs may be higher on
foreign exchanges. Greater margin requirements may limit the Fund's ability
to enter into certain commodity transactions on foreign exchanges. Moreover,
differences in clearance and delivery requirements on foreign exchanges may
occasion delays in the settlement of the Fund's transactions effected on
foreign exchanges.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in futures or options thereon, the Fund could experience
delays and/or losses in liquidating open positions purchased or sold through
the broker and/or incur a loss of all or part of its margin deposits with the
broker. Similarly, in the event of the bankruptcy of the writer of an OTC
option purchased by the Fund, the Fund could experience a loss of all or part
of the value of the option. Transactions are entered into by the Fund only
with brokers or financial institutions deemed creditworthy by the Investment
Manager.
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk which may arise in employing futures contracts to
protect against the price volatility of portfolio securities (and the
currencies in which they are denominated) is that the prices of securities
and indexes subject to futures contracts (and thereby the futures contract
prices) may correlate imperfectly with the behavior of the cash prices of the
Fund's portfolio securities (and the currencies in which they are
denominated). Another such risk is that prices of interest rate futures
contracts may not move in tandem with the changes in prevailing interest
rates against which the Fund seeks a hedge. A correlation may also be
distorted by the fact that the futures market is dominated by short-term
traders seeking to profit from the difference between a contract or security
price objective and their cost of borrowed funds. Such distortions are
generally minor and would diminish as the contract approached maturity.
As stated in the Prospectus, there may exist an imperfect correlation
between the price movements of futures contracts purchased by the Fund and
the movements in the prices of the securities (currencies) which are the
subject of the hedge. If participants in the futures market elect to close
out their contracts through offsetting transactions rather than meet margin
deposit requirements, distortions in the normal relationship between the debt
securities or currency markets and futures markets could result. Price
distortions could also result if investors in futures contracts opt to make
or take delivery of 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.
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Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a futures contract would result in a loss
to the Fund notwithstanding that the purchase or sale of a futures contract
would not result in a loss, as in the instance where there is no movement in
the prices of the futures contract or underlying securities (currencies).
OTHER INVESTMENT POLICIES
Repurchase Agreements. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it
may otherwise be invested or used for payments of obligations of the Fund. A
repurchase agreement may be viewed as a type of secured lending by the Fund
which typically involves the acquisition by the Fund of government securities
from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The agreement provides that the Fund will sell
back to the institution, and that the institution will repurchase, the
underlying security ("collateral") at a specified price and at a fixed time
in the future, usually not more than seven days from the date of purchase.
The collateral will be maintained in a segregated account and will be
marked-to-market daily to determine that the full value of the collateral, as
specified in the agreement, is always at least equal to the purchase price
plus accrued interest. If required, additional collateral will be requested
and, when received, added to the account to maintain full collateralization.
In the event the original seller defaults on its obligations to repurchase,
as a result of its bankruptcy or otherwise, the Fund will seek to sell the
collateral, which action could involve costs or delays. In such case, the
Fund's ability to dispose of the collateral to recover its investment may be
restricted or delayed.
The Fund will accrue interest from the institution until the time when the
repurchase is to occur. Although such date is deemed by the Fund to be the
maturity date of a repurchase agreement, the maturities of securities subject
to repurchase agreements are not subject to any limits and may exceed one
year.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed
to minimize such risks. Repurchase agreements will be transacted only with
large, well-capitalized and well-established financial institutions whose
financial condition will be continuously monitored by the management of the
Fund subject to procedures established by the Trustees. The procedures also
require that the collateral underlying the agreement be specified. The Fund
does not presently intend to enter into repurchase agreements so that more
than 5% of the Fund's net assets are subject to such agreements.
Reverse Repurchase Agreements. The Fund may also use reverse repurchase
agreements for purposes of meeting redemptions or as part of its investment
strategy. Reverse repurchase agreements involve sales by the Fund of
portfolio assets concurrently with an agreement by the Fund to repurchase the
same assets at a later date at a fixed price. Generally, the effect of such a
transaction is that the Fund can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Fund of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise. Opportunities to achieve this
advantage may not always be available, and the Fund intends to use the
reverse repurchase technique only when it will be to its advantage to do so.
The Fund will establish a segregated account with its custodian bank in which
it will maintain cash or cash equivalents or other portfolio securities
(i.e., U.S. Government securities) equal in value to its obligations in
respect of reverse repurchase agreements. Reverse repurchase agreements are
considered borrowings by the Fund and, in accordance with legal requirements,
the Fund will maintain an asset coverage (including the proceeds) of at least
300% with respect to all reverse repurchase agreements. Reverse repurchase
agreements may not exceed 10% of the Fund's total assets. The Fund does not
intend to enter into any reverse repurchase agreements during the coming
year.
When-Issued and Delayed Delivery Securities and Forward Commitments. As
discussed in the Prospectus, from time to time, in the ordinary course of
business, the Fund may purchase securities on
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a when-issued or delayed delivery basis and may purchase or sell securities
on a forward commitment basis. When such transactions are negotiated, the
price is fixed at the time of the commitment, but delivery and payment can
take place a month or more after the date of the commitment. The securities
so purchased are subject to market fluctuation and no interest accrues to the
purchaser during this period. While the Fund will only purchase securities on
a when-issued, delayed delivery or forward commitment basis with the
intention of acquiring the securities, the Fund may sell the securities
before the settlement date, if it is deemed advisable. At the time the Fund
makes the commitment to purchase securities on a when-issued or delayed
delivery basis, the Fund will record the transaction and thereafter reflect
the value, each day, of such security in determining the net asset value of
the Fund. At the time of delivery of the securities, the value may be more or
less than the purchase price. The Fund will also establish a segregated
account with the Fund's custodian bank in which it will continuously maintain
cash or U.S. Government securities or other high grade debt portfolio
securities equal in value to commitments for such when-issued or delayed
delivery securities. Subject to this requirement, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued or
delayed delivery basis may increase the volatility of the Fund's net asset
value. The Fund's Investment Manager and the Trustees do not believe that the
Fund's net asset value or income will be adversely affected by its purchase
of securities on such basis.
When, As and If Issued Securities. As discussed in the Prospectus, the
Fund may purchase securities on a "when, as and if issued" basis under which
the issuance of the security depends upon the occurrence of a subsequent
event, such as approval of a merger, corporate reorganization, leveraged
buyout or debt restructuring. The commitment for the purchase of any such
security will not be recognized in the portfolio of the Fund until the
Investment Manager determines that issuance of the security is probable. At
such time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At such time, the
Fund will also establish a segregated account with its custodian bank in
which it will continuously maintain cash or U.S. Government securities or
other high grade debt portfolio securities equal in value to recognized
commitments for such securities. Settlement of the trade will occur within
five business days of the occurrence of the subsequent event. The value of
the Fund's commitments to purchase the securities of any one issuer, together
with the value of all securities of such issuer owned by the Fund, may not
exceed 5% of the value of the Fund's total assets at the time the initial
commitment to purchase such securities is made (see "Investment
Restrictions"). Subject to the foregoing restrictions, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value. The Fund's
Investment Manager and the Trustees do not believe that the net asset value
of the Fund will be adversely affected by its purchase of securities on such
basis. The Fund may also sell securities on a "when, as and if issued" basis
provided that the issuance of the security will result automatically from the
exchange or conversion of a security owned by the Fund at the time of the
sale.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are callable at
any time by the Fund (subject to notice provisions described below), and are
at all times secured by cash or appropriate high-grade debt obligations,
which are maintained in a segregated account pursuant to applicable
regulations and that are at least equal to the market value, determined
daily, of the loaned securities. The advantage of such loans is that the Fund
continues to receive the income on the loaned securities while at the same
time earning interest on the cash amounts deposited as collateral, which will
be invested in short-term obligations. The Fund will not lend its portfolio
securities if such loans are not permitted by the laws or regulations of any
state in which its shares are qualified for sale and will not lend more than
25% of the value of its total assets. A loan may be terminated by the
borrower on one business days' notice, or by the Fund on two business days'
notice. If the borrower fails to deliver the loaned securities within two
days after receipt of notice, the Fund could use the collateral to replace
the securities while holding the borrower liable for any excess of
replacement cost over collateral. As with any extensions of credit, there are
risks of delay in recovery and in some cases even loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms deemed by the
Fund's management to be creditworthy
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and when the income which can be earned from such loans justifies the
attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price
during the loan period would inure to the Fund. The creditworthiness of firms
to which the Fund lends its portfolio securities will be monitored on an
ongoing basis by the Fund's management pursuant to procedures adopted and
reviewed, on an ongoing basis, by the Board of 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. The Fund does not presently intend to lend any of its
portfolio securities.
Short Sales "against-the-box." A short sale is a transaction in which the
Fund sells a security it does not own in anticipation of a decline in market
price. The Fund will not sell short unless it is "against the box," which
means that at all times when the short position is open, the Fund owns an
equal amount of securities or securities convertible into, or exchangeable
without further consideration, for securities sold short. Short sales against
the box may be used to defer recognition of capital gains or losses for
certain federal income tax purposes. The Fund does not intend to enter into
short sales against the box during the coming year.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate for the fiscal year ended July 31, 1994
was 106%. 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
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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, although the Fund
may purchase securities of issuers which engage in real estate operations and
securities secured by real estate or interests therein.
2. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
3. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets or, in the case of a closed-end company, in accordance with the
provisions of Section 12(d) of the Act and any Rules promulgated thereunder.
4. Borrow money (except insofar as to the Fund may be deemed to have
borrowed by entrance into a reverse repurchase agreement up to an amount not
exceeding 10% of the Fund's total assets), except that the Fund may borrow
from a bank for temporary or emergency purposes in amounts not exceeding 5%
(taken at the lower of cost or current value) of its total assets (not
including the amount borrowed).
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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 or reverse repurchase agreement; (b) purchasing any
securities on a when-issued or delayed delivery basis; (c) purchasing or
selling futures contracts, forward foreign exchange contracts or options; (d)
borrowing money in accordance with restrictions described above; or (e)
lending portfolio securities.
6. Make loans of money or securities, except; (a) by the purchase of
publicly distributed debt obligations in which the Fund may invest consistent
with its investment objectives and policies; (b) by investment in repurchase
or reverse repurchase agreements; or (c) by lending its portfolio securities.
7. Make short sales of securities or maintain a short position, unless
at all times when a short position is open it either owns an equal amount of
such securities or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the
same issue as, and equal in amount to, the securities sold short.
8. 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.
9. Invest for the purpose of exercising control or management of any
other issuer.
The Fund will not invest more than 5% of its net assets in warrants,
including not more than 2% of such net assets in warrants not listed on
either a recognized domestic or foreign exchange. However, the acquisition of
warrants attached to other securities is not subject to this restriction. 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 Investment Manager owns more than 1/2
of 1% of the outstanding securities of such issuer, and such officers,
trustees and directors who own more than 1/2 of 1% own in the aggregate more
than 5% of the outstanding securities of such issuers. The Fund has no
present intention to make any investments, during the coming year, in
securities issued by other investment companies.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered
a violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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Subject to the general supervision of the Fund's Trustees, the Investment
Manager is responsible for decisions to buy and sell securities of 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 non-affiliated dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. The Fund also
expects that securities will be purchased at times in underwritten offerings
where the price includes a fixed amount of compensation, generally referred
to as the underwriter's concession or discount. In the underwritten
offerings, securities are purchased at a fixed price which includes an amount
of compensation equal to the underwriter's concession. On occasion, certain
money market instruments may be purchased directly from an issuer, in which
case no commissions or discounts are paid. For the fiscal year ended July 31,
1994 and for the period October 30, 1992 (commencement of operations) through
July 31, 1993 (fiscal year-end) the Fund paid in brokerage commissions
$649,320 and $401,108, respectively.
The Investment Manager currently serves as investment adviser to a number
of clients, including other investment companies, and may in the future act
as investment manager or adviser to others. It is the practice of the
Investment Manager to cause purchase and sale transactions to be allocated
among the Fund and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Fund and other client
accounts, the main factors considered are the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the
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availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with
this policy, when securities transactions are effected on a stock exchange,
the Fund's policy is to pay commissions which are considered fair and
reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a
requirement always to seek the lowest possible commission cost could impede
effective portfolio management and preclude the Fund and the Investment
Manager from obtaining a high quality of brokerage and research services. In
seeking to determine the reasonableness of brokerage commissions paid in any
transaction, the Investment Manager relies upon its experience and knowledge
regarding commissions generally charged by various brokers and on their
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on securities exchanges. Fixed commissions on
such transactions are generally higher than negotiated commissions on
domestic transactions. There is also generally less government supervision
and regulation of foreign securities exchanges and brokers than in the United
States.
In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment
Manager believes provide the most favorable prices and are capable of
providing efficient executions. If the Investment Manager believes such
prices and executions are obtainable from more than one broker or dealer, it
may give consideration to placing portfolio transactions with those brokers
and dealers who also furnish research and other services to the Fund or the
Investment Manager. Such services may include, but are not limited to, any
one or more of the following: information as to the availability of
securities for purchase or sale; statistical or factual information or
opinions pertaining to investment; wire services; and appraisals or
evaluations of portfolio securities. 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 Fund paid $468,627 and $279,472,
respectively in commissions to brokers providing research services to effect
transactions totalling $175,549,085 and $105,660,118, respectively for the
fiscal year ended July 31, 1994 and during the period from October 30, 1992
(commencement of operations) to July 31, 1993 (fiscal year end).
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of
research or services otherwise performed by the Investment Manager and
thereby reduce its expenses, it is of indeterminable value and the fees paid
to the Investment Manager are not reduced by any amount that may be
attributable to the value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e., Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper. Such transactions
will be effected with DWR only when the price available from DWR is better
than that available from other dealers.
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 them 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
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exchange during a comparable period of time. This standard would allow them
to receive no more than the remuneration which would be expected to be
received by an unaffiliated broker in a commensurate arm's-length
transaction. Furthermore, the Trustees of the Fund, including a majority of
the Trustees who are not "interested" persons to 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 is consistent with
the foregoing standard. The Fund paid DWR $74,905 and $79,560, respectively
(11.54% and 19.84%, respectively of its brokerage commissions for the fiscal
year ended July 31, 1994 and during the period from October 30, 1992
(commencement of operations) to July 31, 1993 (fiscal year-end) to effect
transactions totalling $32,815,235 and $51,902,140 (13.12% and 30.35% of all
transactions on which brokerage commissions were paid).
Section 11(a) of the Securities Exchange Act of 1934, which generally
prohibits members of the United States national securities exchanges from
executing exchange transactions for their affiliates and institutional
accounts which they manage, permits such exchange members to execute such
securities transactions on an exchange only if the affiliate or account
expressly consents. To the extent Section 11(a) would apply to acting as a
broker for the Fund in any of its portfolio transactions executed on any such
securities exchange of which it is a member, appropriate written consents
have been given.
PURCHASE OF FUND SHARES
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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 and may enter into selected dealer
agreements with other selected dealers ("Selected Broker-Dealers"). The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of DWDC.
The Trustees of the Fund, including a majority of the Trustees who are not,
and were not at the time they voted, interested persons of the Fund, as
defined in the Act (the "Independent Trustees"), approved, at their meeting
held on October 30, 1992, the current Distribution Agreement appointing the
Distributor the exclusive Distributor of the Fund's shares and providing for
the Distributor to bear distribution expenses not borne by the Fund. The
current Distribution Agreement is substantively identical to the Fund's
previous Distribution Agreement in all material respects, except for dates of
effectiveness. 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. At their meeting held on April 8, 1994, the
Trustess, including all of the Independent Trustees, approved the
continuation of the Agreement until April 30, 1995.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. Such expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
account executives. The Distributor also pays certain expenses in connection
with the distribution of the Fund's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs
of printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears
the costs of initial typesetting, printing and distribution of prospectuses
and supplements thereto to shareholders. The Fund also bears the cost of
registering the Fund and its shares under federal and state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. Under the Distribution Agreement, the Distributor uses its best
efforts in rendering services to the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations, the Distributor is not liable to the Fund or any of its
shareholders for any error of judgment or mistake of law or for any act or
omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
To compensate the Distributor for services provided and for the expenses
borne under the Distribution Agreement, the Fund has adopted a Plan of
Distribution pursuant to Rule 12b-1 under the Act (the "Plan") pursuant to
which the Fund pays the Distributor compensation accrued daily and
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payable monthly at the annual rate of 1.0% of the lesser of: (a) the average
daily aggregate gross sales of the Fund's shares since the inception of the
Fund (not including reinvestment of dividends or distributions), less the
average daily aggregate net asset value of the Fund's shares redeemed since
the Fund's inception upon which a contingent deferred sales charge has been
imposed or waived, or (b) the Fund's average daily net assets. The
Distributor also receives the proceeds of contingent deferred sales charges
imposed on certain redemptions of shares, which are separate and apart from
payments made pursuant to the Plan. (See "Redemptions and
Repurchases--Contingent Deferred Sales Charges" in the Prospectus). The
Distributor has informed the Fund that a portion of the fees payable by the
Fund each year pursuant to the Plan equal to 0.25% of the Fund's average
daily net assets is characterized as a "service fee" under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (of which
the Distributor is a member). Such portion of the fee is a payment made for
personal service and/or the maintenance of shareholder accounts. The
remaining portion of the Plan fees payable by the Fund is characterized as an
"asset-based sales charge" as such is defined by the aforementioned Rules of
Fair Practice.
Under its terms, the Plan has an initial term ending April 30, 1993, and
provides that it will remain in effect from year to year thereafter, provided
such continuance is approved annually by a vote of the Trustees, including 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 the Plan (the "Independent 12b-1 Trustees"). In determining
to approve the Plan, the Trustees of the Fund, including each of the
Independent 12b-1 Trustees, concluded that the Plan would be in the best
interest of the Fund and would have a reasonable likelihood of benefiting the
Fund and its shareholders. In the Trustees' quarterly review of the Plan,
they will consider its continued appropriateness and the level of
compensation provided therein. Most recent continuation of the Plan for one
year, until April 30, 1995, was approved by the Trustees of the Fund,
including all the Independent 12b-1 Trustees, at a meeting held on April 8,
1994.
At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the independent 12b-1 Trustees, approved certain amendments
to the Plan which took effect in January, 1993 and were designed to reflect
the facts that upon the reorganization described above, the share
distribution activities theretofore performed for the Fund by DWR were
assumed by the Distributor and that DWR's sales activities are now being
performed pursuant to the terms of a selected dealer agreement between the
Distributor and DWR. The amendments provide that payments under the Plan will
be made to the Distributor rather than to DWR as they had been before the
amendment, and that the Distributor in turn is authorized to make payments to
DWR, its affiliates or other selected broker-dealers (or direct that the Fund
pay such entities directly). The Distributor is also authorized to retain
part of such fee as compensation for its own distribution-related expenses.
At their meeting held on April 28, 1993, the Trustees, including a majority
of the Independent 12b-1 Trustees, also approved certain technical amendments
to the Plan in connection with amendments adopted by the National Association
of Securities Dealers, Inc. to its Rules of Fair Practice.
Under the Plan and as required by Rule 12b-1, the Trustees will receive
and review promptly after the end of each fiscal quarter a written report
provided by the Distributor of the amounts expended by the Distributor under
the Plan and the purpose for which such expenditures were made. The Fund
accrued amounts payable to DWR and the Distributor under the Plan for the
fiscal year ended July 31, 1994 and for period October 30, 1992 (commencement
of operations) through fiscal year ended July 31, 1993, of $2,603,442 and
$1,516,920, respectively which is equal to 1.0% of the Fund's average daily
net assets for the fiscal year and was calculated pursuant to clause (b) of
the compensation formula under the Plan. This amount is treated by the Fund
as an expense in the year it is accrued.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method, shares of the Fund
are sold without a sales load being deducted at the time of purchase, so that
the full amount of an investor's purchase payment will be invested in shares
without any deduction for sales charges. Shares of the Fund may be subject to
a contingent deferred sales charge, payable to the Distributor, if redeemed
during the six years after their purchase. The Distributor compensates
account executives of DWR and other Selected Dealers by paying them, from
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its own funds, commissions for the sale of the Fund's shares, currently a
gross sales credit of up to 5% of the amount sold and an annual residual
commission of up to .25 of 1% of the current value (not including reinvested
dividends or distributions) of the amount sold. The gross sales credit is a
charge which reflects commissions paid by the Distributor to account
executives of DWR and other Selected Dealers and Fund associated
distribution-related expenses, including sales compensation, and overhead and
other branch office distribution-related expenses including: (a) the expenses
of operating DWR's branch offices in connection with the sale of Fund shares,
including lease costs, the salaries and employee benefits of operations and
sales support personnel, utility costs, communications costs and the costs of
stationery and supplies, (b) the costs of client sales seminars, (c) travel
expenses of mutual fund sales coordinators to promote the sale of Fund shares
and (d) other expenses relating to branch promotion of Fund sales. The
distribution fee that the Distributor receives from the Fund under the Plan,
in effect, offsets distribution expenses incurred on behalf of the Fund and
opportunity costs, such as the gross sales credit and an assumed interest
charge thereon ("carrying charge"). In the Distributor's reporting of its
distribution expenses to the Fund, such assumed interest (computed at the
"broker's call rate") is calculated on the gross sales credit as it is
reduced by amounts received by the Distributor under the Plan and any
contingent deferred sales charge received by the Distributor upon redemption
of shares of the Fund. No other interest charge is included as a distribution
expense in the Distributor's calculation of its distribution costs for this
purpose. The broker's call rate is the interest rate charged to securities
brokers on loans secured by exchange-listed securities.
The Fund paid 100% of the $2,603,442 accrued under the Plan for the fiscal
year end July 31, 1994 to the Distributor and DWR. The Distributor and DWR
estimate that they have spent, pursuant to the Plan, $16,564,048 on behalf of
the Fund since the inception of the Plan. It is estimated that this amount
was spent in approximately the following ways: (i) 6.02%
($997,492)--advertising and promotional expenses; (ii) 0.37%
($61,380)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 93.61% ($15,505,176)--other expenses, including the
gross sales credit and the carrying charge of which 3.96% ($614,049)
represents carrying charges, 38.25% ($5,931,136) represents commission
credits to DWR branch offices for payments of commissions to account
executives and 57.79% ($8,959,991) represents overhead and other branch
office distribution-related expenses.
At any given time, the Distributor may have incurred expenses in
distributing shares of the Fund which may be more or less than the total of
(i) the payments made by the Fund pursuant to the Plan and (ii) the proceeds
of contingent deferred sales charges paid by investors upon redemption of
shares. Because there is no requirement under the Plan that the Distributor
be reimbursed for all its expenses or any requirement that the Plan be
continued from year to year, this excess amount does not constitute a
liability of the Fund. Although there is no legal obligation for the Fund to
pay expenses incurred by the Distributor in excess of payments made to the
Distributor under the Plan, and the proceeds of contingent deferred sales
charges paid by investors upon redemption of shares, if for any reason the
Plan is terminated, the Trustees will consider at that time the manner in
which to treat such expenses. Any cumulative expenses incurred by the
Distributor, but not yet recovered through distribution fees or contingent
deferred sales charges, may or may not be recovered through future
distribution fees or contingent deferred sales charges. For the fiscal
year-end July 31, 1994, the Distributor received approximately $877,000 in
contingent deferred sales charges from redemptions of the Fund's shares, none
of which was retained by the Distributor.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or
indirect financial interest in the operation of the Plan except to the extent
that the Distributor 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.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of
the Fund, and all material amendments to the Plan must also be approved by
the Trustees in the manner described above. The Plan may be terminated at any
time, without payment of any penalty, by vote of a majority of the
Independent 12b-1
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Trustees or by a vote of a majority of the outstanding voting securities of
the Fund (as defined in the Act) on not more than thirty days' written notice
to any other party to the Plan. So long as the Plan is in effect, the
election and nomination of Independent 12b-1 Trustees shall be committed to
the discretion of the Independent 12b-1 Trustees.
DETERMINATION OF NET ASSET VALUE
As discussed in the Prospectus, the net asset value per share of the Fund
is determined at 4:00 p.m., New York 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.
Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' fair value, in which case
these securities will be valued at their fair value as determined by the
Trustees. Other short-term debt securities will be valued on a mark to market
basis until such time as they reach a remaining maturity of 60 days,
whereupon they will be valued at amortized cost using their value on the 61st
day unless the Trustees determine such does not reflect the securities' fair
value, in which case these securities will be valued at their fair market
value as determined by the Trustees. Listed options on debt securities 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 closing bid and asked prices.
Unlisted options on debt securities are valued at the mean between the latest
bid and asked price. 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, including illiquid securities, are valued at
their fair value as determined in good faith under procedures established by
and under the supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds,
United States government securities and money market instruments, is
substantially completed each day at various times prior to 4:00 p.m., New
York time. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of such times. Foreign currency
exchange rates are also generally determined prior to 4:00 p.m., New York
time. Occasionally, events which affect the values of such securities and
such exchange rates may occur between the times at which they are determined
and 4:00 p.m., New York time, and will therefore not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Trustees.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
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 the Fund's Transfer Agent, Dean Witter Trust Company (the
"Transfer Agent"). This is an open account in which shares owned by the
investor are credited by the Transfer Agent in lieu of issuance of a share
certificate. If a share certficate is desired, it must be requested in
writing for each transaction. Certificates are issued only for full shares
and may be redeposited in the account at any time. There is no charge to the
investor for issuance of a certificate. Whenever a shareholder instituted
transaction takes place in the Shareholder Investment Account, the
shareholder will be mailed a confirmation of the transaction from the Fund or
from DWR or other Selected Broker-Dealer.
Investment of Distributions Received in Cash. As discussed in the
Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution at net
asset value, without the imposition of a contingent deferred sales charge
upon
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redemption, by returning the check or the proceeds to the Transfer Agent
within 30 days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset
value per share next determined after receipt of the check or the proceeds by
the Transfer Agent.
Targeted Dividends(SM). Shareholders may also have all income dividends
and capital gains distributions automatically invested in shares of a Dean
Witter Fund other than the Dean Witter Health Sciences Trust. Such investment
will be made as described above for automatic investment in shares of the
Fund, at the net asset value per share (without sales charge) of the selected
Dean Witter Fund as of the close of business on the payment date of the
dividend or distribution, and will begin to earn dividends, if any, in the
selected Dean Witter Fund the next business day. To participate in the
Targeted Dividends program, shareholders should contact their DWR or other
selected broker-dealer account executive or the Transfer Agent. Shareholders
of the Fund must be shareholders of the Dean Witter Fund targeted to receive
investments from dividends at the time they enter the Targeted Dividends
program. Investors should review the prospectus of the targeted Dean Witter
Fund before entering the program.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Dean Witter
Health Sciences 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
determined after receipt of the check or purchase payment by the Transfer
Agent. The shares so purchased will be credited to the investor's account.
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan ("Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon the
then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount,
not less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable contingent deferred sales charge will be
imposed on shares redeemed under the Withdrawal Plan (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge" in the Prospectus). Therefore,
any shareholder participating in the Withdrawal Plan will have sufficient
shares redeemed from his or her account so that the proceeds (net of any
applicable contingent deferred sales charge) to the shareholder will be the
designated monthly or quarterly amount.
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.
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.
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments through his or her Account Executive or by written
notification to the Transfer Agent. In addition, the party and/or the address
to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also
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terminate the Withdrawal Plan at any time by written notice to the Transfer
Agent. In the event of such termination, the account will be continued as a
regular shareholder investment account. The shareholder may also redeem all
or part of the shares held in the Withdrawal Plan account (see "Redemptions
and Repurchases" in the Prospectus) at any time.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of the Fund may
exchange their shares for shares of other Dean Witter Funds sold with a
contingent deferred sales charge ("CDSC funds"), and for shares of Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund, and five Dean Witter Funds which are
money market funds (the foregoing eight non-FESC or CDSC funds are
hereinafter referred to for purposes of this section as the "Exchange
Funds"). Exchanges may be made after the shares of the Fund acquired by
purchase (not by exchange or dividend reinvestment) have been held for thirty
days. There is no waiting period for exchanges of shares acquired by exchange
or dividend reinvestment. An exchange will be treated for federal income tax
purposes the same as a repurchase or redemption of shares, on which the
shareholder may realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)
As described below, and in the Prospectus under the captions "Exchange
Privilege" and "Contingent Deferred Sales Charge", a contingent deferred
sales charge ("CDSC") may be imposed upon a redemption, depending on a number
of factors, including the number of years from the time of purchase until the
time of redemption or exchange ("holding period"). When shares of the Fund or
any other CDSC fund are exchanged for shares of Exchange Funds, 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 Exchange Funds (calculated from the last day of the month in which
the Exchange Funds shares were acquired), the holding period or "year since
purchase payment made" is frozen. When shares are redeemed out of Exchange
Funds, they will be subject to a CDSC which would be based upon the period of
time the shareholder held shares in a CDSC fund. However, in the case of
shares exchanged into Exchange Funds on or after April 23, 1990, upon a
redemption of shares which results in a CDSC being imposed, a credit (not to
exceed the amount of the CDSC) will be given in an amount equal to the
Exchange Funds 12b-1 distribution fees incurred on or after that date which
are attributable to those shares. Shareholders acquiring shares of Exchange
Funds pursuant to this exchange privilege may exchange those shares back into
a CDSC fund from Exchange Funds, with no CDSC being imposed on such exchange.
The holding period previously frozen when shares were first exchanged for
shares of Exchange Funds resumes on the last day of the month in which shares
of a CDSC fund are reacquired. A CDSC is imposed only upon an ultimate
redemption, based upon the time (calculated as described above) the
shareholder was invested in a CDSC fund.
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("FESC funds"), but
shares of the Fund, however acquired, may not be exchanged for shares of FESC
funds. Shares of a CDSC fund acquired in exchange for shares of an FESC fund
(or in exchange for shares of other Dean Witter Funds for which shares of an
FESC fund have been exchanged) are not subject to any CDSC upon their
redemption.
When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund or for shares of Exchange Funds, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
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exchanged were originally purchased. In allocating the purchase payments
between funds for purposes of the CDSC, the amount which represents the
current net asset value of shares at the time of the exchange which were (i)
purchased more than three or six years (depending on the CDSC schedule
applicable to the shares) prior to the exchange, (ii) originally acquired
through reinvestment of dividends or distributions and (iii) acquired in
exchange for shares of FESC funds, or for shares of other Dean Witter Funds
for which shares of FESC funds have been exchanged (all such shares called
"Free Shares"), will be exchanged first. Shares of Dean Witter American Value
Fund acquired prior to April 30, 1984, shares of Dean Witter Dividend Growth
Securities Inc. and Dean Witter Natural Resource Development Securities Inc.
acquired prior to July 2, 1984, and shares of Dean Witter Strategist Fund
acquired prior to November 8, 1989 are also considered Free Shares and will
be the first Free Shares to be exchanged. After an exchange, all dividends
earned on shares in Exchange Funds 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 Tranfer 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 policy.
With respect to the 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 DWR or other Selected Broker-Dealers in the performance of
such functions. The Transfer Agent shall be liable for its own negligence and
not for the default or negligence of its correspondents or for losses in
transit. The Fund shall not be liable for any default or negligence of the
Transfer Agent, DWR or any Selected Broker-Dealer.
DWR 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 DWR 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 $1,000
for the Fund, $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
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discretion accept initial investments of as low as $1,000. The minimum
initial investment for Dean Witter Short-Term U.S. Treasury Trust is $10,000
although that Fund, in its discretion, may accept initial purchases of as low
as $5,000. The minimum initial investment for all other Dean Witter Funds for
which the Exchange Privilege is available is $1,000.) Upon exchange into Dean
Witter Short-Term U.S. Treasury Trust or 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 and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by any of the Dean Witter Funds, upon such notice as may
be required by applicable regulatory agencies (presently sixty days' prior
written notice for termination or material revision), provided that six
months' prior written notice of termination will be given to the shareholders
who hold shares of the Dean Witter Short-Term U.S. Treasury Trust, 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,
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. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder
may realize a capital gain or loss. However, the ability to deduct capital
losses on an exchange may be limited in situations where there is an exchange
of shares within ninety days after the shares are purchased. The Exchange
Privilege is only available in states where an exchange may legally be made.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Dealer Account Executive or the
Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. As stated in the Prospectus, shares of the Fund can be
redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds may be reduced by the amount of
any applicable contingent deferred sales charges (see below). If shares are
held in a shareholder's account without a share certificate,a written request
for redemption to the Fund's Transfer Agent at P.O. Box 983, Jersey City, NJ
07303 is required. If certificates are held by the shareholder, the shares
may be redeemed by surrendering the certificates with a written request for
redemption. The share certificate, or an accompanying stock power, and the
request for redemption must be signed by the shareholder or shareholders
exactly as the shares are registered. Each request for redemption, whether or
not accompanied by a share certificate, must be sent to the Fund's Transfer
Agent, which will redeem the shares at their net asset value next computed
(see "Purchase of Fund Shares" in the Prospectus) after it receives the
request, and certificate, if any, in good order. Any redemption request
received after such computation will be redeemed at the next determined net
asset value. The term "good order" means that the share certificate, if any,
and request for redemption are properly signed, accompanied by any
documentation required by the Transfer Agent, and bear signature
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guarantees when required by the Fund or the Transfer Agent. If redemption is
requested by a corporation, partnership, trust or fiduciary, the Transfer
Agent may require that written evidence of authority acceptable to the
Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than the Distributor or a selected broker-dealer for the account of
the shareholder), partnership, trust or fiduciary, or sent to the shareholder
at an address other than the registered address, signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A stock
power may be obtained from any dealer or commercial bank. The Fund may change
the signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a new prospectus.
Contingent Deferred Sales Charge. As stated in the Prospectus, a
contingent deferred sales charge ("CDSC") will be imposed on any redemption
by an investor if after such redemption the current value of the investor's
shares of the Fund is less than the dollar amount of all payments by the
shareholder for the purchase of Fund shares during the preceding six years.
However, no CDSC will be imposed to the extent that the net asset value of
the shares redeemed does not exceed: (a) the current net asset value of
shares purchased more than six years prior to the redemption, plus (b) the
current net asset value of shares purchased through reinvestment of dividends
or distributions of the Fund or another Dean Witter Fund (see "Shareholder
Services--Targeted Dividends"), plus (c) the current net asset value of
shares acquired in exchange for (i) shares of Dean Witter front-end sales
charge funds, or (ii) shares of other Dean Witter Funds for which shares of
front-end sales charge funds have been exchanged (see "Shareholder
Services--Exchange Privilege"), plus (d) increases in the net asset value of
the investor's shares above the total amount of payments for the purchase of
Fund shares made during the preceding six years. The CDSC will be paid to the
Distributor. In addition, no CDSC will be imposed on redemptions of shares
which were purchased by certain Unit Investment Trusts (on which a sales
charge has been paid) or which are attributable to reinvestment of dividends
or distributions from, or the proceeds of, such Unit Investment Trusts.
In determining the applicability of the CDSC to each redemption, the
amount which represents an increase in the net asset value of the investor's
shares above the amount of the total payments for the purchase of shares
within the last six years will be redeemed first. In the event the redemption
amount exceeds such increase in value, the next portion of the amount
redeemed will be the amount which represents the net asset value of the
investor's shares purchased more than six years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions
and/or shares acquired in exchange for shares of Dean Witter front-end charge
funds, or for the shares of other Dean Witter funds for which shares of
front-end sales charge funds have been exchanged. A portion of the amount
redeemed which exceeds an amount which represents both such increase in value
and the value of shares purchased more than six years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions
and/or shares acquired in the above-described exchanges will be subject to a
CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years
from the time of any payment for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last
day of the month. The following table sets forth the rates of the CDSC:
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<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE REDEEMED
- -------------------------- -----------------------
<S> <C>
First ..................... 5.0%
Second .................... 4.0%
Third ..................... 3.0%
Fourth .................... 2.0%
Fifth ..................... 2.0%
Sixth ..................... 1.0%
Seventh and thereafter ... None
</TABLE>
In determining the rate of the CDSC it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within
the applicable six-year period. This will result in any such CDSC being
imposed at the lowest possible rate. Accordingly, shareholders may redeem,
without incurring any CDSC, amounts equal to any net increase in the value of
their shares above the amount of their purchase payments made within the past
six years and amounts equal to the current value of shares purchased more
than six years prior to the redemption and shares purchased through
reinvestment of dividends or distributions or acquired in exchange for shares
of Dean Witter front-end sales charge funds, or for shares of other Dean
Witter Funds for which shares of front-end sales charge funds have been
exchanged. The CDSC will be imposed, in accordance with the table shown
above, on any redemptions within six years of purchase which are in excess of
these amounts and which redemptions are not (a) requested within one year of
death or initial determination of disability of a shareholder, or (b) made
pursuant to certain taxable distributions from retirement plans or retirement
accounts, as described in the Prospectus.
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. The term "good order" means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent.
Such payment may be postponed or the right of redemption suspended at times
(a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c)
when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
(d) during any other period when the Securities and Exchange Commission by
order so permits; provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist. If the shares to be redeemed have recently
been purchased by check (including a certified or bank cashier's check),
payment of redemption proceeds may be delayed for the minimum time needed to
verify that the check used for investment has been honored (not more than
fifteen days from the time of receipt of the check by the Transfer Agent).
Transfers of Shares. In the event a shareholder requests a transfer of
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the contingent deferred sales charge or free of such charge
(and with regard to the length of time shares subject to the change have been
held), any transfer involving less than all of the shares in an account will
be made on a pro-rata basis (that is, by transferring shares in the same
proportion that the transferred shares bear to the total shares in the
account immediately prior to the transfer). The transferred shares will
continue to be subject to any applicable contingent deferred sales charge as
if they had not been so transferred.
Reinstatement Privilege. As described in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within 30 days after the date of
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
(without sales charge) next determined after a reinstatement request,
together with the proceeds, is received by the Transfer Agent.
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Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and
reinstatement is made in shares of the Fund, some or all of the loss,
depending on the amount reinstated, will not be allowed as a deduction for
federal income tax purposes but will be applied to adjust the cost basis of
the shares acquired upon reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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As discussed in the Prospectus, the Fund will determine either to
distribute or to retain all or part of any net long-term capital gains in any
year for reinvestment. If any such gains are retained, the Fund will pay
federal income tax thereon, and, if the Fund makes an election, the
shareholders would include such undistributed gains in their income and
shareholders will be able to claim their share of the tax paid by the Fund as
a credit against their individual federal income tax.
Gains or losses on sales of securities by the Fund will generally be
long-term capital gains or losses if the securities have been held by the
Fund for more than twelve months. Gains or losses on the sale of securities
held for twelve months or less will generally be short-term gains or losses.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code (the "Code"). If so qualified, the
Fund will not be subject to federal income tax on its net investment income
and capital gains, if any, realized during any fiscal year in which it
distributes such income and capital gains to its shareholders. In addition,
the Fund intends to distribute to its shareholders each calendar year a
sufficient amount of ordinary income and capital gains to avoid the
imposition of a 4% excise tax.
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 conventions
between certain countries and the United States may reduce or eliminate such
taxes. Investors may be entitled to claim United States foreign tax credits
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. If the Fund makes such election, it 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
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of the regulated investment company diversification requirements applicable
to the Fund. The Fund may request a private letter ruling from the Internal
Revenue Service on some or all of these issues.
Under Code Section 988, special rules are provided for certain
transactions in a foreign currency other than the taxpayer's functional
currency (i.e., unless certain special rules apply, currencies other than the
U.S. dollar). In general, foreign currency gains or losses from forward
contracts, from futures contracts that are not "regulated futures contracts",
and from unlisted options will be treated as ordinary income or loss under
Code Section 988. Also, certain foreign exchange gains or losses derived with
respect to foreign fixed-income securities are also subject to Section 988
treatment. In general, therefore, Code Section 988 gains or losses will
increase or decrease the amount of the Fund's investment company taxable
income available to be distributed to shareholders as ordinary income, rather
than increasing or decreasing the amount of the Fund's net capital gain.
Additionally, if Code Section 988 losses exceed other investment company
taxable income during a taxable year, the Fund would not be able to make any
ordinary dividend distributions.
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 tax provisions applicable 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.
Legislation is currently being considered with respect to this issue and, in
any event, it is not anticipated that any taxes on the Fund with respect to
investments in PFIC's would be significant.
Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. The Fund's "average
annual total return" represents an annualization of the Fund's total return
over a particular period and is computed by finding the annual percentage
rate which will result in the ending redeemable value of a hypothetical
$1,000 investment made at the beginning of a one, five or ten year period, or
for the period from the date of commencement of the Fund's operations, if
shorter than any of the foregoing. The ending redeemable value is reduced by
any contingent deferred sales charge at the end of the one, five or ten year
or other period. For the purpose of this calculation, it is assumed that all
dividends and distributions are reinvested. The formula for computing the
average annual total return involves a percentage obtained by dividing the
ending redeemable value by the amount of the initial investment, taking a
root of the quotient (where the root is equivalent to the number of years in
the period) and subtracting 1 from the result.
The average annual total return of the Fund for the fiscal year ended July
31, 1994 and for the period October 30, 1992 (commencement of operations)
through July 31, 1993 (fiscal year-end) was -3.92% and -6.16%, respectively.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. Such calculations may or may not reflect
the deduction of the contingent deferred sales charge which, if reflected,
would reduce the performance quoted. For example, the average annual total
return of the Fund may be calculated in the manner described above, but
without deduction for any applicable contingent deferred sales charge. Based
on this calculation, the Fund's average annual total return for the fiscal
year ended July 31, 1994 and for the period October 30, 1992 (commencement of
operations) through July 31, 1993 (fiscal year-end period) was 1.08% and
- -3.95%.
In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value (without
the reduction for any contingent deferred sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based on this calculation, the
Fund's total
36
<PAGE>
<PAGE>
return for the fiscal year ended July 31, 1994 and for the period October 30,
1992 (commencement of operations) through July 31, 1993 (fiscal year-end
period) was 1.08% and -6.80%.
The Fund may also advertise the growth of a hypothetical investment of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return (expressed as a decimal and without reflecting the
deduction of the contingent deferred sales charge) and multiplying by
$10,000, $50,000 or $100,000, as the case may be. Based on this calculation,
investments of $10,000, $50,000 and $100,000 in the Fund at inception would
have been $9,320, $46,600 and $93,200.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indices compiled by independent
organizations.
DESCRIPTION OF SHARES OF THE FUND
- -----------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share held. All of the Trustees except for Messrs. Bozic, Purcell and
Schroeder have been elected by DWR as sole shareholder of the Fund and will
be elected by the shareholders at the first meeting of shareholders of the
Fund. Messrs. Bozic, Purcell and Schroeder were elected by the other Trustees
of the Fund. The Trustees themselves have the power to alter the number and
the terms of office of the Trustees, and they may at any time lengthen their
own terms or make their terms of unlimited duration and appoint their own
successors, provided that always at least a majority of the Trustees has been
elected by the shareholders of the Fund. Under certain circumstances the
Trustees may be removed by action of the Trustees. The shareholders also have
the right under certain circumstances to remove the Trustees in accordance
with the provisions of Section 16(c) of the Investment Company Act of 1940.
The voting rights of shareholders are not cumulative, so that holders of more
than 50 percent of the shares voting can, if they choose, elect all Trustees
being selected, while the holders of the remaining shares would be unable to
elect any Trustees.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future
regulations or other unforeseen circumstances). However, the Trustees have
not authorized any such additional series or classes of shares.
The Declaration of Trust further provides that no Trustee, officer,
employee or agent of the Fund is liable to the Fund or to a shareholder, nor
is any Trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise
from his or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of his duties. It also provides that all third persons
shall look solely to the Fund's property for satisfaction of claims arising
in connection with the affairs of the Fund. With the exceptions stated, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the
affairs of the Fund.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for
obligations of the Fund. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Fund, requires that Fund obligations include such disclaimer, and provides
for indemnification and reimbursement of expenses out of the Fund's property
for any shareholder held personally liable for the obligations of the Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself
would be unable to meet its obligations. Given the above limitations on
shareholder personal liability, and the nature of the Fund's assets and
operations, in the opinion of Massachusetts counsel to the Fund, the risk to
shareholders of personal liability is remote.
37
<PAGE>
<PAGE>
The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders.
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is
the Custodian of the Fund's assets. Any Fund cash balances with the Custodian
in excess of $100,000 are unprotected by Federal deposit insurance. Such
amounts 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 Distributors
Inc., the Fund's Distributor and Dean Witter InterCapital Inc. the Investment
Manager. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts;
disbursing cash dividends and reinvesting dividends; processing account
registration changes; handling purchase and redemption transactions; mailing
prospectuses and reports; mailing and tabulating proxies; processing share
certificate transactions; and maintaining shareholder records and lists. For
these services Dean Witter Trust Company receives a per shareholder account
fee from the Fund.
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report,
containing financial statements audited by independent accountants, will be
sent to shareholders each year.
The Fund's fiscal year ends on July 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
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- -----------------------------------------------------------------------------
The Annual Financial Statements of the Fund for the year ended July 31,
1994, 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.
38
<PAGE>
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS July 31, 1994
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ ------------
<S> <C> <C>
COMMON STOCKS (98.9%)
BIOTECHNOLOGY (9.8%)
60,000 Agouron Pharmaceutical, Inc.* ..................... $ 585,000
50,000 Amgen, Inc.* ...................................... 2,475,000
50,000 Cell Genesys, Inc.* ............................... 425,000
235,000 CellPro, Inc.* .................................... 5,052,500
200,000 Centocor, Inc.* ................................... 2,350,000
142,000 Cephalon, Inc.* ................................... 1,349,000
60,000 Chiron Corp.* ..................................... 3,210,000
50,000 Genzyme Corp.* .................................... 1,425,000
70,000 Procyte Corp.* .................................... 656,250
170,000 Protein Design Laboratories, Inc.* ................ 3,208,750
250,000 US Bioscience, Inc.* .............................. 1,468,750
75,000 Viagene, Inc.* .................................... 290,625
------------
22,495,875
------------
CHEMICALS (3.3%)
60,000 American Cyanamid Co. ............................. 3,637,500
140,000 Ivax Corp. ........................................ 2,345,000
50,000 Mallinckrodt Group, Inc. .......................... 1,525,000
------------
7,507,500
------------
COMMERCIAL SERVICES (0.3%)
25,000 ABR Information Services, Inc.* ................... 275,000
30,000 Careerstaff Unlimited, Inc.* ...................... 412,500
------------
687,500
------------
COMPUTER SOFTWARE (8.7%)
150,000 Cerner Corp.* ..................................... 5,362,500
225,000 Clinicom, Inc.* ................................... 3,825,000
280,000 HBO & Co. ......................................... 7,980,000
130,000 Medic Computer Systems, Inc.* ..................... 2,210,000
65,000 Serving Software, Inc.* ........................... 544,375
------------
19,921,875
------------
DRUGS (18.9%)
120,000 Allergan, Inc. .................................... 2,895,000
17,050 Arjo AB (ADR)* 144A** ............................. 549,863
340,000 Astra AB, Series "A" Free (Sweden) ................ 7,366,520
60,000 Chronimed, Inc.* .................................. 540,000
140,000 Cygnus Therapeutic Systems* ....................... 1,067,500
120,000 Diagnostek, Inc.* ................................. 2,715,000
145,000 Dura Pharmaceuticals, Inc.* ....................... 1,522,500
60,000 Elan Corp.* (ADR) ................................. 2,047,500
40,000 Forest Laboratories, Inc.* ........................ 1,710,000
120,000 Grupo Casa Autrey S.A. de CV (ADR) ................ 3,735,000
40,000 Guilford Pharmaceuticals, Inc.* ................... 330,000
60,000 Johnson & Johnson ................................. 2,820,000
100,000 Mylan Laboratories ................................ 2,212,500
160,000 Noven Pharmaceuticals, Inc.* ...................... 1,800,000
30,000 Roche Holdings Ltd. (ADR) ......................... 1,185,000
100,000 Scherer (R.P.)* ................................... 3,775,000
130,000 Teva Pharmaceutical Industries Ltd. (ADR) ........ 3,640,000
200,000 Zenith Laboratories, Inc.* ........................ 3,150,000
------------
43,061,383
------------
HEALTH CARE DIVERSIFIED (1.9%)
50,000 Healthsouth Rehabilitation Corp.* ................. 1,518,750
120,000 Horizon Healthcare Corp.* ......................... 2,805,000
------------
4,323,750
------------
39
<PAGE>
<PAGE>
<CAPTION>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS July 31, 1994 (continued)
- -----------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ------------ ------------
<S> <C> <C>
HEALTH CARE EQUIPMENT & SERVICES (9.9%)
100,000 Coastal Healthcare Group, Inc.* ................... $ 3,450,000
135,000 Columbia Healthcare Corp. ......................... 5,467,500
140,000 Healthcare Compare Corp.* ......................... 2,870,000
170,000 Novacare Corp.* ................................... 2,337,500
65,000 Quantum Health Resources, Inc.* ................... 2,128,750
82,500 Renal Treatment Centers, Inc.* .................... 1,299,375
80,000 Rotech Medical Corp.* ............................. 1,500,000
60,000 St. Jude Medical, Inc. ............................ 1,890,000
80,000 Ventritex, Inc.* .................................. 1,560,000
------------
22,503,125
------------
HOSPITAL MANAGEMENT (13.8%)
35,000 Advocat, Inc.* .................................... 319,375
95,000 Arbor Health Care Co.* ............................ 1,995,000
100,000 Charter Medical Corp.* ............................ 2,287,500
30,000 Community Health Systems, Inc.* ................... 622,500
200,000 Community Psychiatric Centers ..................... 2,575,000
85,050 Coram Healthcare Corp.* ........................... 978,075
160,000 Genesis Health Ventures, Inc.* .................... 3,920,000
160,000 Health Systems International, Inc. (Class A) ..... 4,140,000
160,000 Healthtrust, Inc.* ................................ 4,460,000
50,000 Homedco Group, Inc.* .............................. 1,462,500
130,000 Mariner Health Group, Inc.* ....................... 2,258,750
140,000 Ornda Healthcorp* ................................. 2,082,500
80,000 Pediatric Services of America, Inc.* .............. 750,000
90,000 PhyCor, Inc.* ..................................... 2,745,000
30,000 Theratx, Inc.* .................................... 348,750
100,000 Unilab Corp.* ..................................... 575,000
------------
31,519,950
------------
HOSPITAL SUPPLY (1.1%)
30,000 Mitek Surgical Products, Inc.* .................... 532,500
80,000 National Medical Enterprises ...................... 1,360,000
110,000 Trimedyne, Inc.* .................................. 660,000
------------
2,552,500
------------
MEDICAL EQUIPMENT (1.6%)
30,000 Heart Technology, Inc.* ........................... 592,500
80,000 Sofamor Danek Group, Inc.* ........................ 1,300,000
60,000 Summit Technology, Inc.* .......................... 1,710,000
------------
3,602,500
------------
MEDICAL PRODUCTS & SUPPLIES (6.7%)
130,000 I-Stat Corp.* ..................................... 1,852,500
240,000 IDEXX Laboratories, Inc.* ......................... 7,080,000
30,000 Minntech Corp.* ................................... 382,500
165,000 Perspective Biosystems, Inc.* ..................... 2,021,250
15,000 PerSeptive Technology II Corp.* ................... 206,250
130,000 Target Therapeutics, Inc.* ........................ 2,665,000
70,000 Visx, Inc.* ....................................... 1,102,500
------------
15,310,000
------------
MEDICAL SERVICES (21.6%)
60,000 Apogee, Inc.* ..................................... 1,155,000
100,000 Caremark International, Inc. ...................... 2,312,500
50,000 Coventry Corp.* ................................... 1,675,000
20,000 Gulf South Medical Supply, Inc.* .................. 530,000
230,000 Health Care & Retirement Corp.* ................... 5,721,250
100,000 Health Management System, Inc.* ................... 2,325,000
40
<PAGE>
<PAGE>
<CAPTION>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS July 31, 1994 (continued)
- -----------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ------------ ------------
<S> <C> <C>
100,000 Healthsource, Inc.* ............................... $ 2,825,000
200,000 Humana, Inc.* ..................................... 3,750,000
55,000 Integrated Health Services, Inc.* ................. 1,718,750
50,000 Lincare Holdings, Inc.* ........................... 1,062,500
60,000 Manor Care, Inc. .................................. 1,507,500
50,000 Medaphis Corp.* ................................... 1,450,000
80,000 Mid Atlantic Medical Services, Inc.* .............. 3,310,000
60,000 Oxford Health Plans, Inc.* ........................ 3,465,000
140,000 Physicians Health Services, Inc. (Class A)* ...... 3,185,000
10,000 Quintiles Transnational Corp.* .................... 182,500
50,000 Safeguard Health Enterprise, Inc.* ................ 650,000
40,000 Sierra Health Services, Inc.* ..................... 1,050,000
210,000 Summit Care Corp.* ................................ 3,885,000
75,000 United Healthcare Corp. ........................... 3,412,500
110,000 Vencor, Inc.* ..................................... 4,262,500
------------
49,435,000
------------
MULTI-INSURANCE (1.3%)
100,000 Emphesys Financial Group, Inc. .................... 3,050,000
------------
TOTAL COMMON STOCKS (IDENTIFIED COST $211,862,651) 225,970,958
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS)
- -----------
<S> <C> <C>
SHORT-TERM INVESTMENT (6.5%) U.S. GOVERNMENT AGENCY
(a) (6.5%)
Federal Home Loan Mortgage Corp. 4.001% due 8/1/94 (Amortized
$ 14,920 Cost $14,920,000) ............................................... 14,920,000
--------------
TOTAL INVESTMENTS (IDENTIFIED COST $226,782,651)(B) 105.4% 240,890,958
LIABILITIES IN EXCESS OF OTHER ASSETS .............. (5.4) (12,317,604)
--------------
NET ASSETS ......................................... 100.0% $228,573,354
==============
</TABLE>
ADR-- American Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) US Government Agency was purchased on a discount basis. The interest
rate shown has been adjusted to reflect a bond equivalent yield.
(b) The aggregate cost for federal income tax purposes is $227,234,293;
the aggregate gross unrealized appreciation is $27,588,117 and the
aggregate gross unrealized depreciation is $13,931,452, resulting in
net unrealized appreciation of $13,656,665.
See Notes to Financial Statements
41
<PAGE>
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1994
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(Identified cost $226,782,651)(Note 1) ... $240,890,958
Receivable for:
Investments sold .......................... 6,640,660
Shares of beneficial interest sold ....... 224,372
Dividends ................................. 4,050
Deferred organizational expenses (Note 1) . 104,789
Prepaid expenses ........................... 28,964
--------------
TOTAL ASSETS ............................ 247,893,793
--------------
LIABILITIES:
Payable for:
Investments purchased (Note 4) ............ 16,492,684
Shares of beneficial interest repurchased 148,194
Investment management fee (Note 2) ....... 194,305
Plan of distribution fee (Note 3) ........ 194,943
Payable to bank ............................ 2,147,433
Accrued expenses (Note 4) .................. 142,880
--------------
TOTAL LIABILITIES ....................... 19,320,439
--------------
NET ASSETS:
Paid-in-capital ............................ 233,155,146
Accumulated net realized loss .............. (18,683,099)
Net unrealized appreciation ................ 14,108,307
Accumulated net investment loss ............ (7,000)
--------------
NET ASSETS .............................. $228,573,354
==============
NET ASSET VALUE PER SHARE, 24,537,465
shares outstanding (unlimited shares
authorized of $.01 par value) ............. $9.32
==============
- --------------------------------------------------------------------------
STATEMENT OF OPERATIONS
July 31, 1994
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
INCOME
Dividends (net of $48,192 foreign
withholding tax) ...................... $ 540,715
Interest ................................ 95,745
--------------
TOTAL INCOME ........................... 636,460
--------------
EXPENSES
Investment management fee (Note 2) ...... 2,603,442
Plan of distribution fee (Note 3) ....... 2,603,442
Transfer agent fees and expenses (Note 4) 495,239
Professional fees ....................... 76,374
Shareholder reports and notices ......... 55,644
Custodian fees .......................... 46,803
Registration fees ....................... 43,382
Organizational expenses (Note 1) ........ 32,222
Trustees' fees and expenses (Note 4) .... 25,188
Other ................................... 7,332
--------------
TOTAL EXPENSES ......................... 5,989,068
--------------
NET INVESTMENT LOSS ................... (5,352,608)
--------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (Note 1):
Net realized gain ........................ 1,562,522
Net change in unrealized appreciation .... 6,227,017
--------------
NET GAIN ON INVESTMENTS ................ 7,789,539
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............. $2,436,931
==============
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR OCTOBER 30, 1992
ENDED JULY 31, THROUGH JULY 31,
1994 1993 (NOTE 1)
--------------- --------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss ........................................................... $ (5,352,608) $ (2,098,326)
Net realized gain (loss) ...................................................... 1,562,522 (20,245,621)
Net change in unrealized appreciation ......................................... 6,227,017 7,881,290
--------------- --------------------
Net increase (decrease) in net assets resulting from operations ............. 2,436,931 (14,462,657)
Net increase (decrease) from transactions in shares of beneficial interest (Note
5) ............................................................................ (5,509,664) 246,008,744
--------------- --------------------
Total increase (decrease) ................................................... (3,072,733) 231,546,087
NET ASSETS:
Beginning of period ............................................................ 231,646,087 100,000
--------------- --------------------
END OF PERIOD (including accumulated net investment loss of $7,000 and $0,
respectively) ................................................................. $228,573,354 $231,646,087
=============== ====================
</TABLE>
See Notes to Financial Statements
42
<PAGE>
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES --Dean Witter Health Sciences 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 May 26,
1992 and on August 13, 1992 issued 10,000 shares of beneficial interest for
$100,000 to Dean Witter Reynolds, an affiliate of the Investment Manager, to
effect the Fund's initial capitalization. The Fund commenced operations on
October 30, 1992.
The following is a summary of significant accounting policies:
A. Valuation of Investments --(1) an equity security listed or traded on
the New York or American Stock Exchange or other domestic or foreign stock
exchange is valued at its latest sale price on that exchange prior to the
time when assets are valued (if there were no sales that day, the security is
valued at the latest bid price); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, portfolio securities are valued at
their fair value as determined in good faith under procedures established by
and under the general supervision of the Trustees (valuation of debt
securities for which market quotations are not readily available may be based
upon current market prices of securities which are comparable in coupon,
rating and maturity or an appropriate matrix utilizing similar factors); (4)
short-term debt securities having a maturity date of sixty days or less at
the time of purchase are valued at amortized cost; and (5) the foreign
currency market value of investment securities are translated at the exchange
rates prevailing at the end of the period.
B. Accounting for Investments --Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined on the identified cost
method. In computing net investment income, the Fund amortizes discounts on
certain short-term securities. Dividend income is recorded on the ex-dividend
date.
C. Repurchase Agreements --The Fund's custodian takes possession on
behalf of the Fund of the collateral pledged for investments in repurchase
agreements. It is the policy of the Fund to value the underlying collateral
daily on a mark-to-market basis to determine that the value, including
accrued interest, is at least equal to the repurchase price plus accrued
interest. In the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation.
D. Federal Income Tax Status --It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. Dividends and Distributions to Shareholders --The Fund records
dividends and distributions to its shareholders on the ex-dividend date. The
amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and
43
<PAGE>
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
-----------------------------------------------------------------------------
distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
F. Organizational Expenses --The Fund's Investment Manager paid the
organizational expenses of the Fund in the amount of approximately $162,000.
The Fund has reimbursed the Investment Manager for these expenses which have
been deferred and are being amortized on the straight-line method over a
period not to exceed five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT --Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a management fee, calculated and accrued
daily and payable monthly, by applying the annual rate of 1.0% to the net
assets of the Fund determined as of the close of each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. PLAN OF DISTRIBUTION --Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager. The Fund has adopted a Plan of Distribution (the "Plan"), pursuant
to Rule 12b-1 under the Act pursuant to which the Fund pays the Distributor
compensation accrued daily and payable monthly at an annual rate of 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's
shares since the inception of the Fund (not including reinvestment of
dividend or capital gain distributions), less the average daily aggregate net
asset value of the Fund's shares redeemed since the Fund's inception upon
which a contingent deferred sales charge has been imposed or upon which such
charge has been waived; or (b) the Fund's average daily net assets. Amounts
paid under the Plan are paid to the Distributor to compensate it for the
services provided and the expenses borne by it and others in the distribution
of the Fund's shares, including the payment of commissions for sales of the
Fund's shares and incentive compensation to and expenses of Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager, and other
employees or selected dealers who engage in or support distribution of the
Fund's shares or who service shareholder accounts, including overhead and
telephone expenses; printing and distribution of prospectuses and reports
used in connection with the offering of the Fund's shares to other than
current shareholders and preparation, printing and distribution of sales
literature and advertising materials. In addition, the Distributor may be
compensated under the Plan for its opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred but not yet recovered may be recovered through future distribution
fees from the Fund and contingent deferred sales charges from the Fund's
shareholders.
The Distributor has informed the Fund that for the year ended July 31,
1994, it received approximately $877,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay
such charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES --The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended July 31, 1994 aggregated
$271,097,122 and $282,309,506, respectively. For the same period, the Fund
paid brokerage commissions of approximately $75,000 to DWR for portfolio
transactions executed on behalf of the Fund. At July 31, 1994, the Fund's
payable for investments purchased included unsettled trades with DWR of
approximately $839,000.
44
<PAGE>
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- -----------------------------------------------------------------------------
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At July 31, 1994, the Fund had
transfer agent fees and expenses payable of approximately $57,000.
Effective January 1, 1994, the Fund adopted an unfunded noncontributory
defined benefit pension plan covering all independent Trustees of the Fund
who will have served as an independent Trustee for at least five years at the
time of retirement. Benefits under this plan are based on years of service
and compensation during the last five years of service. Aggregate pension
costs for the year ended July 31, 1994, included in Trustees' fees and
expenses in the Statement of Operations, amounted to $7,000. At July 31,
1994, the Fund had an accrued pension liability of $7,000 which is included
in accrued expenses in the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST --Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD OCTOBER 30,
FOR THE YEAR ENDED JULY 31, 1992 THROUGH JULY 31, 1993
1994 (NOTE 1)
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Sold .................... 8,331,492 $ 86,324,143 28,901,791 $280,298,687
Repurchased ............. (8,906,748) (91,833,807) (3,799,070) (34,289,943)
------------- -------------- ------------- --------------
Net increase (decrease) (575,256) $ (5,509,664) 25,102,721 $246,008,744
============= ============== ============= ==============
</TABLE>
6. FEDERAL INCOME TAXES --At July 31, 1994, the Fund had a net capital loss
carryover of approximately $18,231,000 which will be available through July
31, 2002 to offset future capital gains to the extent provided by
regulations. To the extent that this carryover loss is used to offset future
capital gains, it is probable that the gains so offset will not be
distributed to shareholders. The Fund had permanent book/tax differences
attributable to net operating loss. To reflect cumulative reclassifications
arising from permanent book/tax differences as of July 31, 1993, accumulated
net investment loss was credited and paid-in-capital was charged $2,098,326.
To reflect reclassifications arising from permanent book/tax differences for
the year ended July 31, 1994 accumulated net investment loss was credited and
paid-in-capital was charged $5,345,608.
45
<PAGE>
<PAGE>
DEAN WITTER HEALTH SCIENCES 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 OCTOBER 30, 1992*
ENDED JULY 31, THROUGH JULY 31,
1994 1993
--------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .................. $ 9.22 $ 10.00
--------------- -----------------
Net investment loss ................................... (0.22) (0.08)
Net realized and unrealized gain (loss) on investments 0.32 (0.70)
--------------- -----------------
Total from investment operations ..................... 0.10 (0.78)
--------------- -----------------
Net asset value, end of period ........................ $ 9.32 $ 9.22
=============== =================
TOTAL INVESTMENT RETURN+ .............................. 1.08% (7.80)%(1)
RATIOS/SUPPLEMENTAL DATA: Net assets, end of period
(in thousands)......................................... $228,573 $231,646
Ratio of expenses to average net assets ............... 2.30% 2.38% (2)
Ratio of net investment loss to average net assets ... (2.06)% (1.38)%(2)
Portfolio turnover rate ............................... 106% 55%
<FN>
- ----------
* Commencement of operations.
+ Does not reflect the deduction of sales load.
(1) Not annualized.
(2) Annualized.
</TABLE>
See Notes to Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter Health Sciences Trust
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
Health Sciences Trust (the "Fund") at July 31, 1994, the results of its
operations for the year then ended and the changes in its net assets and its
financial highlights for the year then ended and for the period October 30,
1992 (commencement of operations) through July 31, 1993, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities owned at
July 31, 1994 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
September 16, 1994
46
<PAGE>
DEAN WITTER HEALTH SCIENCES 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 October 30,
1992 through July 31, 1993 and for the fiscal
year ended July 31, 1994.......................... 4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
Portfolio of Investments at July 31, 1994......... 39
Statement of assets and liabilities at
July 31, 1994 .................................... 42
Statement of operations for the year ended July
31, 1994 ........................................ 42
Statement of changes in net assets for the
period October 30, 1992 through July 31, 1993 and
the year ended July 31, 1994 ..................... 42
Notes to Financial Statements .................... 43
Financial highlights for the period October 30,
1992 through July 31, 1993 and for the fiscal
year ended July 31, 1994.......................... 46
(3) Financial statements included in Part C:
None
(b) Exhibits:
8. - Form of Amended and Restated Transfer Agency and
Services Agreement between Registrant and Dean Witter
Trust Company
9. - Form of Services Agreement between Dean
Witter InterCapital Inc. and Dean Witter Services
Company Inc.
1
<PAGE>
11. - Consent of Independent Accountants
16. - Schedules for Computation of Performance
Quotations
27. - Financial Data Schedule
Other - Powers of Attorney
All other exhibits previously filed and incorporated
by reference.
Item 25. Persons Controlled by or Under Common Control With
Registrant.
None
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at September 6, 1994
Shares of Beneficial Interest 38,365
Item 27. Indemnification
Pursuant to Section 5.3 of the Registrant's Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the
indemnification of the Registrant's trustees, officers, employees
and agents is permitted if it is determined that they acted under
the belief that their actions were in or not opposed to the best
interest of the Registrant, and, with respect to any criminal
proceeding, they had reasonable cause to believe their conduct
was not unlawful. In addition, indemnification is permitted only
if it is determined that the actions in question did not render
them liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be
indemnified for the expense of litigation if it is determined
that they are entitled to indemnification against any liability
established in such litigation. The Registrant may also advance
money for these expenses provided that they give their
undertakings to repay the Registrant unless their conduct is
later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of
Trust and paragraph 8 of the Registrant's Investment Management
Agreement, neither the Investment Manager nor any trustee,
officer, employee or agent of the Registrant shall be liable for
any action or failure to act, except in the case of bad faith,
willful misfeasance, gross negligence or reckless disregard of
duties to the Registrant.
2
<PAGE>
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Act") may be permitted to
trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer, or controlling person of the
Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by
such trustee, officer or controlling person in connection with
the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act, and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent
with Release 11330 of the Securities and Exchange Commission
under the Investment Company Act of 1940, so long as the
interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager,
Registrant's Trustees, and other registered investment management
companies managed by the Investment Manager, maintains insurance
on behalf of any person who is or was a Trustee, officer,
employee, or agent of Registrant, or who is or was serving at the
request of Registrant as a trustee, director, officer, employee
or agent of another trust or corporation, against any liability
asserted against him and incurred by him or arising out of his
position. However, in no event will Registrant maintain
insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
See "The Fund and Its Management" in the Prospectus
regarding the business of the investment adviser. The following
information is given regarding officers of Dean Witter
InterCapital Inc. The term "Dean Witter Funds" used below refers
to the following Funds: (1) InterCapital Income Securities Inc.,
(2) High Income Advantage Trust, (3) High Income Advantage Trust
II, (4) High Income Advantage Trust III, (5) Municipal Income
Trust, (6) Municipal Income Trust II, (7) Municipal Income Trust
III, (8) Dean Witter Government Income Trust, (9) Municipal
Premium Income Trust, (10) Municipal Income Opportunities Trust,
(11) Municipal Income Opportunities Trust II, (12) Municipal
3
<PAGE>
Income Opportunities Trust III, (13) Prime Income Trust, (14)
InterCapital Insured Municipal Bond Trust, (15) InterCapital
Quality Municipal Income Trust, (16) InterCapital Quality
Municipal Investment Trust, (17) InterCapital Insured Municipal
Income Trust, (18) InterCapital California Insured Municipal
Income Trust, (19) InterCapital Insured Municipal Trust, (20)
InterCapital Quality Municipal Securities, (21) InterCapital New
York Quality Municipal Securities, (22) InterCapital California
Quality Municipal Securities, (23) InterCapital Insured
California Municipal Securities and (24) InterCapital Insured
Municipal Securities, registered closed-end investment companies,
and (1) Dean Witter Short-Term Bond Fund, (2) Dean Witter Tax-
Exempt Securities Trust, (3) Dean Witter Tax-Free Daily Income
Trust, (4) Dean Witter Dividend Growth Securities Inc., (5) Dean
Witter Convertible Securities Trust, (6) Dean Witter Liquid Asset
Fund Inc., (7) Dean Witter Developing Growth Securities Trust,
(8) Dean Witter Retirement Series, (9) Dean Witter Federal
Securities Trust, (10) Dean Witter World Wide Investment Trust,
(11) Dean Witter U.S. Government Securities Trust, (12) Dean
Witter Select Municipal Reinvestment Fund, (13) Dean Witter High
Yield Securities Inc., (14) Dean Witter Intermediate Income
Securities, (15) Dean Witter New York Tax-Free Income Fund, (16)
Dean Witter California Tax-Free Income Fund, (17) Dean Witter
Health Sciences Trust, (18) Dean Witter California Tax-Free Daily
Income Trust, (19) Dean Witter Managed Assets Trust, (20) Dean
Witter American Value Fund, (21) Dean Witter Strategist Fund,
(22) Dean Witter Utilities Fund, (23) Dean Witter World Wide
Income Trust, (24) Dean Witter New York Municipal Money Market
Trust, (25) Dean Witter Capital Growth Securities, (26) Dean
Witter Precious Metals and Minerals Trust, (27) Dean Witter
European Growth Fund Inc., (28) Dean Witter Global Short-Term
Income Fund Inc., (29) Dean Witter Pacific Growth Fund Inc., (30)
Dean Witter Multi-State Municipal Series Trust, (31) Dean Witter
Premier Income Trust, (32) Dean Witter Short-Term U.S. Treasury
Trust, (33) Dean Witter Diversified Income Trust, (34) Dean
Witter U.S. Government Money Market Trust, (35) Dean Witter
Global Dividend Growth Securities, (36) Active Assets California
Tax-Free Trust, (37) Dean Witter Natural Resource Development
Securities Inc., (38) Active Assets Government Securities Trust,
(39) Active Assets Money Trust, (40) Active Assets Tax-Free
Trust, (41) Dean Witter Limited Term Municipal Trust, (42) Dean
Witter Variable Investment Series, (43) Dean Witter Value-Added
Market Series, (44) Dean Witter Global Utilities Fund, (45) Dean
Witter High Income Securities, (46) Dean Witter National
Municipal Trust, (47) Dean Witter International SmallCap Fund and
(48) Dean Witter Mid-Cap Growth Fund, registered open-end
investment companies. InterCapital is a wholly-owned subsidiary
of Dean Witter, Discover & Co. The principal address of the Dean
Witter Funds is Two World Trade Center, New York, New York 10048.
The term "TCW/DW Funds" refers to the following Funds: (1) TCW/DW
Core Equity Trust, (2) TCW/DW North American Government Income
Trust, (3) TCW/DW Latin American Growth Fund, (4) TCW/DW Income
and Growth Fund, (5) TCW/DW Small Cap Growth Fund, (6) TCW/DW
Balanced Fund, (7) TCW/DW North American Intermediate Income
4
<PAGE>
Trust, (8) TCW/DW Global Convertible Trust,registered open-end
investment companies and (9) TCW/DW Term Trust 2002, (10) TCW/DW
Term Trust 2003, (11) TCW/DW Term Trust 2000, and (12) TCW/DW
Emerging Markets Opportunities Trust, registered closed-end
investment companies.
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------- -----------------------
Charles A. Chairman, Chief Executive Vice
Fiumefreddo Executive Officer President and Director
and Director of Dean Witter
Reynolds Inc.
("DWR"); Chairman,
Director or Trustee,
President and
Chief Executive
Officer of the
Dean Witter Funds;
Chairman, Chief
Executive Officer and
Trustee of the TCW/DW
Funds; Chairman and
Director of Dean
Witter Trust Company
("DWTC"); Chairman,
Chief Executive
Officer and Director
of Dean Witter
Distributors Inc.
("Distributors") and
Dean Witter Services
Company Inc. ("DWSC");
Formerly Executive
Vice President and
Director of Dean
Witter, Discover & Co.
("DWDC"); Director
and/or officer of various DWDC
subsidiaries.
5
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------- -----------------------
Philip J. Director Chairman, Chief
Purcell Executive Officer and
Director of DWDC and
DWR; Director of DWSC
and Distributors;
Director or Trustee
of the Dean Witter
Funds; Director and/
or officer of various
DWDC subsidiaries.
Richard M. Director President and Chief
DeMartini Operating Officer of
Dean Witter Capital
and Director of DWR,
DWSC and Distibutors;
Trustee of the TCW/DW
Funds.
James F. Director President and Chief
Higgins Operating Officer of
Dean Witter Financial;
Director of DWR, DWSC
and Distributors.
Thomas C. Executive Vice Executive Vice
Schneider President, Chief President, Chief
Financial Officer Financial Officer
and Director and Director of
DWSC, DWR and
Distributors.
Christine A. Director Executive Vice
Edwards President, Secretary,
General Counsel and
Director of DWR,
DWSC and Distributors.
Robert M. Scanlan President and Vice President of
Chief Operating the Dean Witter Funds
Officer and the TCW/DW Funds;
President and Chief
Operating Officer
of DWSC; Executive
Vice President of
Distributors;
Executive Vice
President and
Director of DWTC.
6
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------- -----------------------
David A. Hughey Executive Vice Vice President of the
President and Dean Witter Funds and
Chief Administrative the TCW/DW Funds;
Officer Executive Vice
President, Chief
Administrative Officer
and Director of DWTC;
Executive Vice
President and Chief
Administrative Officer
of DWSC and
Distributors.
Edmund C. Executive Vice Vice President of the
Puckhaber President Dean Witter Funds.
John Van Heuvelen Executive Vice President and Chief
President Operating Officer of
DWTC.
Sheldon Curtis Senior Vice Vice President,
President, Secretary and
General Counsel General Counsel of the
and Secretary Dean Witter Funds and
the TCW/DW Funds;
Senior Vice
President and
Secretary of
DWTC; Assistant
Secretary
of DWR and DWDC;
Senior Vice
President, General
Counsel and Secretary
of DWSC; Senior Vice
President, Assistant
General Counsel and
Assistant Secretary
of Distributors.
Peter M. Avelar Senior Vice Vice President of
President various Dean Witter
Funds.
Mark Bavoso Senior Vice Vice President of
President various Dean Witter
Funds.
7
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------- -----------------------
Thomas H. Connelly Senior Vice Vice President of
President various Dean Witter
Funds.
Edward F. Gaylor Senior Vice Vice President of
President various Dean Witter
Funds.
Rajesh K. Gupta Senior Vice Vice President of
President various Dean Witter
Funds.
Kenton J. Senior Vice Vice President of
Hinchliffe President various Dean Witter
Funds.
John B. Kemp, III Senior Vice Director of the
President Provident Savings
Bank, Jersey City,
New Jersey.
Anita H. Kolleeny Senior Vice Vice President of
President various Dean Witter
Funds.
Jonathan R. Page Senior Vice Vice President of
President various Dean Witter
Funds.
Ira Ross Senior Vice Vice President of
President various Dean Witter
Funds.
Rochelle G. Siegel Senior Vice Vice President of
President various Dean Witter
Funds.
Paul D. Vance Senior Vice Vice President of
President various Dean Witter
Funds.
Elizabeth A. Senior Vice
Vetell President
James F. Willison Senior Vice Vice President of
President various Dean Witter
Funds.
Ronald J. Worobel Senior Vice Vice President of
President various Dean Witter
Funds.
8
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------- ------------------------
Thomas F. Caloia First Vice Treasurer of the
President and Dean Witter Funds
Assistant Treasurer and the TCW/DW Funds;
First Vice President
and Assistant
Treasurer of DWSC;
Assistant Treasurer
of Distributors.
Marilyn K. Cranney First Vice Assistant Secretary
President and of the Dean Witter
Assistant Funds and the TCW/DW
Secretary Funds; First Vice
President and
Assistant Secretary
of DWSC; Assistant
Secretary of DWR
and DWDC.
Barry Fink First Vice Assistant Secretary
President of the Dean Witter
and Assistant Funds and the TCW/DW
Secretary Funds; First Vice
President and
Assistant Secretary
of DWSC.
Michael First Vice First Vice President
Interrante President and and Controller of
Controller DWSC; Assistant
Treasurer of
Distributors.
Robert Zimmerman First Vice
President
Joan G. Allman Vice President
Joseph Arcieri Vice President
Stephen Brophy Vice President
Terence P. Brennan,II Vice President
Douglas Brown Vice President
Thomas Chronert Vice President
Rosalie Clough Vice President
B. Catherine Vice President
Connelly
9
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ------------ -----------------------
Salvatore DeSteno Vice President Vice President of
DWSC.
Frank J. DeVito Vice President Vice President of
DWSC.
Dwight Doolan Vice President
Bruce Dunn Vice President
Jeffrey D. Geffen Vice President
Deborah Genovese Vice President
Peter W. Gurman Vice President
Shant Harootunian Vice President
Russell Harper Vice President
John Hechtlinger Vice President
David T. Hoffman Vice President
David Johnson Vice President
Christopher Jones Vice President
Stanley Kapica Vice President
Konrad J. Krill Vice President
Paula LaCosta Vice President Vice President of
various Dean Witter
Funds.
Lawrence S. Lafer Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
Thomas Lawlor Vice President
Lou Anne D. McInnis Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
10
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- -------------- -----------------------
Sharon K. Milligan Vice President
James Mulcahy Vice President
James Nash Vice President
Richard Norris Vice President
Hugh Rose Vice President
Ruth Rossi Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
Carl F. Sadler Vice President
Rafael Scolari Vice President
Diane Lisa Sobin Vice President Vice President of
various Dean Witter
Funds.
Kathleen Stromberg Vice President Vice President of
various Dean Witter
Funds.
Vinh Q. Tran Vice President Vice President of
various Dean Witter
Funds.
Alice Weiss Vice President Vice President
of various Dean
Witter Funds.
Jayne M. Wolff Vice President
Marianne Zalys Vice President
Item 29. Principal Underwriters
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
11
<PAGE>
(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 Short-Term Bond 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 Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth 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 North American Intermediate Income Trust
(8) TCW/DW Global Convertible Trust
(b) The following information is given regarding directors and officers
of Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
12
<PAGE>
Positions and
Office with
Name Distributors
- ---- --------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained by the Investment Manager at its offices,
except records relating to holders of shares issued by the Registrant,
which are maintained by the Registrant's Transfer Agent, at its place
of business as shown in the prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and
State of New York on the 28th day of September, 1994.
DEAN WITTER HEALTH SCIENCES 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. 3 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 09/28/94
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 09/28/94
---------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Edward R. Telling
Philip J. Purcell
By /s/ Sheldon Curtis 09/28/94
----------------------------
Sheldon Curtis
Attorney-in-Fact
Jack F. Bennett Manuel H. Johnson
Michael Bozic Paul Kolton
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
John E. Jeuck
By /s/ David M. Butowsky 09/28/94
----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
EXHIBIT INDEX
Exhibit No. Description
- ---------- ------------
8. - Form of Amended and Restated Transfer Agency
and Services Agreement between Registrant and
Dean Witter Trust Company
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services Company Inc.
11. - Consent of Independent Accountants
16. - Schedules for Computation of Performance
Quotations
27. - Financial Data Schedule
Other - Powers of Attorney
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
DEAN WITTER TRUST COMPANY
DWR
(open-end)
<PAGE>
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
i
<PAGE>
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 1st
day of August, 1993 by and between each of the Dean Witter
Funds listed on the signature pages hereof, each of such Funds
acting severally on its own behalf and not jointly with any of
such other Funds (each such Fund hereinafter referred to as
the "Fund"), each such Fund having its principal office and
place of business at Two World Trade Center, New York, New
York, 10048, and DEAN WITTER TRUST COMPANY, a trust company
organized under the laws of New Jersey, having its principal
office and place of business at Harborside Financial Center,
Plaza Two, Jersey City, New Jersey 07311 ("DWTC").
WHEREAS, the Fund desires to appoint DWTC as its
transfer agent, dividend disbursing agent and shareholder
servicing agent and DWTC desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual
covenants herein contained, the parties hereto agree as
follows:
1
<PAGE>
Article 1 Terms of Appointment; Duties of DWTC
1.1 Subject to the terms and conditions set
forth in this Agreement, the Fund hereby employs and appoints
DWTC to act as, and DWTC agrees to act as, the transfer agent
for each series and class of shares of the Fund, whether now
or hereafter authorized or issued ("Shares"), dividend
disbursing agent and shareholder servicing agent in connection
with any accumulation, open-account or similar plans provided
to the holders of such Shares ("Shareholders") and set out in
the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without
limitation any periodic investment plan or periodic withdrawal
program.
1.2 DWTC agrees that it will perform the 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
<PAGE>
(ii) Pursuant to purchase orders, issue the
appropriate number of Shares and issue certificates therefor
or hold such Shares in book form in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption
requests and redemption directions and deliver the appropriate
documentation therefor to the Custodian;
(iv) At the appropriate time as and when it
receives monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in the
appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) Effect transfers of Shares by the
registered owners thereof upon receipt of appropriate
instructions;
(vi) Prepare and transmit payments for 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
<PAGE>
(ix) Record the issuance of Shares of the Fund
and maintain pursuant to Rule 17Ad-10(e) under the Securities
Exchange Act of 1934 ("1934 Act") a record of the total number
of Shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. DWTC
shall also provide to the Fund on a regular basis the total
number of Shares which are authorized, issued and outstanding
and shall notify the Fund in case any proposed issue of Shares
by the Fund would result in an overissue. In case any issue
of Shares would result in an overissue, DWTC shall refuse to
issue such Shares and shall not countersign and issue any
certificates requested for such Shares. When recording the
issuance of Shares, DWTC shall have no obligation to take
cognizance of any Blue Sky laws relating to the issue of sale
of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the
services set forth in the above paragraph (a), DWTC shall: (i)
perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder 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
<PAGE>
mailing proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses to current Shareholders,
withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing appropriate forms required with
respect to dividends and distributions by federal tax
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other confirm-
able transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders and providing
Shareholder account information; (ii) open any and all bank
accounts which may be necessary or appropriate in order to
provide the foregoing services; and (iii) provide a system
which will enable the Fund to monitor the total number of
Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall (i) identify
to DWTC in writing those transactions and assets to be treated
as exempt from Blue Sky reporting for each State and (ii)
verify the establishment of transactions for each State on the
system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of DWTC for the
Fund's registration status under the Blue Sky or securities
laws of any State or other jurisdiction is solely limited to
the initial establishment of transactions subject to Blue Sky
compliance by the Fund and the reporting of such transactions
5
<PAGE>
to the Fund as provided above and as agreed from time to time
by the Fund and DWTC.
(d) DWTC shall provide such additional
services and functions not specifically described herein as
may be mutually agreed between DWTC and the Fund. Procedures
applicable to such services may be established from time to
time by agreement between the Fund and DWTC.
Article 2 Fees and Expenses
2.1 For performance by DWTC pursuant to this
Agreement, each Fund agrees to pay DWTC an annual maintenance
fee for each Shareholder account and certain transactional
fees, if applicable, as set out in the respective fee schedule
attached hereto as Schedule A. Such fees and out-of-pocket
expenses and advances identified under Section 2.2 below may
be changed from time to time subject to mutual written
agreement between the Fund and DWTC.
2.2 In addition to the fees paid under Section
2.1 above, the Fund agrees to reimburse DWTC in connection
with the services rendered by DWTC hereunder. In addition,
any other expenses incurred by DWTC at the request or with the
consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and
reimbursable expenses within a reasonable period of time
6
<PAGE>
following the mailing of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and
other mailings to all Shareholder accounts shall be advanced
to DWTC by the Fund upon request prior to the mailing date of
such materials.
Article 3 Representations and Warranties of DWTC
DWTC represents and warrants to the Fund that:
3.1 It is a trust company duly organized and
existing and in good standing under the laws of New Jersey and
it is duly qualified to carry on its business in New Jersey.
3.2 It is and will remain registered with the
U.S. Securities and Exchange Commission ("SEC") as a Transfer
Agent pursuant to the requirements of Section 17A of the 1934
Act.
3.3 It is empowered under applicable laws and
by its charter and By-Laws to enter into and perform this
Agreement.
3.4 All requisite corporate proceedings have
been taken to authorize it to enter into and perform this
Agreement.
3.5 It has and will continue to have access to
the necessary facilities, equipment and personnel to perform
its duties and obligations under this Agreement.
7
<PAGE>
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to DWTC that:
4.1 It is a corporation duly organized and
existing and in good standing under the laws of Delaware or
Maryland or a trust duly organized and existing and in good
standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and
by its Articles of Incorporation or Declaration of Trust, as
the case may be, and under its By-Laws to enter into and
perform this Agreement.
4.3 All corporate proceedings necessary to
authorize it to enter into and perform this Agreement have
been taken.
4.4 It is an investment company registered
with the SEC under the Investment Company Act of 1940, as
amended (the "1940 Act").
4.5 A registration statement under the
Securities Act of 1933 (the "1933 Act") is currently effective
and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
8
<PAGE>
Article 5 Duty of Care and Indemnification
5.1 DWTC shall not be responsible for, and the
Fund shall indemnify and hold DWTC harmless from and against,
any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTC or its agents or
subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in good faith
and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with
the terms of this Agreement, or which arise out of the Fund's
lack of good faith, negligence or willful misconduct or which
arise out of breach of any representation or warranty of the
Fund hereunder.
(c) The reliance on or use by DWTC or its agents or
subcontractors of information, records and documents which (i)
are received by DWTC or its agents or subcontractors and
furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTC or
its agents or subcontractors of, any instructions or requests
9
<PAGE>
of the Fund.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations
or the securities or Blue Sky laws of any State or other
jurisdiction that such Shares be registered in such State or
other jurisdiction or in violation of any stop order or other
determination or ruling by any federal agency or any State or
other jurisdiction with respect to the offer or sale of such
Shares in such State or other jurisdiction.
5.2 DWTC shall indemnify and hold the Fund
harmless from or against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability
arising out of or attributable to any action or failure or
omission to act by DWTC as a result of the lack of good faith,
negligence or willful misconduct of DWTC, its officers,
employees or agents.
5.3 At any time, DWTC may apply to any officer
of the Fund for instructions, and may consult with legal
counsel to the Fund, with respect to any matter arising in
connection with the services to be performed by DWTC under
this Agreement, and DWTC and its agents or subcontractors
shall not be liable and shall be indemnified by the Fund for
any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. DWTC, its
10
<PAGE>
agents and subcontractors shall be protected and indemnified
in acting upon any paper or document furnished by or on behalf
of the Fund, reasonably believed to be genuine and to have
been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided
to DWTC or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any
change of authority of any person, until receipt of written
notice thereof from the Fund. DWTC, its agents and
subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed
to bear the proper manual or facsimile signature of the
officers of the Fund, and the proper countersignature of any
former transfer agent or registrar, or of a co-transfer agent
or co-registrar.
5.4 In the event either party is unable to
perform its obligations under the terms of this Agreement
because of acts of God, strikes, equipment or transmission
failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be
liable for damages to the other for any damages resulting from
such failure to perform or otherwise from such causes.
11
<PAGE>
5.5 Neither party to this Agreement shall be
liable to the other party for consequential damages under any
provision of this Agreement or for any act or failure to act
hereunder.
5.6 In order that the indemnification
provisions contained in this Article 5 shall apply, upon the
assertion of a claim for which either party may be required to
indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall
keep the other party advised with respect to all developments
concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party
seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any
claim or make any compromise in any case in which the other
party may be required to indemnify it except with the other
party's prior written consent.
Article 6 Documents and Covenants of the Fund and DWTC
6.1 The Fund shall promptly furnish to DWTC
the following:
(a) If a corporation:
(i) A certified copy of the resolution of the Board
of Directors of the Fund authorizing the appointment of DWTC
and the execution and delivery of this Agreement;
12
<PAGE>
(ii) A certified copy of the Articles of
Incorporation and By-Laws of the Fund and all amendments
thereto;
(iii) Certified copies of each vote of the Board
of Directors designating persons authorized to give
instructions on behalf of the Fund and signature cards bearing
the signature of any officer of the Fund or any other person
authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the
Fund in the form approved by the Board of Directors, with a
certificate of the Secretary of the Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board
of Trustees of the Fund authorizing the appointment of DWTC
and the execution and delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust
and By-laws of the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board
of Trustees designating persons authorized to give
instructions on behalf of the Fund and signature cards bearing
the signature of any officer of the Fund or any other person
authorized to sign written instructions on behalf of the Fund;
13
<PAGE>
(iv) A specimen of the certificate for Shares of the
Fund in the form approved by the Board of Trustees, with a
certificate of the Secretary of the Fund as to such approval;
(c) The current registration statements and any
amendments and supplements thereto filed with the SEC pursuant
to the requirements of the 1933 Act or the 1940 Act;
(d) All account application forms or other
documents relating to Shareholder accounts and/or relating to
any plan, program or service offered or to be offered by the
Fund; and
(e) Such other certificates, documents or opinions
as DWTC deems to be appropriate or necessary for the proper
performance of its duties.
6.2 DWTC hereby agrees to establish and
maintain facilities and procedures reasonably acceptable to
the Fund for safekeeping of Share certificates, check forms
and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such
certificates, forms and devices.
6.3 DWTC shall prepare and keep records
relating to the services to be performed hereunder, in the
form and manner as it may deem advisable and as required by
applicable laws and regulations. To the extent required by
14
<PAGE>
Section 31 of the 1940 Act, and the rules and regulations
thereunder, DWTC agrees that all such records prepared or
maintained by DWTC relating to the services performed by DWTC
hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section
31 of the 1940 Act, and the rules and regulations thereunder,
and will be surrendered promptly to the Fund on and in
accordance with its request.
6.4 DWTC and the Fund agree that all books,
records, information and data pertaining to the business of
the other party which are exchanged or received pursuant to
the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to
any other person except as may be required by law or with the
prior consent of DWTC and the Fund.
6.5 In case of any request or demands for the
inspection of the Shareholder records of the Fund, DWTC will
endeavor to notify the Fund and to secure instructions from an
authorized officer of the Fund as to such inspection. DWTC
reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the
Shareholder records to such person.
15
<PAGE>
Article 7 Duration and Termination of Agreement
7.1 This Agreement shall remain in full force
and effect until July 31, 1996 and from year-to-year
thereafter unless terminated by either party as provided in
Section 7.2 hereof.
7.2 This Agreement may be terminated by the
Fund on 60 days written notice, and by DWTC on 90 days written
notice, to the other party without payment of any penalty.
7.3 Should the Fund exercise its right to
terminate, all out-of-pocket expenses associated with the
movement of records and other materials will be borne by the
Fund. Additionally, DWTC reserves the right to charge for any
other reasonable fees and expenses associated with such
termination.
Article 8 Assignment
8.1 Except as provided in Section 8.3 below,
neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the written consent of
the other party.
8.2 This Agreement shall inure to the benefit
of and be binding upon the parties and their respective
permitted successors and assigns.
16
<PAGE>
8.3 DWTC may, in its sole discretion and
without further consent by the Fund, subcontract, in whole or
in part, for the performance of its obligations and duties
hereunder with any person or entity including but not limited
to companies which are affiliated with DWTC; provided,
however, that such person or entity has and maintains the
qualifications, if any, required to perform such obligations
and duties, and that DWTC shall be as fully responsible to the
Fund for the acts and omissions of any agent or subcontractor
as it is for its own acts or omissions under this Agreement.
Article 9 Affiliations
9.1 DWTC may now or hereafter, without the
consent of or notice to the Fund, function as transfer agent
and/or shareholder servicing agent for any other investment
company registered with the SEC under the 1940 Act and for any
other issuer, including without limitation any investment
company whose adviser, administrator, sponsor or principal
underwriter is or may become affiliated with Dean Witter,
Discover & Co. or any of its direct or indirect subsidiaries
or affiliates.
9.2 It is understood and agreed that the
Directors or Trustees (as the case may be), officers,
employees, agents and shareholders of the Fund, and the
directors, officers, employees, agents and shareholders of the
17
<PAGE>
Fund's investment adviser and/or distributor, are or may be
interested in DWTC as directors, officers, employees, agents
and shareholders or otherwise, and that the directors,
officers, employees, agents and shareholders of DWTC may be
interested in the Fund as Directors or Trustees (as the case
may be), officers, employees, agents and shareholders or
otherwise, or in the investment adviser and/or distributor as
directors, officers, employees, agents, shareholders or
otherwise.
Article 10 Amendment
10.1 This Agreement may be amended or modified
by a written agreement executed by both parties and authorized
or approved by a resolution of the Board of Directors or the
Board of Trustees (as the case may be) of the Fund.
Article 11 Applicable Law
11.1 This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with
the laws of the State of New York.
Article 12 Miscellaneous
12.1 In the event that one or more additional
investment companies managed or administered by Dean Witter
InterCapital Inc. or any of its affiliates ("Additional
Funds") desires to retain DWTC to act as transfer agent,
dividend disbursing agent and/or shareholder servicing agent,
18
<PAGE>
and DWTC desires to render such services, such services shall
be provided pursuant to a letter agreement, substantially in
the form of Exhibit A hereto, between DWTC and each Additional
Fund.
12.2 In the event of an alleged loss or
destruction of any Share certificate, no new certificate shall
be issued in lieu thereof, unless there shall first be
furnished to DWTC an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been
lost or destroyed, supported by an appropriate bond
satisfactory to DWTC and the Fund issued by a surety company
satisfactory to DWTC, except that DWTC may accept an affidavit
of loss and indemnity agreement executed by the registered
holder (or legal representative) without surety in such form
as DWTC deems appropriate indemnifying DWTC and the Fund for
the issuance of a replacement certificate, in cases where the
alleged loss is in the amount of $1000 or less.
12.3 In the event that any check or other order for
payment of money on the account of any Shareholder or new
investor is returned unpaid for any reason, DWTC will (a) give
prompt notification to the Fund's distributor ("Distributor")
(or to the Fund if the Fund acts as its own distributor) of
such non-payment; and (b) take such other action, including
imposition of a reasonable processing or handling fee, as DWTC
19
<PAGE>
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
<PAGE>
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
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Amended and Restated Agreement to be executed in their
names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Equity Income Trust
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
22
<PAGE>
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Select Municipal Reinvestment Fund
(44) Dean Witter Variable Investment Series
By:/s/ Sheldon Curtis
------------------------------------
Sheldon Curtis
Vice President and General Counsel
ATTEST:
/s/ Barry Fink
- -------------------------
Barry Fink
Assistant Secretary
DEAN WITTER TRUST COMPANY
By:/s/ Charles A. Fiumefreddo
----------------------------------
Charles A. Fiumefreddo
Chairman
ATTEST:
/s/ David A. Hughey
- --------------------------
David A. Hughey
Executive Vice President
23
<PAGE>
EXHIBIT A
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned,( Name of Fund )
a (Massachusetts business trust/Maryland Corporation) (the
"Fund"), desires to employ and appoint Dean Witter Trust
Company ("DWTC") to act as transfer agent for each series and
class of shares of the Fund, whether now or hereafter
authorized or issued ("Shares"), dividend disbursing agent and
shareholder servicing agent, registrar and agent in connection
with any accumulation, open-account or similar plan provided
to the holders of Shares, including without limitation any
periodic investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for
the payment by the Fund to DWTC of fees as set out in the fee
schedule attached hereto as Schedule A, DWTC shall provide
such services to the Fund pursuant to the terms and conditions
set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
24
<PAGE>
Please indicate DWTC's acceptance of employment and
appointment by the Fund in the capacities set forth above by
so indicating in the space provided below.
Very truly yours,
( Name of the Fund )
By:..................................
Sheldon Curtis
Vice President and General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST COMPANY
By:.......................
Its:......................
Date:.....................
25
<PAGE>
SCHEDULE A
Fund: Dean Witter Health Sciences Trust
Fees: (1) Annual maintenance fee of $11.00 per
shareholder account, payable monthly.
(2) A fee equal to 1/12 of the fee set forth in
(1) above, for providing Forms 1099 for accounts
closed during the year, payable following the end
of the calendar year.
(3) Out-of-pocket expenses in accordance with
Section 2.2 of the Agreement.
(4) Fees for additional services not set forth in
this Agreement shall be as negotiated between the
parties.
SERVICES AGREEMENT
AGREEMENT made as of the 31st day of December, 1993 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a New Jersey
corporation (herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement")
with certain investment companies as set forth on Schedule A (each such
investment company being herein referred to as a "Fund" and, collectively, as
the "Funds") pursuant to which InterCapital is to perform, or supervise the
performance of, among other services, administrative services for the Funds
(and, in the case of Funds with multiple portfolios, the Series or Portfolios
of the Funds (such Series and Portfolio being herein individually referred to
as "a Series" and, collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as hereinafter
set forth. Without limiting the generality of the foregoing, DWS shall (i)
administer the Fund's business affairs and supervise the overall day-to-day
operations of the Fund (other than rendering investment advice); (ii) provide
the Fund with full administrative services, including the maintenance of
certain books and records, such as journals, ledger accounts and other records
required under the Investment Company Act of 1940, as amended (the"Act"), the
notification to the Fund and InterCapital of available funds for investment,
the reconciliation of account information and balances among the Fund's
custodian, transfer agent and dividend disbursing agent and InterCapital, and
the calculation of the net asset value of the Fund's shares; (iii) provide the
Fund with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary to provide effective
operation of the Fund; (iv) oversee the performance of administrative and
professional services rendered to the Fund by others, including its custodian,
transfer agent and dividend disbursing agent, as well as accounting, auditing
and other services; (v) provide the Fund with adequate general office space and
facilities; (vi) assist in the preparation and the printing of the periodic
updating of the Fund's registration statement and prospectus (and, in the case
of an open-end Fund, the statement of additional information), tax returns,
proxy statements, and reports to its shareholders and the Securities and
Exchange Commission; and (vii) monitor the compliance of the Fund's investment
policies and restrictions.
In the event that InterCapital enters into an Investment Management Agreement
with another investment company, and wishes to retain DWS to perform
administrative services hereunder, it shall notify DWS in writing. If DWS is
willing to render such services, it shall notify InterCapital in writing,
whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to
time determine to be necessary or useful to the performance of its obligations
under this Agreement. Without limiting the generality of the foregoing, the
staff and personnel of DWS shall be deemed to include officers of DWS and
persons employed or otherwise retained by DWS (including officers and employees
of InterCapital, with the consent of InterCapital) to furnish services,
statistical and other factual data, information with respect to technical and
scientific developments, and such other information, advice and assistance as
DWS may desire. DWS shall maintain each Fund's records and books of account
(other than those maintained by the Fund's transfer agent, registrar, custodian
and other agencies). All such books and records so maintained shall be the
property of the Fund and, upon request therefor, DWS shall surrender to
InterCapital or to the Fund such of the books and records so requested.
3. InterCapital will, from time to time, furnish or otherwise make available
to DWS such financial reports, proxy statements and other information relating
to the business and affairs of the Fund as DWS may
1
<PAGE>
reasonably require in order to discharge its duties and obligations to the Fund
under this Agreement or to comply with any applicable law and regulation or
request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of a
closed-end Fund) by applying the annual rate or rates set forth on Schedule B
to the net assets of each Fund. Except as hereinafter set forth, (i) in the
case of an open-end Fund, compensation under this Agreement shall be calculated
by applying 1/365th of the annual rate or rates to the Fund's or the Series'
daily net assets determined as of the close of business on that day or the last
previous business day and (ii) in the case of a closed-end Fund, compensation
under this Agreement shall be calculated by applying the annual rate or rates
to the Fund's average weekly net assets determined as of the close of the last
business day of each week. If this Agreement becomes effective subsequent to
the first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
on Schedule B. Subject to the provisions of paragraph 5 hereof, payment of DWS'
compensation for the preceding month shall be made as promptly as possible
after completion of the computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any Series
thereof, or of InterCapital Income Securities Inc., including amounts payable
to InterCapital pursuant to the Investment Management Agreement, for any fiscal
year ending on a date on which this Agreement is in effect, exceed the expense
limitations applicable to the Fund and/or any Series thereof imposed by state
securities laws or regulations thereunder, as such limitations may be raised or
lowered from time to time, or, in the case of InterCapital Income Securities
Inc. or Dean Witter Variable Investment Series or any Series thereof, the
expense limitation specified in the Fund's Investment Management Agreement, the
fee payable hereunder shall be reduced on a pro rata basis in the same
proportion as the fee payable by the Fund under the Investment Management
Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by
DWS, and such clerical help and bookkeeping services as DWS shall reasonably
require in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations hereunder,
DWS shall not be liable to the Fund or any of its investors for any error of
judgment or mistake of law or for any act or omission by DWS or for any losses
sustained by the Fund or its investors. It is understood that, subject to the
terms and conditions of the Investment Management Agreement between each Fund
and InterCapital, InterCapital shall retain ultimate responsibility for all
services to be performed hereunder by DWS. DWS shall indemnify InterCapital and
hold it harmless from any liability that InterCapital may incur arising out of
any act or failure to act by DWS in carrying out its responsibilities
hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person controlling,
controlled by or under common control with DWS, and that DWS and any person
controlling, controlled by or under common control with DWS may have an
interest in the Fund. It is also understood that DWS and any affiliated persons
thereof or any persons controlling, controlled by or under common control with
DWS have and may have advisory, management, administration service or other
contracts with other organizations and persons, and may have other interests
and businesses, and further may purchase, sell or trade any securities or
commodities for their own accounts or for the account of others for whom they
may be acting.
9. This Agreement shall continue until April 30, 1994, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the
2
<PAGE>
event that the Investment Management Agreement between any Fund and
InterCapital is terminated, this Agreement will automatically terminate with
respect to such Fund.
10. This Agreement may be amended or modified by the parties in any manner by
mutual written agreement executed by each of the parties hereto.
11. This Agreement shall be construed and interpreted in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By: .....................
Attest:
.....................
DEAN WITTER SERVICES COMPANY INC.
By: .....................
Attest:
.....................
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
AT DECEMBER 31, 1993
OPEN-END FUNDS
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter California Tax-Free Daily Income Trust
7. Dean Witter California Tax-Free Income Fund
8. Dean Witter Capital Growth Securities
9. Dean Witter Convertible Securities Trust
10. Dean Witter Developing Growth Securities Trust
11. Dean Witter Diversified Income Trust
12. Dean Witter Dividend Growth Securities Inc.
13. Dean Witter Equity Income Trust
14. Dean Witter European Growth Fund Inc.
15. Dean Witter Federal Securities Trust
16. Dean Witter Global Dividend Growth Securities
17. Dean Witter Global Short-Term Income Fund Inc.
18. Dean Witter Health Sciences Trust
19. Dean Witter High Yield Securities Inc.
20. Dean Witter Intermediate Income Securities
21. Dean Witter Limited Term Municipal Trust
22. Dean Witter Liquid Asset Fund Inc.
23. Dean Witter Managed Assets Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter Natural Resource Development Securities Inc.
26. Dean Witter New York Municipal Money Market Trust
27. Dean Witter New York Tax-Free Income Fund
28. Dean Witter Pacific Growth Fund Inc.
29. Dean Witter Precious Metals and Minerals Trust
30. Dean Witter Premier Income Trust
31. Dean Witter Retirement Series
32. Dean Witter Select Municipal Reinvestment Fund
33. Dean Witter Short-Term U.S. Treasury Trust
34. Dean Witter Strategist Fund
35. Dean Witter Tax-Exempt Securities Trust
36. Dean Witter Tax-Free Daily Income Trust
37. Dean Witter U.S. Government Money Market Trust
38. Dean Witter U.S. Government Securities Trust
39. Dean Witter Utilities Fund
40. Dean Witter Value-Added Market Series
41. Dean Witter Variable Investment Series
42. Dean Witter World Wide Income Trust
43. Dean Witter World Wide Investment Trust
CLOSED-END FUNDS
44. High Income Advantage Trust
45. High Income Advantage Trust II
46. High Income Advantage Trust III
47. InterCapital Income Securities Inc.
48. Dean Witter Government Income Trust
49. InterCapital Insured Municipal Bond Trust
50. InterCapital Insured Municipal Trust
51. InterCapital Insured Municipal Income Trust
52. InterCapital California Insured Municipal Income Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. InterCapital Quality Municipal Securities
56. InterCapital California Quality Municipal Securities
57. InterCapital New York Quality Municipal Securities
4
<PAGE>
SCHEDULE B
DEAN WITTER SERVICES COMPANY
SCHEDULE OF ADMINISTRATIVE FEES - JANUARY 1, 1994
Monthly compensation calculated daily by applying the following annual
rates to the fund's net assets.
Dean Witter Health Sciences 0.10% to the net assets.
Trust
5
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional
Information constituting part of this Post-Effective Amendment No.3
to the registration statement on Form N-1A (the "Registration
Statement") of our report dated September 16, 1994, relating to the
financial statements and financial highlights of Dean Witter Health
Sciences Trust, which appears in such Statement of Additional
Information, and to the incorporation by reference of such report
into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the
heading "Financial Highlights" in such Prospectus and to the
reference 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
September 26, 1994
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
HEALTH SCIENCES TRUST
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ---------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-94 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ----------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
31-Jul-93 $960.80 -3.92% 1.00 -3.92%
30-Oct-92 $894.70 -10.53% 1.75 -6.16%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-94 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------- ----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
31-Jul-93 $1,010.80 1.08% 1.00 1.08%
30-Oct-92 $932.00 -6.80% 1.75 -3.95%
</TABLE>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (D) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
30-Oct-92 -6.80 $9,320 $46,600 $93,200
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 226,782,651
<INVESTMENTS-AT-VALUE> 240,890,958
<RECEIVABLES> 6,869,082
<ASSETS-OTHER> 133,753
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 247,893,793
<PAYABLE-FOR-SECURITIES> 16,492,684
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,827,755
<TOTAL-LIABILITIES> 19,320,439
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 233,155,146
<SHARES-COMMON-STOCK> 24,537,465
<SHARES-COMMON-PRIOR> 25,112,721
<ACCUMULATED-NII-CURRENT> (7,000)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (18,683,099)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,108,307
<NET-ASSETS> 228,573,354
<DIVIDEND-INCOME> 540,715
<INTEREST-INCOME> 95,745
<OTHER-INCOME> 0
<EXPENSES-NET> 5,989,068
<NET-INVESTMENT-INCOME> (5,352,608)
<REALIZED-GAINS-CURRENT> 1,562,522
<APPREC-INCREASE-CURRENT> 6,227,017
<NET-CHANGE-FROM-OPS> 2,436,931
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,331,492
<NUMBER-OF-SHARES-REDEEMED> (8,906,748)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (3,072,733)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (20,245,621)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,603,442
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,989,068
<AVERAGE-NET-ASSETS> 260,344,187
<PER-SHARE-NAV-BEGIN> 9.22
<PER-SHARE-NII> (0.22)
<PER-SHARE-GAIN-APPREC> 0.32
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.32
<EXPENSE-RATIO> 2.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of JACK F. BENNETT,
EDWIN J. GARN, JOHN R. HAIRE, JOHN E. JEUCK, MANUEL H. JOHNSON,
PAUL KOLTON and MICHAEL E. NUGENT, 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 DEAN WITTER 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/ Jack F. Bennett /s/ Manuel H. Johnson
Jack F. Bennett Manuel H. Johnson
/s/ Edwin J. Garn /s/ Paul Kolton
Edwin J. Garn Paul Kolton
/s/ John R. Haire /s/ Michael E. Nugent
John R. Haire Michael E. Nugent
/s/ John E. Jeuck
John E. Jeuck
<PAGE>
DEAN WITTER FUNDS
MONEY MARKET
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Active Assets Tax-Free Trust
4. Active Assets California Tax-Free Trust
5. Active Assets Government Securities Trust
6. Dean Witter Tax-Free Daily Income Trust
7. Dean Witter U.S. Government Money Market Trust
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Dividend Growth Securities Inc.
12. Dean Witter Capital Growth Securities
13. Dean Witter Natural Resource Development Securities Inc.
14. Dean Witter Precious Metals & Minerals Trust
15. Dean Witter Developing Growth Securities Trust
16. Dean Witter World Wide Investment Trust
17. Dean Witter Value-Added Market Series
18. Dean Witter European Growth Fund Inc.
19. Dean Witter Pacific Growth Fund Inc.
20. Dean Witter Equity Income Trust
21. Dean Witter Utilities Fund
22. Dean Witter Health Sciences Trust
23. Dean Witter Global Dividend Growth Securities
ASSET ALLOCATION FUNDS
24. Dean Witter Managed Assets Trust
25. Dean Witter Strategist Fund
FIXED-INCOME FUNDS
26. Dean Witter High Yield Securities Inc.
27. Dean Witter Convertible Securities Trust
28. Dean Witter Intermediate Income Securities
29. Dean Witter World Wide Income Trust
30. Dean Witter Global Short-Term Income Fund Inc.
31. Dean Witter Diversified Income Trust
32. Dean Witter Premier Income Trust
33. Dean Witter U.S. Government Securities Trust
<PAGE>
34. Dean Witter Federal Securities Trust
35. Dean Witter Short-Term U.S. Treasury Trust
36. Dean Witter Tax-Exempt Securities Trust
37. Dean Witter California Tax-Free Income Fund
38. Dean Witter New York Tax-Free Income Fund
39. Dean Witter Multi-State Municipal Series Trust
Arizona Series
California Series
Florida Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
Ohio Series
Pennsylvania Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Limited Term Municipal Trust
SPECIAL PURPOSE FUNDS
42. Dean Witter Variable Investment Series
Money Market Portfolio
Quality Income Plus Portfolio
High Yield Portfolio
Utilities Portfolio
Dividend Growth Portfolio
Capital Growth Portfolio
European Growth Portfolio
Equity Portfolio
Managed Assets Portfolio
43. Dean Witter Retirement Series
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series
<PAGE>
CLOSED-END FUNDS
44. High Income Advantage Trust
45. High Income Advantage Trust II
46. High Income Advantage Trust III
47. InterCapital Income Securities Inc.
48. Dean Witter Government Income Trust
49. InterCapital Insured Municipal Bond Trust
50. InterCapital Insured Municipal Trust
51. InterCapital Quality Municipal Investment Trust
52. InterCapital Quality Municipal Income Trust
53. Municipal Income Trust
54. Municipal Income Trust II
55. Municipal Income Trust III
56. Municipal Income Opportunities Trust
57. Municipal Income Opportunities Trust II
58. Municipal Income Opportunities Trust III
59. Municipal Premium Income Trust
60. Prime Income Trust
61. InterCapital Insured Municipal Income Trust
62. InterCapital California Insured Municipal Income Trust
63. InterCapital Quality Municipal Securities
64. InterCapital California Quality Municipal Securities
65. InterCapital New York Quality Municipal Securities
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of CHARLES A.
FIUMEFREDDO and EDWARD R. TELLING, 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 agent, 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 DEAN WITTER 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/ Charles A. Fiumefreddo /s/ Edward R. Telling
Charles A. Fiumefreddo Edward R. Telling
<PAGE>
DEAN WITTER FUNDS
MONEY MARKET
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Active Assets Tax-Free Trust
4. Active Assets California Tax-Free Trust
5. Active Assets Government Securities Trust
6. Dean Witter Tax-Free Daily Income Trust
7. Dean Witter U.S. Government Money Market Trust
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Dividend Growth Securities Inc.
12. Dean Witter Capital Growth Securities
13. Dean Witter Natural Resource Development Securities Inc.
14. Dean Witter Precious Metals & Minerals Trust
15. Dean Witter Developing Growth Securities Trust
16. Dean Witter World Wide Investment Trust
17. Dean Witter Value-Added Market Series
18. Dean Witter European Growth Fund Inc.
19. Dean Witter Pacific Growth Fund Inc.
20. Dean Witter Equity Income Trust
21. Dean Witter Utilities Fund
22. Dean Witter Health Sciences Trust
23. Dean Witter Global Dividend Growth Securities
ASSET ALLOCATION FUNDS
24. Dean Witter Managed Assets Trust
25. Dean Witter Strategist Fund
FIXED-INCOME FUNDS
26. Dean Witter High Yield Securities Inc.
27. Dean Witter Convertible Securities Trust
28. Dean Witter Intermediate Income Securities
29. Dean Witter World Wide Income Trust
30. Dean Witter Global Short-Term Income Fund Inc.
31. Dean Witter Diversified Income Trust
32. Dean Witter Premier Income Trust
33. Dean Witter U.S. Government Securities Trust
<PAGE>
34. Dean Witter Federal Securities Trust
35. Dean Witter Short-Term U.S. Treasury Trust
36. Dean Witter Tax-Exempt Securities Trust
37. Dean Witter California Tax-Free Income Fund
38. Dean Witter New York Tax-Free Income Fund
39. Dean Witter Multi-State Municipal Series Trust
Arizona Series
California Series
Florida Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
Ohio Series
Pennsylvania Series
40. Dean Witter Select Municipal Reinvestment Fund
41. Dean Witter Limited Term Municipal Trust
SPECIAL PURPOSE FUNDS
42. Dean Witter Variable Investment Series
Money Market Portfolio
Quality Income Plus Portfolio
High Yield Portfolio
Utilities Portfolio
Dividend Growth Portfolio
Capital Growth Portfolio
European Growth Portfolio
Equity Portfolio
Managed Assets Portfolio
43. Dean Witter Retirement Series
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series
<PAGE>
CLOSED-END FUNDS
44. High Income Advantage Trust
45. High Income Advantage Trust II
46. High Income Advantage Trust III
47. InterCapital Income Securities Inc.
48. Dean Witter Government Income Trust
49. InterCapital Insured Municipal Bond Trust
50. InterCapital Insured Municipal Trust
51. InterCapital Quality Municipal Investment Trust
52. InterCapital Quality Municipal Income Trust
53. Municipal Income Trust
54. Municipal Income Trust II
55. Municipal Income Trust III
56. Municipal Income Opportunities Trust
57. Municipal Income Opportunities Trust II
58. Municipal Income Opportunities Trust III
59. Municipal Premium Income Trust
60. Prime Income Trust
61. InterCapital Insured Municipal Income Trust
62. InterCapital California Insured Municipal Income Trust
63. InterCapital Quality Municipal Securities
64. InterCapital California Quality Municipal Securities
65. InterCapital New York Quality Municipal Securities
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that MICHAEL BOZIC, whose signature
appears below, constitues 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
DEAN WITTER 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 15, 1994
/s/ Michael Bozic
Michael Bozic
<PAGE>
DEAN WITTER FUNDS
MONEY MARKET
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Active Assets Tax-Free Trust
4. Active Assets California Tax-Free Trust
5. Active Assets Government Securities Trust
6. Dean Witter Tax-Free Daily Income Trust
7. Dean Witter U.S. Government Money Market Trust
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Dividend Growth Securities Inc.
12. Dean Witter Capital Growth Securities
13. Dean Witter Natural Resource Development Securities Inc.
14. Dean Witter Precious Metals & Minerals Trust
15. Dean Witter Developing Growth Securities Trust
16. Dean Witter World Wide Investment Trust
17. Dean Witter Value-Added Market Series
18. Dean Witter European Growth Fund Inc.
19. Dean Witter Pacific Growth Fund Inc.
20. Dean Witter Equity Income Trust
21. Dean Witter Utilities Fund
22. Dean Witter Health Sciences Trust
23. Dean Witter Global Dividend Growth Securities
24. Dean Witter Global Utilities Fund
ASSET ALLOCATION FUNDS
25. Dean Witter Managed Assets Trust
26. Dean Witter Strategist Fund
FIXED-INCOME FUNDS
27. Dean Witter High Yield Securities Inc.
28. Dean Witter Convertible Securities Trust
29. Dean Witter Intermediate Income Securities
30. Dean Witter World Wide Income Trust
31. Dean Witter Global Short-Term Income Fund Inc.
32. Dean Witter Diversified Income Trust
33. Dean Witter Premier Income Trust
34. Dean Witter U.S. Government Securities Trust
35. Dean Witter Federal Securities Trust
36. Dean Witter Short-Term U.S. Treasury Trust
37. Dean Witter Tax-Exempt Securities Trust
38. Dean Witter California Tax-Free Income Fund
39. Dean Witter New York Tax-Free Income Fund
40. Dean Witter Multi-State Municipal Series Trust
Arizona Series
California Series
Florida Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
Ohio Series
Pennsylvania Series
41. Dean Witter Select Municipal Reinvestment Fund
42. Dean Witter Limited Term Municipal Trust
43. Dean Witter Short-Term Bond Fund
SPECIAL PURPOSE FUNDS
44. Dean Witter Variable Investment Series
Money Market Portfolio
Quality Income Plus Portfolio
High Yield Portfolio
Utilities Portfolio
Dividend Growth Portfolio
Capital Growth Portfolio
European Growth Portfolio
Equity Portfolio
Managed Assets Portfolio
45. Dean Witter Retirement Series
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series
CLOSED-END FUNDS
46. High Income Advantage Trust
47. High Income Advantage Trust II
48. High Income Advantage Trust III
49. InterCapital Income Securities Inc.
50. Dean Witter Government Income Trust
51. InterCapital Insured Municipal Bond Trust
52. InterCapital Insured Municipal Trust
53. InterCapital Quality Municipal Investment Trust
<PAGE>
54. InterCapital Quality Municipal Income Trust
55. Municipal Income Trust
56. Municipal Income Trust II
57. Municipal Income Trust III
58. Municipal Income Opportunities Trust
59. Municipal Income Opportunities Trust II
60. Municipal Income Opportunities Trust III
61. Municipal Premium Income Trust
62. Prime Income Trust
63. InterCapital Insured Municipal Income Trust
64. InterCapital California Insured Municipal Income Trust
65. InterCapital Quality Municipal Securities
66. InterCapital California Quality Municipal Securities
67. InterCapital New York Quality Municipal Securities
68. InterCapital California Insured Municipal Securities
69. InterCapital Insured Municipal Securities
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that JOHN L. SCHROEDER, whose signature
appears below, constitues 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
DEAN WITTER 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 13, 1994
/s/ John L. Schroeder
John L. Schroeder
<PAGE>
DEAN WITTER FUNDS
MONEY MARKET
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Active Assets Tax-Free Trust
4. Active Assets California Tax-Free Trust
5. Active Assets Government Securities Trust
6. Dean Witter Tax-Free Daily Income Trust
7. Dean Witter U.S. Government Money Market Trust
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Dividend Growth Securities Inc.
12. Dean Witter Capital Growth Securities
13. Dean Witter Natural Resource Development Securities Inc.
14. Dean Witter Precious Metals & Minerals Trust
15. Dean Witter Developing Growth Securities Trust
16. Dean Witter World Wide Investment Trust
17. Dean Witter Value-Added Market Series
18. Dean Witter European Growth Fund Inc.
19. Dean Witter Pacific Growth Fund Inc.
20. Dean Witter Equity Income Trust
21. Dean Witter Utilities Fund
22. Dean Witter Health Sciences Trust
23. Dean Witter Global Dividend Growth Securities
24. Dean Witter Global Utilities Fund
ASSET ALLOCATION FUNDS
25. Dean Witter Managed Assets Trust
26. Dean Witter Strategist Fund
FIXED-INCOME FUNDS
27. Dean Witter High Yield Securities Inc.
28. Dean Witter Convertible Securities Trust
29. Dean Witter Intermediate Income Securities
30. Dean Witter World Wide Income Trust
31. Dean Witter Global Short-Term Income Fund Inc.
32. Dean Witter Diversified Income Trust
33. Dean Witter Premier Income Trust
34. Dean Witter U.S. Government Securities Trust
35. Dean Witter Federal Securities Trust
36. Dean Witter Short-Term U.S. Treasury Trust
37. Dean Witter Tax-Exempt Securities Trust
38. Dean Witter California Tax-Free Income Fund
39. Dean Witter New York Tax-Free Income Fund
40. Dean Witter Multi-State Municipal Series Trust
Arizona Series
California Series
Florida Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
Ohio Series
Pennsylvania Series
41. Dean Witter Select Municipal Reinvestment Fund
42. Dean Witter Limited Term Municipal Trust
43. Dean Witter Short-Term Bond Fund
SPECIAL PURPOSE FUNDS
44. Dean Witter Variable Investment Series
Money Market Portfolio
Quality Income Plus Portfolio
High Yield Portfolio
Utilities Portfolio
Dividend Growth Portfolio
Capital Growth Portfolio
European Growth Portfolio
Equity Portfolio
Managed Assets Portfolio
45. Dean Witter Retirement Series
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series
CLOSED-END FUNDS
46. High Income Advantage Trust
47. High Income Advantage Trust II
48. High Income Advantage Trust III
49. InterCapital Income Securities Inc.
50. Dean Witter Government Income Trust
51. InterCapital Insured Municipal Bond Trust
52. InterCapital Insured Municipal Trust
<PAGE>
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. Municipal Income Trust
56. Municipal Income Trust II
57. Municipal Income Trust III
58. Municipal Income Opportunities Trust
59. Municipal Income Opportunities Trust II
60. Municipal Income Opportunities Trust III
61. Municipal Premium Income Trust
62. Prime Income Trust
63. InterCapital Insured Municipal Income Trust
64. InterCapital California Insured Municipal Income Trust
65. InterCapital Quality Municipal Securities
66. InterCapital California Quality Municipal Securities
67. InterCapital New York Quality Municipal Securities
68. InterCapital California Insured Municipal Securities
69. InterCapital Insured Municipal Securities
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that PHILIP J. PURCELL, 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 DEAN WITTER
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 8, 1994
/s/ Philip J. Purcell
Philip J. Purcell
<PAGE>
DEAN WITTER FUNDS
MONEY MARKET
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Active Assets Tax-Free Trust
4. Active Assets California Tax-Free Trust
5. Active Assets Government Securities Trust
6. Dean Witter Tax-Free Daily Income Trust
7. Dean Witter U.S. Government Money Market Trust
8. Dean Witter California Tax-Free Daily Income Trust
9. Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Dividend Growth Securities Inc.
12. Dean Witter Capital Growth Securities
13. Dean Witter Natural Resource Development Securities Inc.
14. Dean Witter Precious Metals & Minerals Trust
15. Dean Witter Developing Growth Securities Trust
16. Dean Witter World Wide Investment Trust
17. Dean Witter Value-Added Market Series
18. Dean Witter European Growth Fund Inc.
19. Dean Witter Pacific Growth Fund Inc.
20. Dean Witter Equity Income Trust
21. Dean Witter Utilities Fund
22. Dean Witter Health Sciences Trust
23. Dean Witter Global Dividend Growth Securities
24. Dean Witter Global Utilities Fund
ASSET ALLOCATION FUNDS
25. Dean Witter Managed Assets Trust
26. Dean Witter Strategist Fund
FIXED-INCOME FUNDS
27. Dean Witter High Yield Securities Inc.
28. Dean Witter Convertible Securities Trust
29. Dean Witter Intermediate Income Securities
30. Dean Witter World Wide Income Trust
31. Dean Witter Global Short-Term Income Fund Inc.
32. Dean Witter Diversified Income Trust
33. Dean Witter Premier Income Trust
34. Dean Witter U.S. Government Securities Trust
35. Dean Witter Federal Securities Trust
36. Dean Witter Short-Term U.S. Treasury Trust
37. Dean Witter Tax-Exempt Securities Trust
38. Dean Witter California Tax-Free Income Fund
39. Dean Witter New York Tax-Free Income Fund
40. Dean Witter Multi-State Municipal Series Trust
Arizona Series
California Series
Florida Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
Ohio Series
Pennsylvania Series
41. Dean Witter Select Municipal Reinvestment Fund
42. Dean Witter Limited Term Municipal Trust
43. Dean Witter Short-Term Bond Fund
SPECIAL PURPOSE FUNDS
44. Dean Witter Variable Investment Series
Money Market Portfolio
Quality Income Plus Portfolio
High Yield Portfolio
Utilities Portfolio
Dividend Growth Portfolio
Capital Growth Portfolio
European Growth Portfolio
Equity Portfolio
Managed Assets Portfolio
45. Dean Witter Retirement Series
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series
CLOSED-END FUNDS
46. High Income Advantage Trust
47. High Income Advantage Trust II
48. High Income Advantage Trust III
49. InterCapital Income Securities Inc.
50. Dean Witter Government Income Trust
51. InterCapital Insured Municipal Bond Trust
52. InterCapital Insured Municipal Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
<PAGE>
55. Municipal Income Trust
56. Municipal Income Trust II
57. Municipal Income Trust III
58. Municipal Income Opportunities Trust
59. Municipal Income Opportunities Trust II
60. Municipal Income Opportunities Trust III
61. Municipal Premium Income Trust
62. Prime Income Trust
63. InterCapital Insured Municipal Income Trust
64. InterCapital California Insured Municipal Income Trust
65. InterCapital Quality Municipal Securities
66. InterCapital California Quality Municipal Securities
67. InterCapital New York Quality Municipal Securities
68. InterCapital California Insured Municipal Securities
69. InterCapital Insured Municipal Securities
